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Cite as: [2015] EWCA Civ 1168, [2015] 6 Costs LO 779, [2016] Ch 489, [2016] 2 WLR 1035, [2015] WLR(D) 464

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		Neutral Citation Number: [2015] EWCA Civ 1168
		Case No. A2/2014/0557

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MRS JUSTICE PROUDMAN
CH/2012/0628
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
MRS JUSTICE ANDREWS
QB/2013/0576

Royal Courts of Justice
Strand, London, WC2A 2LL

19/11/2015

B e f o r e :

LADY JUSTICE ARDEN
LORD JUSTICE SALES
and
SIR BERNARD RIX
(Sitting with Senior Costs Judge Gordon-Saker as Assessor)
____________________

Between:

	Wilsons Solicitors LLP	Appellant
	- and -
	Serena Bentine (Acting by her Litigation Friend, The Official Solicitor)	First Respondent
	- and -
	The Official Solicitor	Second Respondent
		Case No. A2/2014/0557
IN THE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEENS BENCH DIVISION MRS JUSTICE ANDREWS QB/2013/0576	Stone Rowe Brewer LLP	Respondent
	- and -
	Just Costs Limited	Appellant

____________________

Mr Alexander Hutton QC (instructed by Wilson Solicitors LLP) for Wilsons Solicitors LLP
Mr Michael Kent QC & Mr Simon J Brown (instructed by the Official Solicitor)
for Serena Bentine and the Official Solicitor
and
Mr John Foy QC & Mr Simon Butler (instructed by Berlad Graham LLP) for Stone Rowe Brewer LLP
Mr PJ Kirby QC & Mr Rupert Cohen (instructed by Just Costs Solicitors) for Just Costs Limited
Hearing dates : 28 and 29 July 2015

____________________

HTML VERSION OF JUDGMENT
____________________

Lord Justice Sales:

Introduction

There are two appeals before the court which were heard together. Both concern the operation of section 70(9) and (10) of the Solicitors Act 1974 ("the 1974 Act"). These provisions are part of the code contained in section 70 governing the resolution of disputes between a solicitor and a client regarding the fees charged by the solicitor in a bill sent to the client.

The 1974 Act is a consolidation Act. It was amended in various respects by the Legal Services Act 2007 ("the 2007 Act"). Section 70 of the 1974 Act, as amended, provides as follows:

"70 - Assessment on application of party chargeable or solicitor.

(1) Where before the expiration of one month from the delivery of a solicitor's bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be assessed and that no action be commenced on the bill until the assessment is completed.

(2) Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the assessment), order—

(a) that the bill be assessed; and

(b) that no action be commenced on the bill, and that any action already commenced be stayed, until the assessment is completed.

(3) Where an application under subsection (2) is made by the party chargeable with the bill—

(a) after the expiration of 12 months from the delivery of the bill, or

(b) after a judgment has been obtained for the recovery of the costs covered by the bill, or

(c) after the bill has been paid, but before the expiration of 12 months from the payment of the bill,

no order shall be made except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the assessment as the court may think fit.

(4) The power to order assessment conferred by subsection (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill.

(5) An order for the assessment of a bill made on an application under this section by the party chargeable with the bill shall, if he so requests, be an order for the assessment of the profit costs covered by the bill.

(6) Subject to subsection (5), the court may under this section order the assessment of all the costs, or of the profit costs, or of the costs other than profit costs and, where part of the costs is not to be assessed, may allow an action to be commenced or to be continued for that part of the costs.

(7) Every order for the assessment of a bill shall require the costs officer to assess not only the bill but also the costs of the assessment and to certify what is due to or by the solicitor in respect of the bill and in respect of the costs of the assessment.

(8) If after due notice of any assessment either party to it fails to attend, the officer may proceed with the assessment ex parte.

(9) Unless—

(a) the order for assessment was made on the application of the solicitor and the party chargeable does not attend the assessment, or

(b) the order for assessment or an order under subsection (10) otherwise provides,

the costs of an assessment shall be paid according to the event of the assessment, that is to say, if the amount of the bill is reduced by one fifth, the solicitor shall pay the costs, but otherwise the party chargeable shall pay the costs.

(10) The costs officer may certify to the court any special circumstances relating to a bill or to the assessment of a bill, and the court may make such order as respects the costs of the assessment as it may think fit.

[...]

(12) In this section "profit costs" means costs other than counsel's fees or costs paid or payable in the discharge of a liability incurred by the solicitor on behalf of the party chargeable, and the reference in subsection (9) to the fraction of the amount of the reduction in the bill shall be taken, where the assessment concerns only part of the costs covered by the bill, as a reference to that fraction of the amount of those costs which is being assessed."

As originally enacted, section 70(9) was in these terms:

"(9) Unless—

(a) the order for taxation was made on the application of the solicitor and the party chargeable does not attend the taxation, or

(b) the order for taxation or an order under subsection (10) otherwise provides,

the costs of a taxation shall be paid according to the event of the taxation, that is to say, if one-fifth of the amount of the bill is taxed off, the solicitor shall pay the costs, but otherwise the party chargeable shall pay the costs."

(Emphasis added to indicate the differences from subsection (9) as it stood at the relevant time and currently).

Section 72 of the 1974 Act, as amended, sets out supplementary provisions as to assessments. Section 72(4) provides:

"(4) The certificate of the costs officer by whom any bill has been assessed shall, unless it is set aside or altered by the court, be final as to the amount of the costs covered by it, and the court may make such order in relation to the certificate as it thinks fit, including, in a case where the retainer is not disputed, an order that judgment be entered for the sum certified to be due with costs."

Section 70(9) and (10) regulates the costs position where there is a dispute between the solicitor and the client regarding the solicitor's bill for legal services provided by him and an order is made for the assessment of that bill by a costs officer. In the assessment proceedings the solicitor and the client are opposing parties, and costs may be incurred on each side in relation to the assessment proceedings to determine what sum is payable in respect of the bill.

Section 70(9) provides for a basic and simple default rule that the costs of the assessment should follow the event (i.e. be paid by the losing to the winning party), where the "event" (i.e. the criterion of who has won and who has lost) is defined by reference to whether a reduction in the amount of the bill of one fifth has been achieved by the client in the assessment (I refer to this as "the one fifth rule"). However, subsection (10) allows the court to modify this position where the costs officer certifies that there are "special circumstances relating to the bill or to the assessment of the bill."

Since 1986, the relevant costs officers (taxing masters or, now, costs judges) have dealt with all aspects of the assessment of bills of costs under section 70 of the 1974 Act, rather than certifying matters to be sent back to the High Court for further consideration. In modern practice, therefore, there tends not to be a formal certification of "special circumstances"; the costs judge conducting an assessment simply identifies any relevant special circumstances in the course of his ruling on the assessment and makes the appropriate order. This is a sensible way of proceeding, but care needs to be taken to ensure that the relevant "special circumstances" are properly identified in the ruling, if no formal certificate is to be drawn up.

Disputes between solicitors and clients regarding the amount of solicitors' bills can be substantial, and the costs of resolving them can likewise be substantial. For example, in the first of the appeals before us, that in the Bentine case, the assessment went on for 12 days in relation to solicitor's bills in the sum of about £145,000. Both client and solicitor benefit from knowing in advance what the basic default rule is governing the costs of an assessment, and what ordinarily counts as winning and losing, so that they can make a rational calculation of the risks involved in proceeding with a disputed assessment before a costs judge. The costs of conducting underlying legal proceedings may already be considerable, and it is in the interests of the parties and the court that the parties have a reasonable idea of where they stand before they incur yet more costs in arguing about those costs and that arguments about the incidence of the costs of arguing about costs should be kept within reasonable parameters in an effort to prevent them becoming disproportionate. In this context, reasonable protection for the expectations of the parties formed on the basis of the default rule is important.

The principal issue in the first of the appeals before us, that in the Bentine case, concerns the proper interpretation of the one fifth rule in section 70(9). The principal issue in the second appeal, in the Stone Rose Brewer case, concerns the application of the "special circumstances" provision in section 70(10).

Bentine v Bentine: factual background

The underlying proceedings in this case concerned a dispute between a mother and a daughter ("Miss Bentine", a respondent in these proceedings) regarding the beneficial ownership of a property. The appellants in these proceedings, Wilsons Solicitors LLP ("Wilsons"), acted as the solicitors for Miss Bentine. In the event, the matter was settled on the basis of a payment of about £30,000 by the mother to Miss Bentine.

In the course of the proceedings between Miss Bentine and her mother, Miss Bentine was assessed to have lost mental capacity, and her GP issued a certificate to that effect dated 2 July 2009. The legal proceedings between Miss Bentine and her mother remained on foot, but there was a hiatus in terms of any ability for instructions to be given by or on behalf of Miss Bentine until the Official Solicitor took over the conduct of the proceedings on her behalf on 3 August 2009. During the hiatus period, however, Wilsons continued to take steps in the proceedings, purporting to do so on behalf of Miss Bentine.

The underlying proceedings were eventually settled, and pursuant to CPR Part 48.3 HHJ Dight ordered a detailed assessment of the costs charged by Wilsons to Miss Bentine. The total of the bills presented by Wilsons to Miss Bentine for their services was £144,837.70, most of which is in respect of profit costs (£110,124 plus VAT). Part of the bills related to work done in relation to the underlying proceedings in the hiatus period, without instructions from Miss Bentine (a total of £7,050, including VAT: "the hiatus period costs"). Another part of the bills related to work done by Wilsons in relation to a dispute with Miss Bentine about the fees which they were charging her (a total of £24,860, including VAT: "the costs dispute costs").

The Official Solicitor sought assessment of Wilsons' bills on behalf of Miss Bentine. It was agreed that the assessment should proceed as an assessment under section 70 of the 1974 Act.

The costs judge, Master O'Hare, disallowed a substantial part of the costs claimed by Wilsons in their bills, allowing recovery of only £94,933.94 of the total sum claimed for the purposes of the calculation for the one fifth rule. The disallowed part of the costs included the hiatus period costs (on the ground that Wilsons had no valid instructions to do the work in that period to which the costs related) and the costs dispute costs (on the ground that these were costs incurred by Wilsons for their own benefit and against their client, and so not properly chargeable to Miss Bentine – recovery by Wilsons of these costs would depend upon the costs order to be made in the assessment proceedings).

The question then arose, what costs order should be made as between Miss Bentine and Wilsons in relation to the costs of the assessment proceedings? For the purposes of application of the one fifth rule, the costs judge held that the one fifth calculation required the hiatus period costs and the costs dispute costs to be brought into account. He considered that this was the natural effect of section 70(9) and did not regard himself as bound by previous authority to reach a different conclusion. A simple comparison was required of the costs billed by Wilsons (about £144,837.70) against the costs actually assessed to be due to them (£94,933.94), the result of which was that Miss Bentine had succeeded in achieving a reduction of more than one fifth in the sum billed to her and so, by virtue of the statutory one fifth rule in section 70(9) of the 1974 Act, and subject to any "special circumstances" and section 70(10), was entitled to have an order made in her favour that Wilsons should pay her the costs of the assessment. The costs judge found that the way in which Miss Bentine's case had been presented had had the effect of increasing the costs of the assessment and that this constituted special circumstances which justified some departure from the default position in Miss Bentine's favour under the one fifth rule. He therefore ordered that Wilsons pay Miss Bentine 60% of her costs of the assessment.

