Reform of the Solicitors Act 1974, Part III
Four reforms still missing
The Civil Justice Council (CJC) published its consultation paper on reform of Part III of the Solicitors Act 1974 on 23 April 2026. The consultation closed on 16 July 2026 and the Working Group intends to publish its final report by early 2027.1 This article considers whether the proposals go far enough, particularly for commercial clients.
Executive summary
The proposals would substantially recast Part III. They would introduce an overarching principle that solicitors’ charges be fair and reasonable, remove the distinction between contentious and non-contentious business, abolish the statutory bill, and create a graduated system for resolving costs disputes.2 These are significant reforms. They would not, however, ensure that clients receive sufficiently clear and enforceable information about likely costs before substantial liabilities are incurred. The procedural changes need to be accompanied by enforceable duties of price disclosure and budgeting at the outset of the retainer.
Four reforms should be added to what the CJC proposes: replacement of the one-fifth costs threshold in section 70(9) with a proportionate costs regime; publication of hourly rates by firms undertaking substantial commercial work; a mandatory short-form key-terms and costs disclosure; and an enforceable framework for early solicitor-client budgets and costs-risk assessments.
Composition of the Working Group
No disrespect is intended to any member of the Working Group, whose experience and credentials are evident, and the concern is institutional rather than personal. The Group is drawn from the judiciary, the Senior Courts Costs Office, the Law Society, the Solicitors Regulation Authority and the Legal Services Board.3 The published membership does not identify anyone appointed specifically to represent clients or consumer bodies, an independent costs practitioner, or a commercial client with experience of challenging a substantial bill. On a consultation concerned with the regulation and challenge of solicitor-client costs, that is a gap worth naming, and one the CJC could close before the final report.
What the CJC proposes
The consultation paper is a thorough piece of work and its diagnosis is unsparing. The CJC describes Part III as “seriously out of date” and “complex, formalistic and outmoded”, and traces parts of its structure to the Attorneys and Solicitors Act 1729.4 Four proposals carry most of the weight.
First, solicitors’ charges would be subject to an overarching principle that they be “fair and reasonable” by reference to the matter in question, judged objectively, applying both to the amounts charged and to the contractual terms governing remuneration, including hourly rates and commitments to hours-based charging where the time spent is excessive.5 A charge that failed the test would be capped at such amount as would be fair and reasonable.6 Guidance would be modelled on regulation 3 of the Solicitors’ (Non-Contentious Business) Remuneration Order 2009, updated and extended to contentious business.7
Second, the distinction between contentious and non-contentious business would be removed.8 Third, the statutory bill would be abolished, with the content, format, signature and delivery of bills governed instead by conduct rules and rules of court, and the ladder of time limits in section 70 replaced by a single period of one year from receipt, whether or not the bill has been paid.9
Fourth, disputes would be graduated. Under Route 1, a client within the Legal Ombudsman’s jurisdiction whose costs fall below a suggested £50,000 threshold would exhaust the firm’s internal complaints procedure, then complain to the Ombudsman, and could petition the court only on obtaining permission by showing good reason why a further level of review was justified.10 Under Route 2, applying where the client falls outside that jurisdiction or the costs exceed the threshold, a mandated attempt at alternative dispute resolution would precede court proceedings.11
Route 1 may improve access for clients whose complaints fall within the Ombudsman’s jurisdiction, and the CJC is right that the High Court is a disproportionate forum for modest bills. The Court of Appeal said as much in Karatysz.12 The permission stage, however, may itself become a barrier, and the CJC accepts that the model “simply will not function unless adequate funding is made available” to an Ombudsman that already struggles to meet its complaint-handling targets.13 Larger commercial clients, and other clients outside the Ombudsman’s jurisdiction, would generally fall into Route 2, where mandatory ADR precedes the court. The scheme should be tested against the cost and practicality of challenging a bill under each route.
General observations
Where the proposals do not go far enough is on price. They would not require any firm to tell a prospective client what it charges. Nor would they add a more prescriptive statutory requirement governing when and how a firm must estimate the likely total cost, update that estimate and warn the client before materially exceeding it. The paper contains no proposal on the publication of rates and none on solicitor-client budgets. In one respect it separates the issues: the proposed fairness test would exclude the manner in which the agreement was reached, leaving disclosure failures principally to conduct rules and consumer law.14
Part III has been amended repeatedly, most comprehensively by Schedule 16 to the Legal Services Act 2007 with effect from 1 January 2010, which replaced the language of taxation with that of assessment throughout.15 Its architecture is nonetheless inherited from much older legislation and remains built on statutory concepts and assessment machinery that the CJC itself regards as seriously out of date. The absence of accessible and comparable price information has preserved a substantial information asymmetry between firms and clients, which weakens informed choice and, over time, confidence in the profession.
