Section 74(3) Solicitors Act 1974 Does Not Apply To Family Court Proceedings

GORENSTEIN v SEARS TOOTH SOLICITORS [2025] EWHC 1114 (SCCO)

In Gorenstein v Sears Tooth Solicitors [2025] EWHC 1114 (SCCO), the Senior Courts Costs Office conducted a detailed assessment of solicitor-client costs arising from family court proceedings. The case primarily addressed five key costs issues: the applicability of section 74(3) of the Solicitors Act 1974, retainer terms, costs estimates, managing clerks, and estimated time entries. Costs Judge Nagalingam comprehensively rejected the claimant’s arguments that the solicitors’ costs were unreasonably incurred, finding that the retainer letters provided sufficient transparency and that the costs information was consistently communicated. The judge concluded that section 74(3) did not apply to these family court proceedings and that the solicitors were entitled to charge for work reasonably performed, including incoming correspondence and dual attendances. While finding no wholesale unreasonableness, the judgment allowed for potential line-by-line reductions during the continued detailed assessment. Critically, the decision emphasised the difference between solicitor-client and inter partes cost assessments, drawing on principles from the Lynch case, and underscored that family proceedings typically involve limited cost recovery. The matter was adjourned for further line-by-line assessment, with the court expecting the parties to resolve certain preliminary points collaboratively.

“Section 74(3) of the Solicitors Act 1974 provides that… ‘The amount which may be allowed on the assessment of any costs or bill of costs in respect of any item relating to proceedings in the county court shall not… exceed the amount which could have been allowed… as between party and party…’. … The Crime and Courts Act 2013 ... established a 'single' family court. Prior to this, family proceedings were variously dealt with between the high court, various county courts, and magistrates courts... All of the disputed work in the index matter was undertaken well after the implementation of the Crime and Courts Act 2013 and there can be no doubt that the provisions of s74(3)… do not apply to costs incurred in the family court proceedings in this matter.”

Citations

Oakwood Solicitors v Menzies [2024] UKSC 34 A solicitor’s bill must comply with statutory safeguards to protect clients, including the right to assessment before payment, ensuring transparency and fairness in costs recovery. R (PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28 Courts must interpret statutes in context and avoid constructions that produce absurd, unworkable, or unreasonable results when assessing legal costs. ZYN v Walsall Metropolitan Borough Council [2014] EWHC 1918 (Admin) Legislation may be construed with an updated interpretation consistent with the current legal and procedural context to ensure effective application, including in costs assessments. Macdougall v Boote Edgar Esterkin [2001] 1 Costs LR 118 A solicitor must establish informed client approval through a full and fair explanation of relevant costs factors to justify recovery beyond party and party levels. Herbert v HH Law [2019] EWCA Civ 527 Informed approval under CPR 46.9 requires a full and fair explanation of the costs and their implications at the time of agreement to bind the client to payment. Belsner v CAM Legal Services Ltd [2022] EWCA Civ 1387 Section 74(3) of the Solicitors Act 1974 does not apply to pre-proceedings activity not issued in the county court, and “proceedings” must be interpreted according to statutory language without extending it by implication. Re: T (A Child) [2005] EWCA Civ 311 Exceptional costs orders against a party in children proceedings require conduct that is unreasonable in the litigation, not merely in parenting or welfare terms. Lynch v Paul Davidson Taylor (a firm) [2004] EWHC 89 (QB); [2004] 1 WLR 1753 Section 74(3) of the Solicitors Act 1974 does not require a hypothetical inter partes comparison absent a party and party costs order; solicitor-client costs are assessed independently where fixed or scale costs are not prescribed. Guest Supplies International Ltd v Ince Gordon Dadds LLP [2022] EWHC 2562 (SCCO) Where inadequate cost estimates are given, the assessment may limit recovery to a figure it is reasonable for the client to pay, particularly if the client lacked the opportunity to consider costs properly during the retainer. Brush v Bower Cotton & Bower [1993] 4 All ER 741 Estimated time for solicitor work must be scrutinised closely and should only be allowed if shown to be reasonable and reflective of work actually undertaken.

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Key Points

Section 74(3) of the Solicitors Act 1974 does not apply to costs incurred in family court proceedings brought after the implementation of the Crime and Courts Act 2013, as such proceedings are not classified as “proceedings in the county court”. [144–147]
A solicitor and client costs agreement will satisfy CPR 46.9(2) where the client has agreed in writing to pay fees exceeding what would be recoverable inter partes, even if the recovery against another party is unlikely or nil; the absence of an express reference to “shortfall” does not invalidate the agreement. [154–165, 191–194]
Costs will not be presumed unreasonably incurred as a matter of principle merely because they involve charges for communications received, office administrative expenses, or dual attendances, where such charges are anticipated within the retainer. [169–176]
Estimated time is not to be disallowed in a solicitor and client assessment as a matter of principle; rather, reasonableness must be assessed on a line-by-line basis, with reference to the work done and the surrounding context. [220–221]
Exceeding a solicitor’s costs estimate does not automatically render the costs unreasonable; the court will assess whether the client was kept informed and whether any failure to estimate deprived the client of a real opportunity to act differently. [95–97, 103–104, 216–217]

“In signing the retainer, I am satisfied that the Claimant knew she would be liable for more than was likely to be recovered in costs from her former spouse. To put it another way, I am satisfied that the Claimant did not enter into a retainer which included a provision for the Defendant to recover nil fees from her if no adverse costs orders were secured against her former spouse.”