Wilsons appealed. They submitted that the hiatus costs and the costs dispute costs should not be brought into account for the purposes of the one fifth rule, but rather should be regarded as costs attributable to discrete matters in relation to which separate costs orders should be made. The effect of this submission was that Wilsons maintained that the relevant calculation for the purposes of the one fifth rule was to compare the costs billed for matters other than the work in the hiatus period and in relation to the costs dispute: the total costs billed, after removing the hiatus period costs and the costs dispute costs, were therefore £112,927.28, out of which £94,933.94 was assessed to be properly due. On these figures, Wilsons submitted that Miss Bentine had failed to satisfy the one fifth rule, with the result that it was they who should be treated as the successful party in relation to those elements of their bills which fell within the scope of the one fifth rule and a costs order in relation to the dispute in the assessment in respect of those elements should be made in their favour. Wilsons accepted that a separate costs order should be made in Miss Bentine's favour in relation to the dispute in the assessment regarding the recoverability of the hiatus period costs and the costs dispute costs, but the amount of the costs in respect of those matters was considerably less than the costs which were due to them under their interpretation of the one fifth rule.

Proudman J, sitting in the High Court with costs assessors (Master Campbell and Mr Graham Humby), accepted Wilsons' submission regarding the application of the one fifth rule: [2013] EWHC 3098 (Ch). Proudman J considered that she was bound by Court of Appeal authority (In re Taxation of Costs; In re A Solicitor [1936] 1 KB 53 – "In re A Solicitor") in relation to the operation of the predecessor of the one fifth rule contained in section 66 of the Solicitors Act 1932 ("the 1932 Act"). Proudman J held that the hiatus costs and the costs dispute costs each constituted elements in the bill outwith the solicitor's retainer and on the authority of In re A Solicitor, and the old case of White v Milner (1794) 2 H. Bl. 357 which it followed, held that those sums should not be brought into account for the purposes of the calculations relevant to the one fifth rule.

This meant that the decision regarding what costs orders to make was at large for the High Court. However, the court considered that "special circumstances" existed and that, in exercise of the costs discretion under section 70(10), adjustments should be made to the default costs position (which was, on the High Court's view, in Wilsons's favour), it should still award Miss Bentine 60% of her costs of the assessment. The court therefore dismissed Wilsons' appeal.

Wilsons now appeal to this court, contending that the High Court erred in principle in the exercise of its discretion under section 70(10). The Official Solicitor, acting for Miss Bentine and himself, seeks to uphold the High Court's decision under section 70(10), but also by a respondent's notice contends that the High Court erred in law in its interpretation of section 70(9) and the one fifth rule, and that the costs judge's decision on both section 70(9) and (10) should be upheld.

I should also mention that on the appeal Mr Kent QC, for Miss Bentine and the Official Solicitor, made the further submission that, even if he was wrong on the main points on the appeal, the costs judge and the High Court had erred in setting out the relevant figures for the purposes of the calculation for the one fifth rule. He submitted that if an appropriate adjustment were made to take account of the alleged error, then even on the approach of the High Court Miss Bentine had still achieved success under the one fifth rule so as to be prima facie entitled to her costs of the assessment, subject to the costs judge's disallowance of 40% pursuant to section 70(10). However, this was not a point raised on the appeal or in the respondent's notice, and Mr Kent was not given permission to raise it. Moreover, before the High Court it was a matter which Mr Brown, junior counsel (who was acting alone at that stage) for Miss Bentine and the Official Solicitor, had sought to raise in written submissions after the hearing in that court but which, after objection, he had withdrawn: see [11]. Therefore, it was not an issue which Miss Bentine and the Official Solicitor are entitled to pursue in this court and it is unnecessary to say anything more about it.

Bentine v Bentine: discussion

In my judgment, the appeal should be dismissed, but on the basis of reasoning different from that of the High Court. I think that the costs judge was right in his approach to application of the one fifth rule in section 70(9) and that his decision and exercise of discretion under section 70(9) and (10) cannot be impugned and should stand.

In my opinion there are two reasons why the High Court's interpretation of section 70(9) should not be accepted, one short and one rather longer. The short reason is a simple matter of statutory interpretation of the special costs code contained in section 70 of the 1974 Act, as amended: the costs judge was right to hold that the amount of the overall bill presented by Wilsons was reduced by more than one fifth, so the costs of the assessment should be paid by Wilsons, subject to the exercise of his discretion under section 70(10). There is no good reason to divide up different elements within the bill for the purposes of application of the one fifth rule. The longer reason is based on the fact that the decision in In re A Solicitor can be shown to have been decided per incuriam, on the basis of an erroneous understanding of the state of the law prior to the 1932 Act. This requires examination of some very old authorities and statutes, including in particular an Act for the Better Regulation of Attornies and Solicitors of 1729 (2 Geo. 2, c. 23) ("the 1729 Act") and an Act for Consolidating and Amending Several of the Laws relating to Attornies and Solicitors Practising in England and Wales 1843 (6&7 V., c. 73) ("the 1843 Act").

The longer reason is, in my view, part of the background which explains the validity of the short reason. In enacting the special costs code in section 70 of the consolidating 1974 Act, Parliament's primary intention was that, absent ambiguity or significant uncertainty as to its meaning, it should be applied according to its language, given its natural meaning, without the need for reference back to the complexities of the law which preceded it. When Parliament amended the terms of section 70 by the 2007 Act, the effect was that the amendments became part of the consolidating 1974 Act and Parliament's intention remained the same, namely that absent ambiguity of significant uncertainty as to its meaning, section 70 should be applied according to its up-to-date language, given its natural meaning. In the context of this judgment, it is convenient to explain the longer reason first.

The ancient predecessor of the one fifth rule (which was originally a one sixth rule) is section 23 of the 1729 Act, which in relevant part provided as follows:

"… no Attorney or Solicitor of [certain specified courts] shall commence or maintain any action or suit for the recovery of any fees, charges or disbursements at law or in equity, until the expiration of one month or more, after such attorney or solicitor respectively shall have delivered unto the party or parties to be charged therewith … a bill of such fees, charges and disbursements …; and upon application of the party or parties chargeable by such bill … unto the … Lord High Chancellor, or the Master of the Rolls, or unto any of the Courts aforesaid, or unto a Judge or Baron of any of the said courts respectively, in which the business contained in such bill, or the greatest part thereof in amount or value, shall have been transacted; and upon the submission of the said party or parties … to pay the whole sum, that upon taxation of the said bill shall appear to be due to the said Attorney or Solicitor respectively, it shall and may be lawful for [those specified judges], and they are hereby required to refer the said bill, and the said Attorney's or Solicitor's demand thereupon … to be taxed and settled by the proper officer of such court …; and upon the taxation and settlement of such bill and demand, the said party or parties shall forthwith pay to the said Attorney or Solicitor respectively … the whole sum that shall be found to be or remain due thereon …; and in default thereof the said party or parties shall be liable to an attachment or process of contempt, or to such other proceedings, at the election of the said Attorney or Solicitor, as such party or parties was or were before liable unto; and if, upon the said taxation and settlement, it shall be found that such Attorney shall happen to have been overpaid, then in such case the said Attorney or Solicitor respectively shall forthwith refund and pay unto the party or parties intituled thereunto … all such money as the said officer shall certify to have been overpaid; and in default thereof the said Attorney or Solicitor respectively shall in like manner be liable to an attachment or process of contempt, or to such other proceedings, at the election of the said party or parties, as he would have been subject unto, if this Act had not been made; and the said respective courts are hereby authorized to award the costs of such taxations to be paid by the parties, according to the event of the taxation of the bill (that is to say) if the bill taxed be less by a sixth part than the bill delivered, then the Attorney or Solicitor is to pay the costs of the taxation; but if it shall not be less, the court in their discretion shall charge the Attorney or Client, in regard to the reasonableness of unreasonableness of such bills" (emphasis added).

In summary, section 23 of the 1729 Act provided a solicitor's client in receipt of a bill from the solicitor with the option of applying for taxation of the bill (on condition of submitting to abide by the result of the taxation and accepting liability to a process of contempt of court if he failed to do so) as an alternative to enforcement of the retainer agreement according to the ordinary processes of the law. The section provided for a strict rule as to payment of the costs of the taxation by the solicitor, if the client achieved a one sixth or better reduction in the amount of the bill (with no discretion in the court to override that rule), and a more flexible rule if the client failed to achieve such a result.

Case law gradually built up around the application of this provision. White v Milner in 1794 became the leading authority. On a taxation of an attorney's bill received by the client, more than one sixth was taken off; but the deduction was not caused by any over-charges of particular items, but from the whole expenses of defending two actions on behalf of a third party being disallowed, where the attorney had alleged that the client had agreed to pay for such defences, but the court officer accepted the client's denial of this. The court held that the one sixth rule in the 1729 Act "was applicable only where an attorney made exorbitant charges on his client in the particulars of his bill, and the foundation of the demand was not denied, but only the amount of it." On the facts of the case, the deducted items were removed because the foundation of the demand was denied, and so were not to be brought into account for the purposes of the calculation to apply the one sixth rule. Therefore, the client was unable to show that he should have the costs of the taxation by reason of application of the one sixth rule in the statute. The headnote in the report summarised the result thus: "An attorney is not liable to pay the costs of taxing his bill under [the 1729 Act] where the deduction of one sixth is occasioned, not by the particular items being taxed, but by a whole branch of it being disallowed."

White v Milner involved a very clear case in which a part of the bill was severable from the main subject matter of the services for which the client had retained the attorney. But it is not difficult to see that an interpretation of the one sixth rule which turns on whether the "foundation" of a claim is denied (by contrast with whether the claim is exorbitant) or whether a "whole branch" of a claim is disallowed can give rise to uncertainty in many situations. The dividing line will not always be clear. In a sense, an exorbitant claim to be paid fees is made without a proper foundation and it may be hard to analyse particular situations as falling one side of the line or the other with confidence (e.g. what is the position if a solicitor is authorised by his client to retain junior counsel, but exceeds his authority by retaining leading counsel at greater expense? Or if the solicitor spends money to retain an expert witness where that has not been authorised by the client?). In the present case, it is by no means clear that the work done in the hiatus period, in respect of proceedings for which Wilsons had been retained at a time when Miss Bentine had capacity, is properly to be regarded as done without retainer; Blankley v Central Manchester and Manchester Children's University Hospitals NHS Trust [2015] EWCA Civ 18; [2015] 1 Costs LR 119 tends to indicate that the retainer should be taken as continuing in that period. There is evidence in some of the old cases of a degree of dissatisfaction with the statement of the dividing line proposed in White v Milner.