In 1998, I published an article in The Legal 500 addressing weaknesses in the computerised time recording and billing practices then used by many leading firms.16 The article included a survey of the hourly rates actually charged by major commercial firms, as distinct from the Guideline Hourly Rates used in summary assessment. Those rates are a different creature: they emerged from the Woolf reforms and the introduction of summary assessment under the Civil Procedure Rules in April 1999, were consolidated in the Supreme Court Costs Office’s Guide to the Summary Assessment of Costs, and have been the responsibility of the Master of the Rolls since 2007.17 The underlying transparency issue remains unresolved.
The Legal Services Board asked me to deliver an internal seminar on this subject in 2010. In its 2012 interim baseline report on the market impacts of the Legal Services Act, the Board identified only three sources of price information available to it over time: the ONS experimental prices index, the Guideline Hourly Rates, and an annual hourly rates survey of larger corporate solicitors’ firms.18 I have not identified any subsequent publicly available survey with comparable coverage of the hourly rates charged by leading commercial firms.
A Law Society Gazette commentary published in February 2024 observed that no one had “really had a handle on what the big City firms charge from year to year” since that annual snapshot stopped, and recorded the conclusion that magic circle rates had doubled in 15 years.19 I expect to publish my latest and final hourly-rate survey in September 2026.
Four reforms still missing
1. Replace the one-fifth costs threshold
Section 70(9) of the Solicitors Act 1974 provides that, unless the order for assessment or an order under section 70(10) otherwise provides, the costs of an assessment are paid according to its event: if the amount of the bill is reduced by one fifth, the solicitor pays those costs; otherwise the party chargeable pays them.20 It is a costs-allocation rule, described by Sir Geoffrey Vos MR as “simply about fixing a rule of thumb for determining which side pays the costs of what can be a complex and expensive exercise”.21 It places a substantial costs risk on a client who challenges a bill and secures a reduction of anything less than a fifth.
The threshold is a blunt mechanism. Section 70(10) allows the costs officer to certify special circumstances and the court to make such order as to the costs of the assessment as it thinks fit, and the Court of Appeal has made clear that it will use that discretion against disproportionate challenges even where the one-fifth threshold is crossed.22 Liability for the costs of an assessment should not ordinarily turn on whether the reduction falls just above or just below twenty per cent. Costs consequences should reflect the degree of overcharging, the conduct of the parties and the proportionality of the challenge, rather than a single numerical threshold. That falls squarely within consultation question 13, which invites views on other provisions of Part III that should be reviewed or removed.23
The cost of assessment proceedings already deters many challenges. The party-and-party regime provides a useful benchmark: bills of £75,000 or less are ordinarily dealt with by provisional assessment, and recoverable assessment costs are capped at £1,500 plus VAT and court fees where the matter does not proceed beyond that stage.24 The risk created by the one-fifth threshold compounds that deterrent and should be replaced with a proportionate costs regime. The replacement should follow the discretionary model in CPR 47.20(3), with particular regard to the amount and percentage of the reduction, settlement offers, the parties’ conduct, and whether it was reasonable to claim or dispute particular items.
2. Require publication of hourly rates
The SRA Transparency Rules already require the publication of price and service information, but only for a closed list of nine categories: residential conveyancing, uncontested probate, immigration applications and certain immigration appeals, summary-only road traffic matters, unfair and wrongful dismissal claims for employees and employers, debt recovery up to £100,000, and licensing applications for business premises.25 Most complex commercial transactional and disputes work falls outside that regime. The question is whether an appropriately adapted publication requirement should be extended to that market.
Firms undertaking substantial commercial work should publish their standard rates or indicative ranges where they charge by time, state when the information was last updated, specify whether VAT is included, and explain that negotiated discounts, blended rates and alternative fee arrangements may produce different charges. Any requirement would need safeguards against misleading comparisons and should be assessed for possible competition effects. Ranges, fee-earner grades and update dates would be more informative than a mandated single tariff.
