When a client challenges a solicitor’s bill, the amount by which the bill is ultimately reduced can have consequences beyond the value of the reduction itself. In particular, where a solicitor’s bill is reduced by 20% or more on assessment, the solicitor may become responsible for the costs of the assessment. This is commonly referred to as the 20% or one-fifth rule and is widely regarded as an important consideration for both solicitors and clients before deciding whether to proceed with an assessment.

The potential costs consequences mean that it is not enough to simply establish that a bill appears excessive. A client considering an assessment should also consider whether the likely reduction is sufficient to justify the costs and risks involved, while solicitors should understand the potential exposure if their bill is substantially reduced.

What is the 20% rule for legal costs?

The one-fifth rule arises under section 70 of the Solicitors Act 1974 and applies to the assessment of solicitor-client bills in the circumstances set out by the legislation. Where the court assesses a bill and reduces it by 20% or more, the general position is that the solicitor will be required to pay the costs of the assessment. Where the reduction is below 20%, the client will generally be responsible for those costs, although the court can take other circumstances into account.

The significance of the threshold becomes clearer when considering the overall financial position. For example, if a solicitor’s bill is £50,000 and assessment reduces it to £40,000, the reduction is £10,000, representing exactly 20% of the original bill. A reduction to £40,500, however, represents a reduction of only 19%. Although the difference between the two outcomes is relatively small in terms of the bill itself, it can affect who is responsible for the costs of the assessment.

It’s worth noting that this solicitor-client one-fifth rule is a separate matter from the 20% threshold that applies in inter partes detailed assessment under CPR 47.20, where a party requesting an oral hearing following provisional assessment faces its own, different 20% consequence. The two shouldn’t be conflated.

Why can the costs of assessment become important?

A detailed challenge to legal costs can involve considerable work, particularly where the bill is substantial or there are multiple issues to consider. Reviewing the solicitor’s charges, examining the supporting documentation and identifying disputed items can all contribute to the overall cost of the assessment process.

This creates a potential risk for a client who believes a bill is too high but is unlikely to achieve a reduction approaching the 20% threshold. The saving achieved through the assessment may not outweigh the costs incurred in obtaining that reduction. Equally, a solicitor whose bill is reduced by 20% or more may face an additional financial consequence because responsibility for the assessment costs can arise alongside the reduction to the bill.

For this reason, obtaining specialist costs advice at an early stage can be particularly useful. An assessment of the bill and the available evidence may help establish whether there are realistic grounds for challenging the charges and whether the likely outcome justifies taking the matter further.

What happens if payments on account have already been made?

It is common for solicitors to receive payments on account during the course of a matter before the final bill is delivered. The fact that payments have already been made does not, in itself, prevent the client from challenging the bill where the relevant requirements for an assessment are satisfied.

Where an assessment subsequently reduces the amount properly payable, the sums already paid will need to be taken into account when establishing the final position between the parties. Depending on the circumstances, this may result in an amount being repayable to the client or affect the balance remaining due.

The treatment of payments on account will depend on the particular bills, payments and assessment outcome, so it should not be assumed that the amount already paid represents the final liability.

Are the assessment costs always determined by the 20% threshold?

Although the one-fifth rule provides an important starting point, the court is not necessarily required to apply the consequences mechanically in every situation. Section 70 contains provisions concerning the costs of assessment and allows the court to consider whether there are special circumstances which justify a different order.

The courts have considered the operation of the rule in a number of cases, including Herbert v HH Law Ltd [2019] EWCA Civ 527. That case demonstrates the importance of the statutory threshold, with the solicitor ultimately being liable for the costs of the assessment after the bill was reduced by more than one-fifth.

The case is also a useful reminder that the costs of challenging a bill should be considered as part of the wider assessment strategy. The outcome is not simply about reducing the amount charged; there can also be significant consequences concerning the costs incurred in achieving that reduction.

What should solicitors and clients consider before an assessment?

Before proceeding with an assessment, both parties should consider the likely reduction alongside the potential costs and risks involved. In particular:

• The likely level of reduction: A client should consider whether there are sufficient grounds to challenge the charges and whether the evidence supports a reduction approaching or exceeding the 20% threshold.
• The costs of the assessment: Reviewing the bill, preparing the challenge and dealing with the assessment process can involve additional costs. These should be weighed against the potential saving.
• The evidence supporting the charges: Solicitors should ensure that their charges are properly supported and that the bill can withstand scrutiny. Clients should similarly identify specific charges or areas of work that they believe are unreasonable or excessive.
• The wider financial consequences: The outcome may affect more than the amount of the original bill. Where the relevant threshold is met, responsibility for the costs of the assessment can become an important part of the overall financial position.

Obtaining specialist costs advice before commencing or responding to an assessment can help clarify these issues and provide a more realistic understanding of the potential outcome.

How can Greener Costs assist?

Greener Costs provides specialist costs advice to solicitors and clients dealing with disputed legal costs and assessment proceedings. Our costs specialists can review the issues arising from a bill, advise on potential challenges and help assess the likely financial consequences of taking the matter forward.

Whether you are considering challenging a solicitor’s bill or responding to a client’s challenge, early costs advice can help identify the key issues, potential reductions and risks associated with the assessment process.

Contact Greener Costs via info@greenercosts.co.uk or by calling 01204 263047 to discuss how our specialist costs services can assist with your matter.

Frequently Asked Questions

What happens when a solicitor’s bill is reduced by 20% on assessment?

Where a solicitor’s bill is reduced by 20% or more on assessment, the solicitor may be required to pay the costs of the assessment. The statutory one-fifth rule is therefore important when considering the potential financial consequences of challenging a bill, although the court can consider whether special circumstances justify a different costs order.

Who pays the costs of a solicitor-client assessment?

The party responsible for the assessment costs depends on the extent of the reduction and the circumstances of the case. Where the bill is reduced by at least one-fifth, the general position is that the solicitor pays the assessment costs. If the reduction is less than one-fifth, the client will generally be responsible, subject to the court’s discretion and any applicable exceptions.

Can I challenge a solicitor’s bill if I have already made payments on account?

Yes. Payments made on account do not necessarily prevent a client from seeking an assessment of a solicitor’s bill. If the assessment reduces the amount properly payable, payments already made will generally need to be taken into account when establishing the final balance between the parties.

Is a solicitor automatically liable for assessment costs if the bill is reduced by more than 20%?

Not necessarily. Although the 20% threshold is an important part of the statutory framework, the court has discretion in certain circumstances and may consider whether there are special circumstances that justify making a different order. The individual facts of the assessment therefore remain important.