In Rigby v Edwards (1821) 5 Madd. 18, the Vice-Chancellor (Sir John Leach) distinguished White v Milner on the questionable ground that the client was only alleged to be a surety and came to a different conclusion regarding the operation of the one sixth rule in the 1729 Act on similar facts. Again, a solicitor included in the bill to his client costs in relation to steps taken in the defence of proceedings against a third party, but on taxation failed to show that the client had agreed to pay such costs. The Vice-Chancellor took advice from the Chancery clerks, who advised that the sums in relation to the business done for the third party allegedly on the retainer of the client should be brought into account for the purposes of application of the one sixth rule, and he followed this approach. On appeal, however, the Lord Chancellor (Lord Eldon) followed the approach in White v Milner, albeit in a later case in 1821, Pytches v Revett, Lord Eldon expressed some doubt whether he was right to do so (the only report we were shown of both Lord Eldon's decisions is that in an appendix to Beames on Costs, 2^nd ed., 1840, pp. 255-260). White v Milner was also followed in Mills v Revett (1834) 1 A & E 856.

In Morris v Parkinson (1835) 2 C.M. & R. 178, on a taxation of an attorney's bill of costs the master found that one of the actions in which the costs had been incurred had been improperly commenced by the attorney and that the costs referable to that action should be disallowed, with the result that more than one sixth of the bill was taken off. The client claimed to be entitled to the costs of the taxation by application of section 23 of the 1729 Act. In response, the attorney relied on White v Milner and argued that, as in that case, the disallowance of the costs of the action in question constituted disallowance of "one branch of the bill", and so should not be brought into account in the calculation for the purposes of the one sixth rule. It may be noted that this is an example of the way in which the approach in White v Milner creates scope for argument about what constitutes a distinct "branch" of a bill. The court ruled in the client's favour on this issue, and held that the disallowed costs had to be brought into account for the purposes of the calculation under the one sixth rule. Lord Abinger CB and Parke B were plainly unhappy with the approach suggested by White v Milner, albeit they said it was unnecessary to go so far as to overrule it; instead, they distinguished that case because the client was not chargeable with the sum in question and it should have been charged to another person, whereas in the case before them "the sum in question was disallowed, because the attorney ought not to have charged this item at all, and therefore it ought never to have been inserted into the bill" (per Parke B at 180).

The law was changed in material respects by the 1843 Act, section 37 of which provided in relevant part as follows:

"… no Attorney or Solicitor … shall commence or maintain any action or suit for the recovery of any fees, charges or disbursements for any business done by such Attorney or Solicitor, until the expiration of one month after such Attorney or Solicitor … shall have delivered unto the party to be charged therewith … a bill of such fees, charges and disbursements …; and upon the application of the party chargeable by such bill within such month it shall be lawful, in case the business contained in such bill shall have been transacted [in certain specified courts] for the Lord High Chancellor or the Master of the Rolls [or any judge of such courts], and they are hereby respectively required, to refer such bill, and the demand of such Attorney or Solicitor … to be taxed and settled by the proper officer of the court in which such reference shall be made …; and … the costs of such reference shall, except as hereinafter provided for, be paid according to the Event of such taxation; that is to say, if such bill when taxed be less by a sixth part than the bill delivered … then such Attorney or Solicitor … shall pay such costs; and if such bill when taxed shall not be less by a sixth part than the bill delivered … then the party chargeable with such bill [i.e. the client] … shall pay the costs; and every order to be made for such reference as aforesaid shall direct the officer to whom such reference shall be made to tax such costs of such reference to be so paid as aforesaid, and to certify what, upon such reference, shall be found to due to or from such Attorney or Solicitor … in respect of such bill … and of the costs of such reference, if payable; provided also, that such officer shall in all cases be at liberty to certify specially any circumstances relating to such bill or taxation, and the court or judge shall be at liberty to make thereupon any such order as such court or judge may think right respecting the payment of the costs of such taxation …" (emphasis added)

Thus, no formal submission of the client to the taxation jurisdiction was required, the law of contempt was removed from the picture and the taxing officer and court had a wider discretion than previously to disapply the one sixth rule, where special circumstances were certified.

The courts treated this new statutory regime as something which allowed them to make a fresh start, free of the authority of White v Milner. This is clear from the case of In Re Clark (1851) 13 Beavan 173, affirmed on appeal at (1851) 1 De Gex M & G 43. The case concerned a solicitor who had acted for two clients in relation to various matters, including what was alleged by him to have been the bringing of an action on behalf of a third party at the request of one of the clients and against her undertaking to pay the costs of that action. On taxation, the master disallowed the costs of this action, which he found had not been authorised by the client. The master took these disallowed costs into account for the purposes of the one sixth rule, which meant that the clients had succeeded in reducing the bill by more than one sixth; accordingly, the master ordered the solicitor to pay the costs of the taxation. The solicitor appealed, arguing that since the costs of the action on behalf of the third party had been disallowed altogether, White v Milner meant that they should not be brought into account in the calculation for the purposes of the one sixth rule. The Master of the Rolls (Lord Langdale) dismissed the appeal. He took the advice of the taxing masters, who informed him by way of a certificate that since the 1843 Act came into operation it had been considered that the distinction in White v Milner between items to be struck out and items to be taxed off no longer existed: Lord Langdale MR endorsed this view. The certificate of the taxing masters referred to a lack of evidence of a well-defined or consistent practice under the 1729 Act, and went on:

"But, since [the 1843 Act] came into operation, it has been considered that the distinction between items to be struck out and items to be taxed off no longer exists. The new Act, instead of reserving the costs of taxation for the subsequent order of the court, directs them to be taxed and paid at once according to the event, and not merely the costs of the 'taxation', as provided in the repealed [1729 Act], but the costs of the 'reference'. The words of the Acts, and of the common orders thereon, are express, that if the bill, when taxed, be more or less by one-sixth than when delivered, the solicitor or client, as the case may be, is to pay the costs of the 'reference'; and as a bill, if one sixth-part of it be disallowed, is equally within the words of the statute, and is equally less by one-sixth, as taxed, than it was when delivered, whether such one-sixth be deducted or struck out; and as, in such case, the solicitor is to pay the costs of the reference, the question of striking out or taxing off has become a mere arrangement of figures, without any practical effect, while the provision that the taxing officer is to have power to make a special report relating to the bill and taxation was considered to have been introduced for the purpose of enabling either party to obtain relief, if the justice of the case should require the strict rule laid down in the former provision of the Act to be departed from. Since the passing of [the 1843 Act], therefore, the practice of the taxing masters' offices has been uniform not to strike anything out of the bill, but to tax off all items disallowed, and to include the amount of such disallowed items in the computation …"

The solicitor appealed to the Court of Appeal in Chancery, again seeking to rely on White v Milner and arguing that the changes in the 1843 Act did not sufficiently indicate an intention to alter the approach under the 1729 Act and in that case. The Court of Appeal in Chancery upheld the decision of Lord Langdale MR and endorsed the approach of the taxing masters. Speaking for the court, Knight Bruce LJ stated that their interpretation of the 1843 Act was "a rational and beneficial construction".

Unfortunately, the judgments in In re Clark were overlooked by counsel and the Court of Appeal in In re A Solicitor. They were also overlooked by counsel and the courts below in the present case. They were found only by research undertaken by Arden LJ during the course of the hearing, and then raised with counsel.

There were further statutes between the 1843 Act and the 1932 Act, but we were informed by counsel that none of them made any material change to the position set out in the 1843 Act. The 1932 Act was "An Act to consolidate the Solicitors Acts 1839 to 1928, and other enactments relating to solicitors of the Supreme Court." Section 66 of the 1932 Act, the successor to section 37 of the 1843 Act and a predecessor of section 70 of the 1974 Act, made provision for the taxation of a solicitor's bills on the application of a client. Section 66(3) and (5) provided as follows:

"(3) Every order for the taxation of a bill shall require the taxing officer to tax not only the bill but also the costs of the taxation and to certify what is due to or by the solicitor in respect of the bill and in respect of the costs of the taxation.

…

(5) Unless –

(i) the order for taxation was made on the application of the solicitor and the party chargeable does not attend the taxation; or

(ii) the order for taxation otherwise provides,

the costs of the taxation shall be paid according to the event of the taxation, that is to say, if one-sixth of the amount of the bill is taxed off, the solicitor shall pay the costs, but otherwise the party chargeable shall pay the costs:

Provided that the taxing officer may certify any special circumstances relating to the bill or the taxation thereof to the court, and the court may make thereon any such order they think fit respecting the payment of the costs of the taxation."

The first part of subsection (5), which sets out the relevant rule (then a one-sixth rule, which has now become the one fifth rule), is expressed in language which is, so far as material, in identical terms to section 70(9) of the 1974 Act as originally enacted, but which is different from the language which now appears in section 70(9). Section 70(9) now uses the simple and ordinary terminology of the amount of a bill being "reduced" by one fifth, rather than the amount of a bill being "taxed off" by one sixth.

The operation of the one sixth rule in section 66(5) was considered by the Court of Appeal in In re A Solicitor. The case concerned a solicitor's bill addressed to two clients on the footing that they were jointly liable for it, but on taxation one of the clients established that part of the work had been done without retainer from him and solely for the other client. The court held that where items in a solicitor's bill are struck out of it on taxation at the instance of the client, because the business to which the items relate was never included in any retainer given to the solicitor by the client, those items cannot be taken into consideration for the purpose of calculating whether one sixth of the amount of the bill has been taxed off. The argument on this point proceeded solely by reference to the authorities on the 1729 Act, White v Milner, Mills v Revett and Rigby v Edwards. The court assumed that the position under section 23 of the 1729 Act and under section 37 of the 1843 Act was the same: p. 531. This was clearly an error: In re Clark had been overlooked.

In my view, In re A Solicitor was decided per incuriam. Had the court appreciated that, on its proper construction, the 1843 Act had changed the law, so that a reduction in a solicitor's bill due to the client establishing that he had not given the solicitor a retainer to undertake some part of the work for which remuneration was claimed in the bill was a matter to be brought into account for the purposes of the calculation for the one sixth rule, it would have found that section 66(5) of the 1932 Act was to the same effect. As In re Clark made clear, the concept of "taxation" in this context involved drawing no distinction between different ways in which a solicitor's bill might fall to be reduced, so the natural meaning of the words used in section 66(5) was in line with the interpretation of the one sixth rule in the 1843 Act endorsed in In re Clark. Moreover, the 1932 Act was a consolidating statute, in a line of other consolidating statutes, so if there had been any doubt about the meaning of section 66(5) the court should have gone back to the 1843 Act and the authorities on the interpretation of the one sixth rule in section 37 of that Act: see Farrell v Alexander [1977] AC 59. This would have led to the same conclusion.

Mr Hutton QC, for Wilsons, submitted that there is a material difference between the wording of section 37 of the 1843 Act and section 66(5) of the 1932 Act, in that the former spoke of an order in relation to the costs of a "reference" and the latter of "the costs of the taxation", so that the interpretation given to the one sixth rule in the latter provision in In re A Solicitor should be taken to be correct notwithstanding In re Clark. I do not accept this submission, for two reasons. First, the difference in language is not significant. It is attributable to the way in which the 1843 Act describes the process by which a matter would come before a costs master (on the making of a reference to the master), whereas by 1932 the equivalent process was described as an "order that the bill be taxed" (section 66(1)). Secondly, and in any event, what matters for the purposes of the one sixth rule is how the "event" (defining success for one party or the other) is described, and it is described in closely similar language, and by reference to what happens when the bill is taxed, in both provisions.