Key Findings In The Case

The court found that all of the disputed costs were incurred in family court proceedings postdating the Crime and Courts Act 2013, and therefore section 74(3) of the Solicitors Act 1974 had no application to any of the fees claimed in respect of those proceedings [144–147].
The judge found that the Claimant had entered into written retainers that clearly and expressly provided for her to be liable for the Defendant’s charges in full, regardless of inter partes recovery, thereby satisfying the requirement under CPR 46.9(2) for an agreement permitting the solicitor to recover more than might be obtained from the opposing party [154–165, 191–194].
The retainer documents were found to have sufficiently warned the Claimant of the types of charges to be levied, including fees for incoming communications, administrative expenses, and dual attendances, such that these items would not be presumed unreasonably incurred as a matter of principle [169–176].
It was found that the majority of time entries in the bills were conservatively estimated due to the Defendant’s non-computerised time-recording practices, but the failure to contemporaneously record time did not render the entries fictitious or unreasonable by default; the judge found no justification for disallowing estimated time entries as a whole [220–221].
The judge determined that while solicitors’ cost estimates were repeatedly exceeded, the Defendant had provided timely updates and explanations, and the Claimant had opportunities to query charges during the retainer period. Accordingly, no finding was made that the Claimant was deprived of a real opportunity to act differently as a result of those estimates [95–97, 103–104, 216–217].

“I have already concluded that section 74(3) of the Solicitors Act is not engaged in this matter. However, even if I am wrong about that I consider the retainers give the right for the Defendant to seek "an amount of costs greater than that which the client could have recovered from another party to the proceedings... I have seen nothing in the retainers or the post retainer communications that would lead me to conclude that the Claimant reasonably believed that at all times her solicitors would limit their charges to that which might have been recovered from her former spouse (in the limited circumstances such a recovery could even arise)."

Background

The case of Gorenstein v Sears Tooth Solicitors concerned a detailed assessment of costs under the Solicitors Act 1974. The claimant, Ms Elinor Gorenstein, sought an assessment of costs billed by her former solicitors, Sears Tooth, in relation to family proceedings involving financial remedy and children matters. The assessment was heard before Costs Judge Nagalingam in the Senior Courts Costs Office (SCCO). The parties had exchanged points of dispute and replies, with key issues centring on the applicability of section 74(3) of the Solicitors Act 1974, the adequacy of costs estimates provided, and the reasonableness of certain categories of costs claimed.

Costs Issues Before the Court

The court was required to determine several preliminary costs issues, including:

Whether section 74(3) of the Solicitors Act 1974 applied to the assessment, given that the underlying proceedings were in the Family Court rather than the County Court.
Whether the retainer agreement complied with CPR 46.9(2), particularly regarding informed consent for costs exceeding what might be recoverable inter partes.
The adequacy of costs estimates provided by the defendant and whether the claimant should be bound by them.
The treatment of estimated time entries in the bill of costs.
The categorisation of fee earners described as “Managing Clerks” and the appropriate charging rates.

The Parties’ Positions

Claimant’s Submissions:
The claimant argued that section 74(3) of the Solicitors Act 1974 applied, limiting recoverable costs to what could have been allowed on an inter partes basis. Relying on Oakwood Solicitors v Menzies [2024] UKSC 34 and PACCAR Inc v Competition Appeal Tribunal [2023] UKSC 28, the claimant contended that the statutory construction should protect clients from excessive costs. The claimant further submitted that the retainer failed to provide “full and fair” disclosure of costs risks, citing Macdougall v Boote Edgar Esterkin [2001] 1 Costs LR 118 and Herbert v HH Law [2019] EWCA Civ 527. Additionally, the claimant challenged the adequacy of costs estimates and the inclusion of estimated time entries.

Defendant’s Submissions:
The defendant argued that section 74(3) did not apply, as the proceedings were in the Family Court, not the County Court. Relying on Belsner v CAM Legal Services Ltd [2022] EWCA Civ 1387, the defendant submitted that CPR 46.9 provided sufficient consumer protections. The defendant maintained that the retainer adequately explained costs liabilities and that post-retainer communications reinforced this understanding. On estimates, the defendant cited Guest Supplies International Ltd v Ince Gordon Dadds LLP [2022] EWHC 2652 (SCCO), arguing that estimates were not binding caps and that the claimant had not demonstrated reliance on them to her detriment.

The Court’s Decision

Section 74(3) Solicitors Act 1974:
The court held that section 74(3) did not apply, as the proceedings were in the Family Court, not the County Court. The Crime and Courts Act 2013 had clarified the distinction between these jurisdictions, and there was no evidence Parliament intended to extend section 74(3) to Family Court matters. The court rejected the claimant’s argument that this created an “absurd result,” noting that pre-2013, similar proceedings would have been in the High Court, where section 74(3) also did not apply.

Retainer and CPR 46.9:
The court found the retainer complied with CPR 46.9(2). The retainer explicitly stated that the claimant would be responsible for her own costs, with limited exceptions where costs might be recovered from the opponent. This constituted an agreement permitting the solicitor to recover more than might be allowed inter partes. The court also rejected the claimant’s argument that certain costs (incoming letters, overheads, dual attendances) were “unusually incurred,” as the retainer had clearly provided for these charges.

Costs Estimates:
The court declined to cap costs at the estimated figures but agreed they should be considered in assessing reasonableness. Following Guest Supplies, the court held that estimates were not binding unless relied upon to the client’s detriment. The defendant had provided regular updates and explanations for exceeding estimates, and the claimant had not shown she would have acted differently had more accurate estimates been given.

Estimated Time:
The court rejected the claimant’s argument that all estimated time should be disallowed. Instead, it directed that such entries be assessed on a line-by-line basis, taking into account the work actually done and the claimant’s knowledge of the same.

Managing Clerks:
The court encouraged the parties to resolve this issue between themselves, failing which further submissions would be required.

Next Steps:
The matter was adjourned for a line-by-line assessment of the remaining disputed costs, with the parties directed to provide available dates for the continuation hearing.

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