The Competition and Markets Authority’s legal services market study, published on 15 December 2016, found that consumers “find it hard to make informed choices because there is very little transparency about price, service and quality”, and recommended new minimum standards of disclosure. It confined itself to individual consumers and small businesses, however, and expressly treated larger firms serving corporate clients as “outside the scope of our market study”.26 In the stakeholder discussions I attended during that study, no persuasive reason was advanced for exempting major City firms from publishing this basic pricing information. Publication would improve comparability, support informed client choice and give regulators more reliable market evidence.
3. Require a short-form key-terms and costs disclosure
Industry-wide contractual terms would create rigidity and would not suit the range of retainers in the market. The better mechanism is a mandatory, short-form key-terms and costs disclosure, presented consistently and in plain language, covering pricing, scope, assumptions, funding, termination, complaints, limitations of liability and the material cost risks the client is accepting. Model wording could be published without requiring every firm to adopt an identical contract.
Current documentation is long and fragmented across appendices. In the Post Office group litigation the claimants recovered £57.75m, of which some £46m was absorbed by legal costs, leaving an average of about £20,000 each against claims a parliamentary committee put at around £700,000 apiece.27 On the material I saw at the time, the billing and costs documentation, including counsel’s formal opinion, ran to roughly 113 pages and the funding agreement to close to 50. The version of the documentation made available to me did not contain full information about the funder’s charges. That is my own account rather than a matter of public record.28 In discussions I had with a number of sub-postmasters, many did not understand the combined effect of the retainer, the funding agreement, the insurance and the deductions from their recovery. Those discussions were anecdotal and were not a representative survey. Informed consent, rather than formal disclosure, is the right regulatory objective.
4. Strengthen budgets and early costs-risk assessments
This recommendation concerns the estimates and costs information given by the solicitor to the client. It is distinct from an inter partes costs budget prepared for case-management purposes under Part 3 of the Civil Procedure Rules, which caps what a losing opponent may be ordered to pay and says nothing about what a solicitor may charge its own client.
Paragraph 8.7 of the SRA Code of Conduct already requires a solicitor to ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and, when appropriate, as the matter progresses, about the likely overall cost of the matter and any costs incurred.29 That duty is right in principle and too loose in practice. A framework should specify when the initial estimate is due, the tolerance and assumptions on which it is given, the trigger for revision, the notice required before it is materially exceeded, and the consequence of a failure to update it.
Specification without enforcement changes nothing. There should be consequences where a firm fails to provide a compliant estimate, fails to update it, or provides one not prepared with reasonable care. The courts already give effect to that principle on solicitor-client assessment.30 The distance between an approved budget and actual expenditure can be very large. In Winehouse v Parry the claimant’s budgeted costs were £160,850 including VAT and his actual costs by April 2026 were £951,080, a gap the judge attributed to his own conduct of the litigation.31 In the Duke of Sussex’s claim against Associated Newspapers the parties’ combined budgets were initially just over £38.8m, which the court held to be manifestly excessive and reduced to approved figures of £4.084m and £4.445m; the defendant is now reported to be claiming £34.5m.32 These cases illustrate why inter partes costs management cannot substitute for solicitor-client budgeting: approved recoverable budgets may diverge sharply from actual expenditure. They do not establish that either client received inadequate information from their solicitors.
Conclusion
The CJC has proposed a serious set of procedural reforms and its diagnosis of Part III is correct. The weakness is that the reforms bite only after the bill has arrived, when the client is already committed. A client who cannot discover what a firm charges before instructing it, and who is not told what the matter is likely to cost as it proceeds, is no better protected by a cheaper route to complain afterwards. Replacing the one-fifth threshold, requiring publication of rates, imposing a short-form key-terms disclosure and making solicitor-client estimates enforceable would supplement what the CJC proposes rather than compete with it. The final-report phase gives the Working Group an opportunity to consider them.
Notes
- Civil Justice Council, Reform of the Solicitors Act 1974, Part III: Consultation Paper (23 April 2026), para 1.9. The document is a consultation paper, not an interim report.
CJC Consultation Paper – official PDF - Ibid, paras 4.3, 4.11, 4.12–4.19 and 4.23.
CJC Consultation Paper - Ibid, Appendix C. The membership list on the CJC’s project webpage has not been updated and differs from Appendix C.
CJC Consultation Paper - Ibid, para 1.6.
CJC Consultation Paper - Ibid, para 4.3.
CJC Consultation Paper - Ibid, para 4.9.
CJC Consultation Paper - Ibid, paras 4.6–4.7.
CJC Consultation Paper
Underlying legislation: Solicitors’ (Non-Contentious Business) Remuneration Order 2009 - Ibid, para 4.11.