After the 1932 Act, the next relevant statute is the Solicitors Act 1957 ("the 1957 Act"). This was again a consolidating statute. It re-enacted section 66 of the 1932 Act without any material change.

The 1974 Act is itself a consolidating statute. As I have pointed out, section 70(9) as originally enacted defined the "event of the taxation" in identical terms to section 66(5) of the 1932 Act, save for the substitution of "one-fifth" for "one-sixth". Subject to that change, the one sixth rule in section 70(9) had the same meaning as in section 66(5).

The language of "taxation" was changed to the language of "assessment", in the form in which section 70 now appears, by the 2007 Act, in line with other changes made by that Act. The language of part of a bill being "taxed off" was changed to the more straightforward language of the amount of a bill being "reduced". Those changes did not indicate any intention to revert to the old position under the 1729 Act, as set out in White v Milner.

For these reasons, I consider that the High Court was wrong to treat In re A Solicitor and the earlier cases on the 1729 Act as authority which supported the interpretation it gave to the one fifth rule (as it now is) in section 70 of the 1974 Act. Had the court had its attention drawn to In re Clark and understood the interpretation given to section 37 of the 1843 Act, it should have concluded that the costs judge in this case was right to bring the reductions in Wilsons' bill in respect of the hiatus costs and the costs dispute costs into account for the purposes of the calculation for the one fifth rule.

There is also a simpler and more direct route to the same conclusion which in my view, as already indicated, ought to be regarded as the proper analysis in this case. Section 70 of the consolidating 1974 Act sets out a self-contained code for dealing with assessment of costs due from a client to a solicitor under a bill, where the client applies to the court for such assessment. It has been kept up to date by Parliament by amendments made by the 2007 Act. Those amendments form part of the consolidating 1974 Act, as Parliament intends that it should now stand and be read. Where Parliament passes a consolidation Act, especially where (as here) it sets out a self-contained code for dealing with a particular topic in one place and keeps the code up to date as appropriate for the context, the inference is that Parliament intends the Act to be construed according to its natural linguistic meaning, without the need for reference back to the prior legislative history or previous authority unless there is an ambiguity or real doubt about its meaning. The presumption is that a consolidation Act is intended to be a reliable statement of the law on which citizens can rely according to its ordinary meaning, as read as it stands at the date it falls to be applied.

Since there are differences of view within the Court, I should say here that this is only a presumption as to Parliament's intention when construing a consolidation Act. It is possible to imagine situations in which that presumption might be outweighed by other relevant factors. For example, if there were a Supreme Court decision which gave an authoritative interpretation of a particular original statutory provision the year before it was repealed and then re-enacted in a consolidation Act and a government White Paper, Law Commission report or discussion in parliamentary debate made it clear that Parliament was aware of the decision and intended in re-enacting the provision to endorse the interpretation laid down in that decision, one could readily see that Parliament should be taken in that case to have legislated by reference to that particular decision and in that respect to have intended to depart from the usual presumption applicable to consolidation statutes.

But I consider that the present case is a long way away from that sort of situation and that the usual presumption as to Parliament's intention when enacting a consolidation Act applies. As a consolidation Act, the 1974 Act, as amended, is intended by Parliament to be given effect as a legislative statement containing a single integrated body of law to be interpreted as at the relevant date on which it falls to be applied, without any need for reference back to the same or similar provisions as they appeared in earlier legislative versions or to authority on those versions: see the speeches of the majority in Farrell v Alexander [1977] AC 59 at 73B-C (Lord Wilberforce), 82B-D and 83D-H (Lord Simon of Glaisdale) and 97B-E (Lord Edmund-Davies). Therefore, in my opinion, the court's main task in this case should have been to construe section 70(9) of the 1974 Act (as amended) as it existed at the time of the dispute, giving the words used in it their natural meaning.

However, as the majority also stated in Farrell v Alexander, where, after undertaking such an exercise, a provision which falls to be applied is found to be ambiguous, a subordinate presumption comes into play, namely that it is presumed that there was no intention to change the meaning of the provision which has been taken and repeated in the same or similar language in the consolidation Act. In such circumstances, it may be relevant to try to determine the meaning of the relevant provision by looking to see what it meant in a previous statute, including by reference to authority on the provision as it appeared in that statute: see [1977] AC 59 at 73B (Lord Wilberforce), 84D-H (Lord Simon of Glaisdale) and 97B (Lord Edmund-Davies).

As I read the judgments in Farrell v Alexander, this summary accurately sets out the ratio decidendi of the decision. For the purposes of deciding that case Lord Wilberforce regarded it as necessary to decide what consequences attach to the enactment of a consolidation Act, clarifying the position which had been left uncertain after earlier discussion of the issue in Maunsell v Olins [1975] AC 373, and laid down the relevant approach authoritatively: pp. 72E-73F. As he said,

"unless the process of consolidation, which involves much labour and careful work, is to become nothing but a work of mechanical convenience, I think this tendency [to look back through the history of a consolidation Act's various provisions, and the cases decided upon them, and minutely trace the language from Act to Act] should be firmly resisted: that self-contained statutes, whether consolidating previous law, or doing so with amendments, should be interpreted, if reasonably possible, without recourse to antecedents, and that the recourse should only be had when there is a real and substantial difficulty or ambiguity which classical methods of construction cannot resolve. This is particularly true of Acts such as the Rent Act 1968 which have to be applied by county courts, and which have to be understood or at least explained to great numbers of citizens."

I observe here that similar general considerations apply in the present case. In particular, for a client litigating against his solicitor over the solicitor's bill, where the client may often be representing himself, it is important that the client should be able to rely on what appears to be the clear meaning of section 70(9) of the 1974 Act as it currently stands in understanding what the costs risks are of proceeding in that way.

Lord Wilberforce found that there was no ambiguity in the provision of the consolidation Act which fell to be interpreted in Farrell v Alexander – section 85(1) of the Rent Act 1968 – and based his decision on what he had found to be its clear meaning without reference back to authority on the previous Rent Acts: p. 73F.

Lord Simon of Glaisdale was similarly clear in his speech. He again took the House to be deciding the question of principle of the proper approach to the interpretation of a consolidation Act: p. 81E. Lord Simon was an experienced parliamentarian and gave a helpful account of the process of consolidation of statutes: pp. 82B-83D. But he emphasised at pp. 83D-85C that the approach to construction of a consolidation Act is equivalent to that described by Lord Wilberforce: "The initial judicial approach is the same as with the interpretation of any other statute", and not "via the statutes it has replaced" (p. 83D-E); and it is only if there is found to be an ambiguity that "that may sometimes (though rarely) be resolved by examination of the superseded legislation" (p. 84H). Lord Simon regarded section 85 as unambiguous and gave his decision accordingly: see p. 84H and pp. 88G-89A. He described the argument presented by reference to the previous legislation and authority on that legislation as being, in the absence of ambiguity, "fallacious" for the reasons he had previously explained: p. 86B.

Lord Edmund-Davies also identified the question of whether it was correct in construing the Rent Act 1968 as a consolidation Act to refer to the construction placed on earlier Rent Acts as "the main controversy" which the House had to resolve: p. 93H. He resolved that controversy by adopting the same approach as Lord Wilberforce and Lord Simon, holding that it is legitimate to refer to the earlier legislation only where there is an ambiguity in the consolidation Act: pp. 94B-94F. In relation to a consolidation Act, Lord Edmund-Davies said, at p. 97B, "On the decided cases, only if its wording is ambiguous and its ambit obscure is one permitted to consider its legislative ancestry"; and he emphasised at p. 97A-D that this was the principled point of difference between himself and the dissentient in the case, Lord Russell of Killowen. Lord Edmund-Davies's conclusion was that there was no ambiguity in section 85, and he decided the case accordingly: pp. 95D and 97E.

Of the other members of the appellate committee, Viscount Dilhorne agreed with the majority as to the meaning of section 85 and agreed that it was unambiguous (pp. 77G-78A), although he did go on to consider the previous legislation and authorities on it. He did not in terms disagree with the statements of principle by Lords Wilberforce, Simon and Edmund-Davies regarding the proper approach to interpretation of a consolidation Act, and though it could be said that such disagreement is implied by his discussion of the previous legislation and authority on it, the inference that he meant to disagree is somewhat attenuated by the fact that he had already expressed a clear conclusion as to the meaning of section 85 by reference to the terms of the 1968 Act taken by itself. Lord Russell of Killowen dissented. He held that the proper interpretation of section 85 should begin with the antecedent legislation and authority on it (p. 98E-G), in disagreement with the principle laid down by the majority, as Lord Edmund-Davies was at pains to emphasise. To my mind, this serves to highlight the centrality in the reasoning of the majority of the approach they held should be adopted in construing the Rent Act 1968 as a consolidation Act.

The position as summarised in the leading commentary reflects what the majority in Farrell v Alexander decided: "In the first instance, a consolidation Act is to be construed in the same way as any other Act", and it is only if "any real doubt as to its legal meaning arises" that other subsidiary aids to interpretation apply, such as that it is presumed that Parliament did not intend to make a change to the law when enacting a consolidation Act: see Oliver Jones, Bennion on Statutory Interpretation, 6^th ed., section 211. It may be noted that the same approach applies to a codifying Act, namely that one starts with the provisions of the Act itself and construes them according to their natural meaning, and it is only if "any real doubt as to its legal meaning arises" that other subsidiary aids to interpretation apply, including again that a codifying Act is presumed not to be intended to change the law: ibid., section 212, citing the speech of Lord Herschell LC in Bank of England v Vagliano Bros. [1891] AC 107 at 144 –

"I think the proper course is, in the first instance, to examine the language of the statute, and to ask what is its natural meaning, uninfluenced by any considerations derived from the previous state of the law, and not to start with enquiring how the law previously stood, and then, assuming that it was intended to leave it unaltered, to see if the words of the enactment will bear an interpretation in conformity with this view. If … treated in this fashion it appears to me that its utility will be almost entirely destroyed and the very object with which it was enacted will be frustrated. The purpose of such a statute surely was that on any point specifically dealt with by it, the law should be ascertained by interpreting the language used, instead of, as before, by roaming over a vast number of authorities …"

What is common to the two kinds of statute, consolidating and codifying, is that Parliament intends thereby to lay down a new legislative statement of the law which citizens may safely rely upon where its ordinary linguistic meaning is clear. In both cases, Parliament intends that they should be spared the time, effort, expense and uncertainty involved in researching the position under previous legislation and in earlier case-law.

I drew the attention of the parties to Farrell v Alexander as an authority relevant to the appeal and asked Mr Hutton for his submissions on this issue, since the wording of the 1974 Act as amended seemed on the face of it to be against his client's position and it was important that he should have a fair opportunity to deal with this point. Mr Kent, for his part, submitted that effect should be given to section 70(9), as amended, according to what he maintained was its plain and unambiguous meaning.

