CJC Proposes Major Reform to Legal Fee Disputes
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Legal fee disputes remain one of the most frustrating and costly issues for both clients and law firms. Whether the disagreement relates to the level of legal fees, the way a retainer was explained, or how costs claimed have been presented, disputes over solicitor-client costs continue to generate significant litigation.
Now, the Civil Justice Council (CJC) has proposed major reform to the way these disputes are handled. Its recent consultation suggests that Part III of the Solicitors Act 1974 should be replaced entirely, with a new statutory code designed to simplify the process and reduce the number of costs disputes reaching the courts.
For firms dealing with costs recovery, detailed assessment, and solicitor-client challenges, the proposals could have significant consequences.
At ARC Costs, we regularly advise on disputes involving solicitor-client bills, recoverability, and the assessment of costs. These proposed reforms highlight just how important clarity, transparency, and strategy have become when dealing with legal fee disputes.
Why are legal fee disputes increasing?
The current system for challenging solicitor-client costs is built around legislation that is now more than 50 years old.
Under Part III of the Solicitors Act 1974, clients can challenge solicitor bills through formal court procedures, often involving the Senior Courts Costs Office and detailed technical arguments around whether the client gave “informed consent” to the fees charged. This system has become increasingly difficult to navigate.
Modern litigation involves far more complex charging structures than it did in 1974. Many law firms now issue interim invoices throughout a case rather than waiting until the end. Conditional fee agreements, no win, no fee arrangements, and hybrid funding models have also created greater complexity around what clients are expected to pay and when. As a result, disputes over legal costs are becoming more common.
The Civil Justice Council has described the current regime as “complex, formalistic and outmoded,” arguing that it creates unnecessary litigation rather than resolving disputes efficiently.
The impact of the Belsner case
Much of the recent focus on legal fee disputes comes from the well-known case of Belsner.
This case highlighted the tension between whether charges were technically fair and reasonable, and whether the solicitor had properly complied with regulatory obligations to provide the client with the best possible information about costs.
Even where the solicitor’s fees were ultimately found to be reasonable, questions remained around transparency and compliance with the Solicitors Regulation Authority rules.
This created uncertainty for firms, particularly in areas such as personal injury, where fixed fee arrangements, success fees, and deductions from damages are common.
The CJC has identified this as a key problem. The consultation notes that disputes are increasingly focused not simply on the amount charged, but on whether the client properly understood what they were agreeing to.
Replacing “informed consent” with a fairness test
One of the most significant proposals is the replacement of the current “informed consent” rules with a broader principle that solicitor charges should be “fair and reasonable.”
At present, many disputes focus on whether a client gave sufficient consent to the level of fees being charged. This often leads to highly technical arguments about retainers, client care letters, and the wording of funding agreements. Under the proposed system, the focus would move toward a broader assessment of fairness.
This could simplify disputes significantly, but it would also create new questions:
- What makes fees fair and reasonable?
- How should this be measured?
- What evidence will be required?
Without clear guidance, disputes may simply move from one form of argument to another.
The end of the contentious and non-contentious distinction
The CJC has also proposed removing the distinction between contentious and non-contentious business.
Currently, work done before proceedings are issued, such as pre-action correspondence or protocol compliance, is generally treated as non-contentious. Once proceedings begin, the entire retainer may become contentious.
This distinction affects how solicitor-client costs are assessed and whether certain work becomes recoverable from an opponent who must pay the costs. In practice, this creates unnecessary complexity.
For example, much of the substantive work in litigation happens before proceedings are issued, particularly in personal injury claims and matters involving early settlement or a settlement offer.
The distinction no longer reflects how modern litigation operates, and its removal would likely simplify many solicitor-client assessments.
Greater use of the Legal Ombudsman
For lower-value disputes, the CJC proposes that complaints should be dealt with through the Legal Ombudsman scheme rather than through formal court assessment. This would apply particularly where bills are modest and do not justify the cost of full court proceedings.
For larger matters, particularly where bills exceed £50,000, the proposal is for mandatory alternative dispute resolution before court proceedings can begin. This is intended to reduce the volume of cases reaching the courts and avoid unnecessary expense. For firms, this means that resolving disputes early and commercially will become even more important.
How this affects fixed costs and personal injury claims
The proposals are particularly relevant in areas involving fixed costs, especially personal injury litigation. Many disputes arise where clients assume that because the opponent will pay the costs, they will not face any deduction from damages. This is often not the case, particularly in no win, no fee matters involving success fees or unrecovered costs.
Where clients do not fully understand this position, disputes follow. Firms must ensure that explanations around:
- Fixed recoverable costs
- Success fees
- Deductions from damages
- ATE insurance
- What happens if a claim settles early
are clear from the outset.
This is not simply a compliance issue; but also a costs protection issue.
The role of detailed assessment
Where disputes cannot be resolved, the matter may still proceed to detailed assessment. This remains one of the most technical areas of costs law.
The court will examine:
- The reasonableness of the costs claimed
- Whether the work was necessary
- Whether the level of legal fees is proportionate
- Whether court orders affect recovery
- Compliance with applicable time limits
This often involves formal Bills of Costs, Replies, and hearings before specialist judges.
The Senior Courts Costs Office continues to play a central role in high-value disputes, particularly where solicitor-client costs are challenged at a significant level.
Why clear retainers matter more than ever
Regardless of whether reform proceeds, one issue remains constant. Poorly drafted retainers create disputes. Many legal fee disputes could be avoided entirely through better upfront communication.
Clients should clearly understand:
- What work is included
- What may be charged separately
- Whether interim invoices will be issued
- What happens if the case settles early
- How success fees or deductions operate
- Whether the opponent will actually pay all legal costs
The more complex the funding arrangement, the greater the need for clarity. This is particularly important in commercial litigation, Court of Protection matters, and high-value personal injury claims.
How ARC Costs can assist with legal fee disputes
At ARC Costs, we regularly advise law firms on solicitor-client disputes, Bills of Costs, and recoverability issues arising from contested legal fees.
We assist with:
- Reviewing retainers and funding arrangements
- Preparing and defending Bills of Costs
- Advising on proportionality and recoverability
- Responding to solicitor-client assessments
- Supporting negotiations before formal proceedings
- Representation in detailed assessment matters
Whether the issue relates to a disputed invoice, unrecovered costs, or challenges around whether a client should pay the costs, early specialist advice can often prevent far greater problems later.
The Civil Justice Council’s proposals reflect a wider reality. The way legal services are delivered has changed, but the legislation governing solicitor-client costs has not kept pace.
If reform proceeds, the handling of legal fee disputes could become faster, clearer, and more commercially focused. However, regardless of legislative change, the underlying principles remain the same. Firms that communicate clearly, structure retainers carefully, and manage costs strategically are far less likely to face disputes later.
For those that do, specialist costs advice remains essential. At ARC Costs, we help firms navigate that process with clarity and confidence.
To speak to a member of the team, feel free to give us a call on 01204 397302 or send an email to info@arccosts.co.uk.