CJC Consultation Paper - Ibid, paras 4.23–4.28.
CJC Consultation Paper - Ibid, paras 4.14–4.16 and Question 8.
CJC Consultation Paper - Ibid, paras 4.17–4.18.
CJC Consultation Paper - Karatysz v SGI Legal LLP [2022] EWCA Civ 1388 at [45] (Vos MR).
Karatysz v SGI Legal LLP – BAILII judgment - CJC Consultation Paper, para 4.21.
CJC Consultation Paper - Ibid, paras 4.5 and 4.10.
CJC Consultation Paper - Legal Services Act 2007, Sch 16, para 65, in force 1 January 2010 (SI 2009/3250). Part III was also amended by the Courts and Legal Services Act 1990 and the Crime and Courts Act 2013.
Legal Services Act 2007 – Schedule 16
Legal Services Act 2007 (Commencement No. 15) Order 2009 – SI 2009/3250 - The Legal 500 (1998). The 1998 print edition is not digitised and the article is not available online.
No hyperlink available. - Civil Justice Council, Guideline Hourly Rates (January 2021), paras 1.1 and 2.7–2.8; Master of the Rolls, Guideline Hourly Rates 2026, in force 1 January 2026.
Civil Justice Council – Guideline Hourly Rates Report 2021
Master of the Rolls – Guideline Hourly Rates 2026 - Legal Services Board, Market Impacts of the Legal Services Act: Interim Baseline Report (2012), paras D.12.11–D.12.12 and Figure 53.
Legal Services Board – Market Impacts of the Legal Services Act 2012 - Paul Rogerson, “Margin calls”, Law Society Gazette (February 2024).
Paul Rogerson, “Margin calls” – Law Society Gazette - Solicitors Act 1974, s 70(9).
Solicitors Act 1974 – section 70 - Karatysz (n 12) at [33].
Karatysz v SGI Legal LLP – BAILII judgment - Solicitors Act 1974, s 70(10); Karatysz (n 12) at [45].
Solicitors Act 1974 – section 70
Karatysz v SGI Legal LLP – BAILII judgment - CJC Consultation Paper, Question 13.
CJC Consultation Paper - CPR 47.15(1) and (5); Practice Direction 47, para 14.1. Those provisions govern the detailed assessment of costs payable by one party to another and are cited here as a policy benchmark, not as a rule applicable to solicitor-client assessment. On the proposed model, see CPR 47.20(3)–(4).
Civil Procedure Rules – Part 47
Practice Direction 47 – Detailed Assessment of Costs - SRA Transparency Rules, rules 1.3 and 1.4 (in force 6 December 2018; current version in force 11 April 2025).
SRA Transparency Rules - Competition and Markets Authority, Legal Services Market Study: Final Report (15 December 2016), executive summary and “The scope of this market study”.
CMA Legal Services Market Study
CMA Legal Services Market Study – Final Report PDF - House of Commons Business, Energy and Industrial Strategy Committee, Post Office and Horizon – Compensation: Interim Report (HC 1129, 17 February 2022), paras 7 and 12.
Post Office and Horizon – Compensation: Interim Report – UK Parliament - These figures come from documentation I saw at the time and are not on the public record.
No hyperlink required/available. - SRA Code of Conduct for Solicitors, RELs and RFLs, para 8.7.
SRA Code of Conduct for Solicitors, RELs and RFLs - Harrison v Eversheds LLP [2017] EWHC 2594 (QB); see also Belsner v Cam Legal Services Ltd [2022] EWCA Civ 1387 at 14.
Harrison v Eversheds LLP [2017] EWHC 2594 (QB) – BAILII
Belsner v CAM Legal Services Ltd [2022] EWCA Civ 1387 – BAILII - Winehouse v Parry [2026] EWHC 1970 (KB) at [67] and [77].
Mitchell Winehouse v Parry and another – official Judiciary judgment - Baroness Lawrence of Clarendon OBE and others v Associated Newspapers Ltd [2025] EWHC 106 (KB) (costs management); the approved figures are recorded at Appendix 1, paras A1.4–A1.5 of [2026] EWHC 1637 (KB). Costs were argued on 29–30 July 2026 and judgment was reserved.
Sussex, Lawrence and others v Associated Newspapers [2025] EWHC 106 (KB) – official Judiciary judgment
Lawrence and others v Associated Newspapers [2026] EWHC 1637 (KB) – official Judiciary judgment
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