As regards section 70 of the 1974 Act, I consider that the considerations that one is dealing with a self-contained code which has been kept up to date by Parliament as part of a consolidating statute indicate that the interpretive presumptions explained in Farrell v Alexander apply. Parliament does not intend that there should be any reference back to previous law, including even if there was some binding authority on previous similar or identical statutory provisions, if the interpretation of the present provision according to the natural meaning of the words used is clear – that would defeat Parliament's object in taking the trouble to create a self-contained code in a consolidation Act to which people may refer and on which they may safely rely where the meaning of the words used in that Act is clear.

As I have explained above, there has been a change in the language used to express the one sixth or one fifth rule from that used in section 66(5) of the 1932 Act and the original version of section 70(9) of the 1974 Act (which employ the technical concepts of "taxation" and sums "taxed off") to that used in section 70(9) as it stood at the relevant time and currently stands (which employs the ordinary language of "assessment" and of amounts in a bill being "reduced"). In my view, on the natural meaning of the words used in section 70(9) of the 1974 Act as it stood at the relevant time and currently stands, the effect of that provision is clear. Wilsons presented a bill in the sum of £144,837.70, and on assessment it was reduced to £94,933.94, i.e. by more than one fifth. Miss Bentine has therefore succeeded in satisfying the one fifth rule, and – subject to section 70(10) - the costs of the assessment should follow that event, as the costs judge held. Moreover, the unsatisfactory nature of any dividing line of the kind set out in White v Milner, referred to above, points strongly against any inference that Parliament intended such a dividing line to be read into section 70(9): it would be likely to give rise to more arguments and hence cost, in the context of a procedure which is intended to be as simple and inexpensive as possible and a rule (the one fifth rule) which is supposed to provide clarity and reasonable certainty for parties in advance of any decision to embark on costs assessment proceedings. There is no ambiguity which requires reference back to the position under any of the 1729, 1843 or 1932 Acts, with all the hazards of misunderstanding and omission of relevant materials that involves.

In my judgment, the High Court erred in effectively starting its interpretive analysis (by following In re A Solicitor) with the 1729 Act and then trying to see how the law had changed since then. The proper starting point should have been section 70(9) of the 1974 Act as it stood at the relevant time and currently stands, with reference back to earlier law only if giving the language of that provision its natural meaning reveals an ambiguity, which it does not.

In light of the change in the language of section 70(9) from that of section 66(5) of the 1932 Act, it cannot be said that the decision in In re A Solicitor would have provided binding authoritative guidance (assuming it had not been decided per incuriam) on a provision with identical wording in the previous legislation. It is therefore unnecessary to address the position in the perhaps more difficult case which would have arisen if at the relevant time section 70(9) of the 1974 Act had still been in the terms in which it was originally enacted, using language identical to that in section 66(5) of the 1932 Act on which this court pronounced in In re A Solicitor. I venture to think that the position would still have been that which I consider was laid down by the majority in Farrell v Alexander, namely that one should start afresh with the provision in the consolidating 1974 Act, giving it its natural meaning, and only resort to looking at authority on previous legislative provisions if an ambiguity or real doubt as to its meaning were detected. Had that been the relevant task, I would still have been inclined to think that it was clear on the ordinary meaning of the words used in section 70(9), as originally enacted, that Miss Bentine had succeeded in the taxation according to the one fifth rule and should be awarded her costs of the taxation. But we did not hear detailed argument on this, and I express no final conclusion about it.

For the reasons set out above, I would dismiss the appeal in the Bentine case, but for reasons different from those given by the High Court. It is unnecessary to examine whether Wilsons' argument that the High Court erred in the exercise of its discretion is correct or not.

Stone Rowe Brewer LLP v Just Costs Limited

I turn to the second appeal before us, in the Stone Rowe Brewer case. This is concerned with the operation of section 70(10) of the 1974 Act. It arises in a case in which one firm of solicitors, Stone Rowe Brewer LLP ("SRB"), was the client of another firm of solicitors ("Just Costs") which provided SRB with legal services. Just Costs presented SRB with 15 bills of costs, totalling approximately £33,000. SRB applied for a detailed assessment of those bills. It was common ground that they should be assessed together on an aggregate basis.

As regards five of the bills, amounting to about £20,000, SRB contended that it was not liable to pay because Just Costs was in repudiatory breach of the retainer agreement, which SRB had accepted. The resolution of this issue generated significant costs in the course of the assessment. There were also issues whether Just Costs had agreed to a reduction in its hourly rates in the course of the retainer and whether the costs charged were excessive.

In the event, just before the hearing commenced before the costs judge (again, Master O'Hare) the parties managed to agree an overall sum due under the aggregated bills of £23,700, which represented a reduction of about 30% of the total amount of the bills. The parties did not allocate any part of the settlement sum to particular bills, elements of bills or matters in dispute; it was a compendious compromise agreement. However, the parties left the question of what costs order should be made in respect of the assessment proceedings for determination by the costs judge. This meant that the costs judge inevitably had to deal with matters in a rather broad-brush way, since he was being asked to decide what costs order should be made without the benefit of going through a full hearing on the merits. He had been put in this position by the agreement made by the parties and cannot be criticised for addressing the matter in such a fashion.

Following the agreed aggregate approach, the costs judge correctly held that SRB was the winning party under the one fifth rule in section 70(9) and should recover its costs of the assessment, subject to special circumstances and section 70(10).

Just Costs submitted that special circumstances did exist. The main part of the dispute related to the issue of repudiatory breach in respect of the five bills totalling £20,000, in respect of which if SRB had been successful Just Costs' recovery would have been nil. Just Costs maintained that they had succeeded in substance in defending itself against SRB's claim of repudiatory breach, which had taken up most of the costs of preparation, and the costs order to be made should reflect this. In fact, in advance of the hearing and the making of the settlement agreement, Just Costs had conceded, for other reasons, that SRB had no liability to pay in respect of one of the five bills (the King bill).

The costs judge agreed that special circumstances existed such that he should order SRB to pay 70% of Just Costs' costs of the assessment. His reasoning is as follows:

"1. As far as Stone Rowe Brewer is concerned, 15 bills were sent for detailed assessment. So far today the parties have managed to agree all of those save the costs of assessment. I understand the total of those bills was in the order of £33,000 and the aggregate reduction is in the sum of just 70% of that. In respect of those 15 bills five of them totalled about £20,000 in value and there were allegations of repudiatory breach which if established would reduce those bills to zero. Of the other ten, the challenges were of a more commonplace nature as to quantum. In applying what we call the one-fifth rule, one ordinarily looks at the aggregate reductions to get the reduction per court hearing rather than per bill, and on that basis the one-fifth rule would indicate [SRB] should receive their costs unless there are special circumstances, and special circumstances have been advanced by [Just Costs]. They point out that as to the majority of these costs where 100% reduction was sought [Just Costs] not [SRB] are victors. On the majority of costs they have achieved a high percentage of recovery. I am not quite sure if it is as high as 80% - it probably is not – but nevertheless they have achieved far more than half the value of those five bills. And on the other bills although they have lost on those things nevertheless I am told that most of their costs and most of the paperwork in this bill would have related to the difficult allegations of repudiatory breach.

2. It seems to me that most of the argument in this case and therefore most of the costs incurred in this case is likely to relate to the first five bills [i.e. those in relation to which repudiatory breach was alleged] in respect of which [Just Costs] have been victors in four of them [i.e. the four apart from the King bill, which had been conceded by Just Costs prior to the hearing]. I do not think the other ten bills would have generated costs in the same way. They would not have generated counsel's fees; they would not have generated witness statement costs; they would not have generated a hearing longer than one day with costs lawyers on each side. In fact the costs claimed by each side exceed the costs in dispute … in these bills, and [Just Costs'] claim for costs in fact exceeds the full costs claimed in these bills. I think I ought to take an issues-based approach. I accept that special circumstances are shown. By taking an issues-based approach, I should look at who was the victor in different parts and in order not to make an issues-based order, then evaluate those different parts and make an order which gives one side or the other the relevant percentage. I think the overall victor in this case is [Just Costs]. I think they are the victors as to four out of five of the bills and most of these proceedings were about those. [SRB] is the victor as to that one bill and also as to the ten others, ten others in value lower then the first five and the ten others leading to an assessment of a more commonplace kind. I therefore think I ought to allow [Just Costs] their costs of the hearing but reduce those costs in two ways. I reduce them first in respect of their loss on the King bill by 10%. I have not made it simple and given them four-fifths of their costs. I have assumed that a lot of these costs would have been incurred anyway on the others, and I ought to allow them their costs less 10% in respect of the King bill. I ought to make a further reduction in respect of the other ten bills and I think that reduction is a further 20% so overall I think in the special circumstances of this case [Just Costs] are entitled to their costs of these proceedings but limited to 70% of those costs. I think the commonplace arguments would have led – whether it was ten bills or 15 - … to a hearing without counsel, without witness statements and a one-day hearing, and these things often crack, especially where, as here, there are very experienced costs professionals on both sides. This is not the ordinary solicitor/client dispute. This is a solicitor/client dispute where the client is also a solicitor. I am content that my figures are the ones at which I want to arrive."

SRB appealed to the High Court (Andrews J sitting with Master Campbell as assessor). Andrews J allowed the appeal: [2014] EWHC 219 (QB). She held that the costs judge erred in finding that "special circumstances" existed within the meaning of section 70(10). He should not have examined the individual bills to see on which Just Costs could be regarded as the winner if they had been assessed separately and the one-fifth rule applied to each of them; nor could it be said that there was anything exceptional about the fact that the issues raised in respect of those bills were more complex or generated more costs in the assessment than the issues in respect of the other bills – "That is something which could occur in any case like this one, in which the order for assessment covers numerous bills": [29].

In my view, the test whether "special circumstances" exist for the purposes of section 70(10) is the same as for the same phrase as used in section 70(3). In the context of section 70(3), Lewison J observed in Falmouth House Freehold Co. Ltd v Morgan Walker LLP [2010] EWHC 3092 (Ch); [2011] 2 Costs LR 292, at [13]:

"Whether special circumstances exist is essentially a value judgment. It depends on comparing the particular case with the run of the mill case in order to decide whether a detailed assessment in the particular case is justified, despite the restrictions in section 70(3). In Re Cheeseman [1891] 2 Ch 289 the Court of Appeal held that it would not interfere with the decision of the first instance judge on whether special circumstances existed except in a strong case. All the more so, in my judgment, where the value judgment has been made by a specialist costs judge. …"

A similar approach applies in relation to section 70(10), the question being whether something so outside a run of the mill case has occurred as to justify departing from the prima facie result given by the default one fifth rule in section 70(9).

Andrews J took a narrow view of the sort of matter which might qualify as "special circumstances" for the purposes of section 70(10). Having referred to the statement by Lewison J in Falmouth House Freehold Co. at [25], she said this at [26]:

"That approach is of limited assistance in the context of Section 70(10) because that subsection deals with circumstances justifying depriving the party regarded as the overall winner of the prescribed benefit of his success, whereas a finding of "special circumstances" under Section 70(3) operates so as to confer the right to a detailed assessment upon someone who would not ordinarily be entitled to it. In the context of subsection (10), and on the normal understanding of the language of the phrase, it would appear that there should be grounds which would make it unfair for the normal consequences prescribed by the Statute to apply; and those grounds would have to be exceptional. Therefore, the question that the costs judge has to ask himself is whether or not there is something that has happened in the case which, exceptionally, makes it unfair that the claimant should not get the costs to which it is presumed he is entitled because he has succeeded in reducing the overall bill by more than 20%."

I think that Andrews J's use of the word "exceptionally" here indicates a test which is rather too narrow. In Riley v Dibb Lupton Alsop (1997) 147 LJ 1422 Sedley J observed, in the context of section 70(3) of the 1974 Act, that "special circumstances" do not have to be "exceptional". The same is true in the context of section 70(10). It is better not to gloss the language used in section 70(10), albeit one should bear in mind when applying that provision that one is looking for something significant and out of the ordinary course which justifies departing from the prima facie one fifth rule set by Parliament.

The sort of value judgment which is called for in the context of section 70(10) is one which a costs judge as experienced as Master O'Hare is well-placed to make. When deciding whether "special circumstances" existed, I can see no reason in principle why he should not have had regard to the way in which particular issues arose in the proceedings and the outcome achieved in relation to them. Although I did wonder whether Master O'Hare went too far in describing Just Costs as "the overall victor", and failed thereby to give proper weight to the fact that according to the one fifth rule in section 70(9) SRB was the successful party, I consider on balance that this phraseology does not indicate any error of law or approach on his part. He had specifically reminded himself earlier in his ruling that SRB was the successful party according to the one fifth rule. In applying section 70(10), Master O'Hare was entitled to attach the respective weight that he did to the usual position under the one fifth rule and to the overall outcome for the parties on the issues debated in the proceedings.

In my view, Master O'Hare did not misdirect himself and was entitled to make the assessment regarding special circumstances which he did in this case, and the High Court erred in criticising and displacing the evaluative judgment which he made. I would therefore allow this appeal.

Sir Bernard Rix:

I did not intend to write a judgment of my own, but I have been asked to do so in the light of the element of disagreement which has developed between Lord Justice Sales and Lady Justice Arden with respect to the learning to be derived from Farrell v. Alexander [1977] AC 59. In the circumstances, I would also wish to say something in connection with the significance of the statutory rule in favour of the solicitor's client whereby a reduction of 20% in the solicitor's bill counts as a success earning the client the full costs of the assessment, in the absence of special circumstances. The former point arises in the appeal in Bentine v. Bentine, the latter point in the appeal in Stone Rowe Brewer LLP v. Just Costs Limited.

Bentine v. Bentine

I agree with my Lord and my Lady as to the proper outcome of the appeal in Bentine v. Bentine. However, whereas Sales LJ considers that Farrell v. Alexander justifies what he has described as "a simpler and more direct route to the same conclusion" (at paras 42ff above), Arden LJ has doubted the correctness of this second route and has expressed the provisional view that, in the light of the dicta of Lord Dilhorne and Lord Simon in Farrell v. Alexander, this court would remain bound by In re A Solicitor [1936] 1 KB 53 had it not been decided per incuriam for the reasons explained in the judgment of Sales LJ.

I should state at once my opinion that, in light of the fact that we did not have anything like full argument on the significance of Farrell v. Alexander, it would be safer, as my Lady suggests and as Sales LJ accepts at para. 57 above, not to express a final view on how far the reasoning of the majority in Farrell v Alexander should be taken to extend when dealing with a case where a provision in a consolidation Act is in identical terms to the provision in the previous statute which has been repealed and consolidated and there is binding authority on the meaning of the provision as it appeared in that previous statute. However, since my Lord and my Lady have nevertheless expressed the views they have in their judgments, I would simply state the following observations as to the structure of the disagreement.

First, I am doubtful that it would be right to view the 1974 Act, as amended, as in pari materia with the 1932 Act which was considered, alongside the earlier statutes of 1729 and 1843, in In re A Solicitor. Section 66(5) of the 1932 Act provided: "if one-sixth of the amount of the bill is taxed off"; whereas section 70(9) of the 1974 Act, in the amended form it had at the relevant time, provided: "if the amount of the bill is reduced by one fifth". Nothing of course hangs on the change from one-sixth to one-fifth, but the language of "reduced" is much more general than "taxed off". It is to be noted that the earlier statutes of 1729 and 1843 had also used the language of "taxed". It may be arguable, as it was at an earlier time, that "taxed off" does not apply to a retainer point, which is not so much a point of taxation as of contract; but that argument could hardly apply to the more general language "reduced". I note that in In re A Solicitor at 532 Scott LJ said this:

"We think that the phrase "taxed off" contained in the Solicitors Act, 1932, means a reduction of the bill by the Taxing Master where the business involved is within the retainer, and not where the client says: "This is business with which I have no concern, it ought never to have been in the bill at all.""

It might be said that Scott LJ there assimilated the phrases "taxed off" and "reduced". However, I think that what he is really saying is that "taxed off" has a narrower meaning, limited to reduction by way of taxation of costs within a retainer. Therefore I am inclined to think that one is entitled to view the 1974 Act, as amended, as a consolidation statute that stands on its own feet as such, crafted in different language from the earlier statutes.

Secondly, if I am right in that view, then In re A Solicitor ceases to be a binding authority as a matter of precedent. On that basis, it is unlike Zimmerman v. Grossman [1972] 1 QB 167, the earlier Court of Appeal decision in Farrell v. Alexander: for that was a decision on the same statute (the Rent Act 1968) as was the subject of consideration in Farrell v. Alexander. It follows that it might not be necessary to consider In re A Solicitor as "indistinguishable" in the same way as Zimmerman was considered to be (see Lord Simon at 92F).

Thirdly, in the context of the "simpler and more direct route" proposed by Sales LJ, I do not think that one should logically regard In re A Solicitor as necessarily binding on this court in the presence of the altered language of section 70(9) of the 1974 Act. If the language had been identical, then it seems to me that this court might continue to be bound, even though the 1974 Act was a consolidating statute, for it would be a starting hypothesis that there was a previous decision of this court on the identical wording.

Fourthly, where therefore an earlier decision is arguably binding on identical or arguably identical wording, there might be difficulties in applying the teaching of Farrell v. Alexander as to the interpretation of consolidation statutes, so helpfully identified in the passages cited in Sales LJ's judgment.

In sum, as I began by saying, in the absence of full argument on Farrell v. Alexander and its learning for the situation which would have arisen if section 70(9) of the 1974 Act, as amended, had been in terms identical to section 66(5) of the 1932 Act, as interpreted in In re A Solicitor, I would prefer, like Arden LJ, to express no final view as to the effect of Farrell v Alexander in such a case. However, on the amended version of section 70(9) which is applicable in this case, I consider that, as I have suggested, the altered language of section 70(9) is materially different and clear. As it transpires, it is just as well that my Lady's own researches were able to bring to light the important authority of In re Clark (1851) 13 Beavan 173, (1851) 1 De Gex M & G 43, since on the basis of that authority we are all in a position to agree as to the result in the Bentine appeal.

Stone Rowe Brewer LLP v. Just Costs Limited

I agree with Sales LJ and Arden LJ that the costs judge, Master O'Hare, was entitled to form the view that there were "special circumstances" and that he was not therefore bound by the one-fifth rule in section 70(9) of the 1974 Act, as amended, to award all the costs of the assessment to the client, here the respondent (SRB).

However, I am troubled by the way in which Master O'Hare proceeded from that point in awarding to the solicitor, here the appellant, 70% of its costs of the assessment. Such a turnaround from a liability for 100% of the client's costs, to the recovery of 70% of its own costs, is worthy of careful consideration.

That consideration is all the more pertinent where the statute defines a 20% reduction as amounting to victory for the purpose of the allocation of costs; where the client is normally a consumer (although in this case a firm of solicitors), so that the one-fifth rule is regarded as a piece of consumer protection; and where there was a settlement on the basis that the 20% threshold had been crossed, indeed comfortably crossed. Settlements are much to be desired and encouraged.

The statute of course permits the 20% rule to be escaped in the presence of "special circumstances". That opens up a discretion to depart from the statutory rule whereby a 20% reduction of the solicitor's bill would otherwise require the client to receive all its costs. In agreement with Sales LJ this court is deciding that "special circumstances" should not be interpreted as narrowly as the judge would have done. In the circumstances there is all the more reason to ensure that the statutory protection given to the client by the 20% test is not lost sight of.

I do not think that it would be right, therefore, to consider that a costs judge who has found special circumstances has an entirely unfettered discretion to do whatever he wants. The judge is in my opinion bound by the overall considerations which operate in the context of costs allocations and which can be found for instance set out in CPR Part 44. Moreover, ex hypothesi the client has beaten the 20% marker which makes him, in the eyes of the statute, the overall winner in the dispute which has been entered upon. Therefore, although the 20% rule may be supplanted, the statutory test of who is the winner should not be lost sight of.

There is jurisprudence in such a context (ie where the party who has "won" the litigation nevertheless is subject to considerations which affect the normal rule of an award of costs in favour of the winner) designed to assist the court to achieve a principled fairness and consistency.

One such decision is Kastor Navigation Co Ltd v. AGF Global Risks (UK) Ltd ("The Kastor Too") [2004] EWCA Civ 277, [2004] 2 Lloyd's Rep 119, [2004] 4 Costs LR 569. The relevant costs section of what is otherwise a long report are helpfully set out in the Costs Law Reports. The claimant there claimed on its hull insurance for the loss of its vessel. When it began its proceedings its only claim was for an actual total loss. Some time later, however, it added an alternative case for a constructive total loss, on the basis that at some time prior to the vessel's sinking it had been so damaged by fire that the cost of repairing her would have exceeded her value. At trial the actual loss claim failed, but the constructive total loss succeeded. Indeed, the insurers admitted the fire on the eve of trial and accepted the constructive total loss by the close of the trial. However, the actual total loss claim had occupied most of both the 17 day trial and the pre-trial work. In a separate decision concerning the costs of the litigation [2003] EWHC 472 (Comm), the judge, Tomlinson J, adopted an issue based approach and awarded the claimant 15% of its overall costs but awarded the insurers 85% of their overall costs. Since the parties' costs were agreed to be about the same, the overall effect of these orders was to grant the insurers a net 70% of their costs and the claimant nothing (at para [141]). The insurers appealed, and the claimant cross-appealed on the question of costs.

The reasoning which led Tomlinson J to his costs order was very similar to that of Master O'Hare in the present case. As the judgment of this court (Tuckey, Rix and Neuberger LJJ) put it:

"[128] Based on these findings the judge said that he was satisfied that the making and pursuit of the actual total loss claim substantially lengthened and increased the costs both of the action and of the trial. It was simply inconceivable that a claim for a constructive total loss alone would have generated costs on anything like the scale which had in fact occurred. This conclusion did not involve a finding that the owners had acted unreasonably or improperly but the judge referred to his view of the owners expert evidence 'should such considerations be relevant'."

That is the way in which Master O'Hare reasoned his award of costs, for he said:

"2. It seems to me that most of the argument in this case and therefore most of the costs incurred in this case is likely to relate to the five bills in respect of which the Defendants have been victors in four of them. I do not think the other ten bills would have generated costs in the same way. They would not have generated counsel's fees; they would not have generated witness statement costs; they would not have generated a hearing longer than a day with costs lawyers on each side…I think I ought to take an issues-based approach. I accept that special circumstances are shown."

However, in this court in The Kastor Too the judge's costs award was overturned and an order of no order as to costs was substituted. The reasoning of this court was as follows. First, it concluded that the claimant was entitled to be regarded as the winner in the litigation, or, in the language of CPR 44.3(2)(a) as the "successful party" (at para [143]). Secondly, it reminded itself that "the rules confer a wide discretion on trial judges on questions of costs. This court must exercise restraint when it is asked to upset orders for costs and should only do so if they are flawed" (at [148]). Thirdly, it said that there was nothing wrong in the judge adopting an issue by issue approach to his costs order (at para [149]). But the judge had erred in simply visiting "the mathematical outcome of the issue by issue approach on the owners. This took no account of the other factors to which we have referred" (at para [153]).

The Kastor Too has been recently followed by this court in The Northampton Regional Livestock Centre Company Ltd v. Cowling and Lawrence [2015] EWCA Civ 651, [2015] 4 Costs LO 477. Tomlinson LJ there said:

"111. Like the trial judge in Kastor Navigation Co Ltd v. AGF MAT ("The Kastor Too") [2004] 2 Lloyd's Rep 119, as it happens me, the judge here did not start from the general rule that the successful party is entitled to its costs. Adopting the approach of the Court of Appeal in that case, it was in my view "an error of approach simply to visit the mathematical outcome of the issue by issue approach" on the claimant – see per Rix LJ at page 149. One needs to stand back from the mathematical result and ask whether in all the circumstances it is the right result."

In my judgment Master O'Hare in the present case has made the same error as in The Kastor Too and Cowling and Lawrence. He has adopted an issue based approach (he was entitled to do that, having found "special circumstances") but in doing so he has simply adopted the mathematical outcome of doing that and has wholly lost sight of the fact that under the basic 20% test it was the client, not the solicitor, who was the overall winner, or what the CPR calls the "successful party". It seems to me clear that he has done that both from what he said in his judgment and from the outcome of the order that he has made, viz an order in which the client recovers none of his costs but is required to pay 70% of the costs of the solicitor. He said:

"2…By taking an issues-based approach, I should look at who was the victor in different parts and make an order which gives one side or the other the relevant percentage. I think the overall victor in this case is in fact the Defendant [ie the solicitor]. I think they are the victors as to four out of five of the bills and most of these proceedings were about those. The Claimant is the victor as to that one bill and also as to the ten others, ten others in value lower than the first five and the ten others leading to an assessment of a more commonplace kind. I therefore think I ought to allow the Defendants the costs of the hearing but reduce those costs in two ways. I reduce them first in respect of their loss of the King bill [one of the five] by 10%...I ought to make a further reduction in respect of the other ten bills and I think the reduction is a further 20% so overall I think that in the special circumstances of this case the Defendants are entitled to their costs of these proceedings but limited to 70% of those costs."

It seems to me to be entirely clear that the judge has wholly put out of his mind that the client was the overall winner under the 20% rule, and directed himself completely by reference to the consequences of an issue by issue approach. That is what he says. He said "I should look at who was the victor in different parts and make an order which gives one side or the other the relevant percentage". The solicitor obtained 70% of its claim and was awarded 70% of its costs. The judge said in terms "I think the overall victor in this case is in fact the [solicitor]". I know that earlier in his judgment he referred to the "one-fifth rule" and to the exception to it opened up by "special circumstances". He could hardly have done otherwise. It is just as in The Kastor Too Tomlinson J had referred to the fact that the claimant had won a (large) financial recovery, and one that had exceeded the insurers' Part 36 offer, of course he knew that, but he had then, once he had decided to adopt an issue-based approach, approached that mathematically and without taking the claimant's victory into account. I do not say that Master O'Hare had immediately forgotten that the client had won on the 20% test, but that he had considered himself entitled to put it out of his mind when once he had found special circumstances.

It seems to me that that is an error of law and/or principle, and that it entitles this court to reach its own conclusion as to the correct award of costs. Of course, if I thought the correct order was little different from the solution of Master O'Hare, I would not think it right to interfere. As a matter of principle, I think it would be wrong to do so, to tinker as it were with the judge's solution. However, I think that in the circumstances of this case, making as generous an allowance as I would think it right to do in favour of the solicitor for the "special circumstances" found by the judge, I would not go further than to deprive the client of its costs and to say no order as to costs.

In reaching this conclusion, and emphasising, as I have already done, a complete acceptance of the matters identified by the judge in his judgment, I would nevertheless point to the following matters, which the respondent client has raised and which I consider worthy of recital: (i) the aggregate reduction was about 30% of the total claimed (29.6% to be precise), in other words the 20% line was well beaten; (ii) in order to achieve that 30% reduction, the respondent had had to access the court in pursuance of its right to do so under The Solicitors Act 1974; (iii) it was only on the day fixed for the assessment that the appellant, the solicitor, settled the claim for a reduction (with the exception of one bill which had been conceded by the solicitor earlier): in other words it was only at the doors of the court that the 20% line was breached; (iv) even in respect to the five bills (mentioned by the judge) where the broader issue of repudiation had been raised the reduction was more than 20%, indeed it was 34%; (v) the hearing was due to take two days, but the judge himself allowed that the disputes apart from those concerned with repudiation would have required a "one-day hearing"; (vi) the judge made no adverse findings as to conduct; (vii) the judge referred to the fact that in this case the "client" in a solicitor/client dispute was also a solicitor: but I would have thought that this was a neutral factor and in any event the "solicitor" was a costs specialist; (viii) parties to The Solicitors Act assessments who settle their proceedings on the basis that the 20% line has been crossed should not find themselves in peril, even where there are special circumstances of the kind identified here, of finding themselves treated as the overall losers and prima facie made liable for the whole of the solicitor's costs. There might be other circumstances based on conduct, or on failure to match an offer to settle, or where the solicitor had made early concessions and the litigation was entirely down to the client's perseverance in failure: but none of such possibilities applied in the present case.

Given the significance of the 20% statutory rule and the importance of encouraging settlement and the help which the 20% test ought to give to disputants in this context as a guide, even in the presence of special circumstances, I consider the judge's approach to be unfortunate.

I would therefore allow the appeal on the basis on which we are all agreed, that Andrews J limited the nature of "special circumstances" too far; but I would have for myself wanted, with respect to the different views of my Lady and my Lord, to hold that Master O'Hare had erred in law and/or in principle in making such a severe order against a client who had crossed the 20% line, and I would have thought that no order as to costs was the fair order.

Lady Justice Arden DBE:

Summary of my conclusions on both appeals

For the reasons given below, I agree with Sales LJ as to the orders he proposes on both appeals, and save to the extent indicated below, with the reasons that he gives.

The alternative ground on which Sales LJ would allow the appeal in Bentine v Bentine is that In re A Solicitor [1936] I KB 53 was decided per incuriam and that this Court is bound by Re Clark [1851] I De Gex M& G 43. I agree.

The other ground is whether, if In re A Solicitor was not per incuriam, and binding on the High Court and this Court, this Court could interpret section 70 of the Solicitors Act 1974 ("the 1974 Act") (as amended by the Legal Services Act 2007 ("the 2007 Act")) in the light of its clear meaning, and without regard to In re A Solicitor. Sales LJ describes this as the "simpler and more direct route" and he considers it in paragraphs 42-57 of his judgment. It was not, however, fully argued by the parties although Sales LJ helpfully referred to Farrell v Alexander [1977] AC 59 during the hearing. For the reasons given in this judgment, I would, however, leave open the question whether a consolidation statute should be interpreted without reference to previous case law where that previous case law consists of a prior binding decision on the meaning of a statute consolidated. I note that Sir Bernard Rix agrees with my approach on this.

In the Stone Rowe Brewer appeal, I agree that the appeal should be allowed for the reasons given by Sales LJ but wish to deal with the points raised by Sir Bernard Rix in his judgment. We all agree that a costs judge, determining costs under section 70(10) of the 1974 Act, should not lose sight of, or forget, who was the winner under the 20% rule in section 70(9). It follows that he should give such weight to that factor as he thinks fit having regard to all the circumstances of the case. In my judgment, Master O'Hare would not have forgotten that the claimants were the winners under section 70(9) when he made his order under section 70(10). Given the limitations of appellate review in relation to the exercise of discretion, I conclude that this Court cannot set aside order of Master O'Hare. It would not be enough for the Court to conclude that it would have made some other order.

Farrell v Alexander and the interpretation of consolidation statutes where there is a prior binding decision on the statute consolidated (the other ground of Sales LJ's decision in the Bentine appeal)

Farrell v Alexander establishes, that where the meaning of a consolidation statute is clear, the court should not generally investigate its "antecedents" (see per Lord Wilberforce at 73, Lord Simon at 83 and Lord Edmund Davies at 97). It should interpret the statute afresh according to its ordinary meaning. Those antecedents include earlier judicial authorities as well as earlier legislative provisions. But it does not follow that the interpretation of a consolidation statute in this way authorises the court to ignore some earlier authority on an earlier legislative provision which has been consolidated where that authority is binding on it under the doctrine of precedent.

I proceed on the basis that, in this present case, there is no material difference between the relevant statutory language considered in In re A Solicitor and that in section 70 of the 1974 Act. The Solicitors Acts 1957 to 1974 were all consolidation Acts. There was an intervening statutory amendment, namely section 15 of the Solicitors (Amendment) Act 1974. This altered the percentage in what is now section 70(9) from one-sixth to one-fifth, but this does not affect the essential character of the provision. That remained unchanged from 1932 onwards. It may be possible to distinguish In re A Solicitor on the basis that the relevant part of the provision had changed because of the change from "taxed off" to "reduced", brought about by the 2007 Act. The word "reduced", however, is used as defining the event of the assessment and so, while it is not necessary to reach a final view, it seems to me that the better view would be that the change is immaterial and was merely consequential on the procedural change from the "taxation" of costs to the "assessment" of costs. That interpretation would leave intact the ratio in White v Milner (1794) 2 H.Bl.357 and Mills v Revett (1834) 1 Ad. and El. 856, which were both followed in In re A Solicitor: the principle established by those cases is if on taxation part of the bill is struck out on the basis that the client is not the person liable for such part, the disallowance of that part is not a "reduction" upon taxation within the meaning of the statute.

I return to the principle established by Farrell and its convergence with the doctrine of precedent. The next step in my reasoning is to consider the position in Farrell itself. The question was whether a statutory prohibition on the payment of sums required to be made as a condition of the grant of a protected tenancy application applied where the existing tenant imposed the requirement, rather than the landlord. In the case in question, that payment had been required by an existing tenant without the landlord's knowledge. This Court had held in the judgment under appeal in that case ("the third decision") that it was bound by an earlier decision of the Court of Appeal ("the second decision") (Zimmerman v Grossman [1972] 1 QB 167), which had in turn held that it was bound by a third decision of this Court (Remmington v Larchin [1932] 3 KB 404) which had been made on an earlier statute, which had used different language. The House of Lords in Farrell did not need to decide whether any of those decisions of this court was binding on this Court because a majority (of 4 to 1) preferred a different interpretation of the statutory provision in question and because the House was not in any event bound by what this Court had decided.

In the event only three members of the majority dealt with the point question whether this Court was bound (on either the second or third occasions). Lord Wilberforce held that it was unnecessary to consider whether this Court was in the second case bound by the first decision: in his judgment, it was right that the first decision should be overruled. The remaining members of the majority were Lord Dilhorne, Lord Simon and Lord Edmund-Davies, of whom only Lord Dilhorne and Lord Simon considered the hypothesis with which the alternative ground of Sales LJ's judgment is concerned, namely that this Court was bound by one of its earlier decisions. The important point is that each of them considered that this Court was so bound. This was the case even though the statute was a consolidation statute.

Thus both Lord Dilhorne and Lord Simon, for different reasons, held that this court in the decision under appeal was bound by the second decision. That meant that this Court had to follow the second decision and not interpret the consolidation statute without reference to its antecedents. For his part, Lord Edmund-Davies drew a distinction between the second and third decisions. He upheld the first decision and held that the second decision was wrongly decided. He concluded that this Court in reaching the decision then under appeal was wrong to accept that it was binding on it. It followed that the question with which I am presently concerned did not arise on his approach. As I have said, the only two relevant expressions of opinion were those of Lord Dilhorne and Lord Simon.

In all the circumstances, I would not express a final view on Sales LJ's alternative ground based on Farrell. My provisional view is that this court remains bound by the doctrine of precedent even if it is interpreting a consolidation statute, and that its decision can only be reversed by a decision of the Supreme Court. In the rare case where this problem arises, there can usually be a short hearing in this Court, which, if satisfied that it is bound, will principally be concerned with whether it should give permission to appeal to the Supreme Court or leave that matter to the Supreme Court itself.

Applying that to the present case, on my provisional view, if this Court had not found that In re A Solicitor was decided per incuriam it would have to have followed In re A Solicitor notwithstanding that section 70 was a consolidating provision. Indeed it would have followed In re A Solicitor because section 70 was a consolidating provision. It would only not have been so bound if the language of the relevant provision had been materially different from that considered in In re A Solicitor, on which, for the reasons given above, I have doubt.

Stone Rowe Brewer LLP v JustCosts Ltd: can this Court set aside the decision of Master O'Hare regarding the costs of assessment?

I agree with the judgment of Sales LJ on this issue, and would add the following observations in response to the important points made by Sir Bernard Rix.

The statutory scheme in subsections (9) and (10) of section 70 of the 1974 Act has, so far as material to this appeal, the following features:

i) where the solicitors' bill is reduced by 20% or more, the claimant will receive his costs of the assessment, unless the costs judge finds that there are special circumstances; and

ii) if the costs judge finds that there are special circumstances, he may make such order "as it may think fit."

If the costs judge finds "special circumstances", must he nonetheless give weight to the provisions of section 70(9), i.e. to the fact that under that sub-section, the claimant was winner, when he or she comes to determine the costs of the assessment under section 70(10)? The answer to that question entails some analysis of what policy section 70(9) is on its face intended to pursue. In my judgment, the policy behind section 70(9) is that the remedy under section 70 should be efficacious and that potential claimants should not be disincentivised from bringing claims under section 70 by the usual costs-shifting rule. The result of the usual cost-shifting rule would be that, if the solicitors were successful in obtaining judgment for their bill they would in the absence of other factors obtain an order for costs. Without section 70(9), this would be so even if it was reduced by 20% or more. Section 70(9) displaces that result.

Sir Bernard Rix has held Master O'Hare, in performing an issues-based assessment of costs under section 70(10), gave insufficient weight to the statutory winner under section 70 (9). He derives support from Kastor Navigation Co Ltd v AGF MAT ("The Kastor Too") [2004] 2 Lloyd's Rep 119 (Tuckey, Rix and Neuberger LJJ) (claim for loss of ship under insurance policy on bases that the ship was either an actual total loss or a constructive total loss: success on the latter issue). This court held that the successful party was the ship-owner and that it was wrong in principle to make an issues-based assessment which took no account of this fact. This decision was recently applied in The Northampton Regional Livestock Centre Company Ltd v Cowling (Arden, Tomlinson and King LJJ). This was a claim for an account of profits for breach of duty against two partners. It failed against partner A at trial, and an alternative claim for damages in negligence as a director for effectively the same loss failed against him also. This court found that both partners were liable for breach of trust and reversed the trial judge's order for costs under which the claimants had had to pay the greater part of the costs assessed on an issues basis.

In the Kastor Too (at 151), this court distinguished the case where there were separate claims. So too in Northampton Regional there was effectively only one loss for which compensation was sought. That is not the situation in this case. There are several separate bills and so the question of who is the winner in a case where there are separate claims can be established in exactly the way that Master O'Hare held. It is not a simple question of looking to see in whose favour the final judgment is issued.

My approach to section 70(10) is as follows. I accept that the statutory policy expressed in section 70(9) is not necessarily made irrelevant by a finding that there are special circumstances under section 70(10). It may be that, in deciding what order to make under section 70(10), the court will consider it appropriate to take into account the fact that Parliament intended that claimants under section 70 should have some protection. But, I do not consider that it has to be given weight in every case where there are special circumstances. The wide words used by Parliament in section 70(10) make it clear that the court may, dependent on the circumstances, decide to give the section 70(9) outcome no substantial weight. It is, as I see it, a factor to which the costs judge may give weight according to the circumstances of the case. This is so even though bills of costs would normally be aggregated for the purpose of ascertaining who was the winner under section 70(9). The simple fact is that that provision is not a requirement under section 70(10). The weight to be given under section 70(10) to who is the statutory winner under section 70(9) is a matter for the discretion of the Master or costs judge, and this Court should not interfere unless the result is perverse or the Master or costs judge has misdirected himself on a matter of law.

How are these points to be applied in the present case? First, it is apparent from the first part of his judgment (which Sales LJ has set out) that Master O'Hare was well aware of the fact ("the section 70(9) outcome") that the claimants were the winner under section 70(9). It would be formalistic to set aside his order under section 70(10) because he does not repeat that point when he comes to consider his order under that sub-section. It would I think be fair to assume that he had that point in mind in the remainder of his judgment.

Was the failure by Master O'Hare to give the section 79(9) outcome weight under section 70(10) reviewable on appeal? In my judgment, the answer to this question is also no. I have explained already that I do not consider he was bound to do so. It was a matter for his discretion and it is not shown that his decision was perverse or that it took into account matters that ought to have been excluded, or vice-versa. The relevant circumstances here included the fact that the claimants were a commercial client and could be treated as experienced litigators. In addition, it could have protected its position under section 70 (10), as Master O'Hare said, by making an offer which was without prejudice as to costs.

I respectfully do not consider that the exercise by Master O'Hare of his discretion was perverse or otherwise such that this Court can set it aside. I will explain why I have reached that conclusion in the remaining paragraphs of this section of my judgment.

In the first paragraph of his judgment (set out by Sales LJ above), Master O'Hare explains the background. In the second paragraph he concludes special circumstances are shown and that he ought to take an issues-based approach. In the course of argument, he had summarised without opposition from Counsel what he considered an issues-based approach to involve in these terms:

"Take an issues based approach but not make an issues-based order."

This is reflected in the direction which Master O'Hare gives himself in the following part of his judgment:

"By taking an issues based approach, I should look at who was the victor in different parts and in order not to make an issues based order, then evaluate those different parts and make an order which gives one side or the other the relevant percentage."

I respectfully draw attention to the fact that the summary which Sir Bernard Rix gives in his judgment of this part of Master O'Hare's judgment omits the crucial fact that Master O'Hare directed himself that he should first look at who was the victor in the various parts and then, "in order not to make an issues-based order", then evaluate those different parts and make an order which gives one side or the other the relevant percentage, he directs himself that he will evaluate the different parts [bills] and make an order which gives one side or the other the relevant percentage after all appropriate deductions for that bill have been made.

Thus, Master O' Hare deals first with the point that the defendant was the victor in the case of four of the five bills and makes a point that most of these proceedings were about those five bills. Those bills totalled £20,000 and in respect of the four bills the defendant recovered about 85% on average. The final bill was the King bill, amounting to £4,000, on which the claimants were the victors because the defendant conceded that the conditional fee agreement between the parties did not apply because the required "success" was not achieved. The claimants were, as Master O'Hare points out, the victors on the King bill. In respect of that bill Master O'Hare makes a reduction of 10% against the total amount of costs. Since Master O'Hare was evaluating the different parts and making an order which gave one side or another the relevant percentage, he was not attributing 10% to the King matter. He was in fact making a deduction of 5%: the defendant had to pay that amount to the claimants and would not be entitled to recover that part of the total costs so 10% had to be deducted from the final amount to be awarded in the defendant's favour. Sir Bernard Rix put this point to Counsel for the appellant in argument that the judgment of Master O'Hare had to be treated as having this effect. Counsel accepted that. It was not an improbable percentage because an aliquot share of the total amount claimed for the costs of amounts attributable to a single bill was about 7%.

Master O'Hare performs the same task with the final ten bills. He must have thought that the claimants ought only to get 10% of the incurred costs in respect of all those bills so that the total reduction from the amount payable to the defendant was 20%. He explains why he thought that should be so. Had it not been for the point wrongly taken about repudiation, there could have been listing for a one day hearing without counsel and without witness statements and there would likely to have been a settlement.

Moreover, while the issue on the five bills, on which the claimants won four, went to 100% of the bills, the issue on the ten other bills was only whether the hourly charging rate should be £146 or £111. The parties compromised on that issue. The total amount claimed on the bills was £13,000. The compromised amount was £10,500. So the reduction was only £2,500. This meant that the dispute on the ten bills was comparatively small in value in contrast to the four bills on which £20,000 was recovered. In my judgment, Master O'Hare was clearly entitled to take into account in the exercise of his discretion the disproportionality of costs and the comparative value of the bills. Master O'Hare was clearly of the view that the costs which had been incurred on the dispute as to costs in the present case were disproportionate.

The respondents submit on this appeal that the finding that most of the evidence related to the repudiation issue was wrong but in my judgment this was a finding of fact which Master O'Hare was entitled to make. The respondents further argue that the defendant was not the winner. In my judgment, the defendant clearly was the winner on the four largest bills on an issues-based approach. On this, I agree with the judgment of Sales LJ.

The various deductions that Master O'Hare made amounted to 30%. I do not consider that it is shown that Master O'Hare deducted 30% because that was the amount of the bill which the defendant failed to recover. His reasoning is in my judgment inconsistent with that conclusion.

For all these reasons, on this appeal, I agree with the order which Sales LJ proposes. Therefore that appeal will be allowed.