Legal Update (2008 Archive)
Conditional Fee Agreements (including CCFAs)
VINAYAK V LOVEGROVE & ELLIOT [2007] EWHC 90096 (COSTS) 10/01/2007 MASTER CAMPBELL
This case concerned an application by D (paying costs) for C to disclose its CFA and, if C declined, for an order that C serve “such other evidence as they intended to rely on”.
The Court held that a “genuine issue” which merited further investigation had been raised because the CFA claimed a success fee (applying Hollins v Russell, paragraph 74, per Brooke L). C was directed to lodge the CFA for inspection by the Court under CPD 40.14; if it disclose a case for C to meet, C would be put to an election whether to waive privilege and show the CFA to D, or to prove the case relying on other evidence; if, following inspection, no further investigation was justified, D could either accept the Court’s view or put C to election whether to disclose the CFA or call evidence.
In the event, C waived privilege and handed over the CFA; the case is included in the summaries because it was added to the SCCO website having been the subject of an article about disclosure of CFAs.
PUKSIS V BRUMBIE [2008] EWHC 90095 (COSTS) 07/01/2008 MASTER GORDEN-SAKER
C’s solicitor represented C under a CFA with a success fee supported by an Accident Line Protect ATE policy.
Held.
(1) No breach of Regulation 4(2)(c) CFA Regulations 2000 (Requirement for solicitor to inform client of any interest he might have in recommending the ATE policy in question).
(2) No breach of Regulation 4(2)(d) (informing C which other methods of funding the costs were available).
Appeal to Court of Appeal, listed for 17 November 2008.
WOOLLEY V HADEN BUILDING SERVICES LTD [2008] EWHC 90097 (COSTS) 15/02/2008 MASTER ROGERS
C’s solicitor acted for C’s widow as her late husband’s personal representative under a CFA with a success fee.
Held – no breach of Regulation 4(2)(c) – 1ll appropriate enquiries about the client’s insurance policies and about other methods of funding the claim had been made.
TANDARA V WEIGHTMANS (SOLICITORS) [2008 EWHC 90101 (COSTS) 14/03/2008 MASTER O’HARE
The court assessed profit costs and upaid disbursements at nil for work undertaken by a solicitor (D) under a defective CFA. Was his former client (C) entitled to be reimbursed for paid disbursements such as counsel’s fees?
D had acted as solicitors for C under a CFA in an ongoing claim for personal injuries. Prior to its resolution D, ceased acting for C and submitted bills for £45,000. On detailed assessment under the Solicitors Act 1974, C claimed that there was no valid retainer because the CFA did not comply with the s.58(1) Courts and Legal Services Act 1990, so C had no liability for costs to D; alternatively, if the retainer was valid, C’s liability was postponed until the personal injury claim ended in success.
Having failed to reach a compromise, D agreed that the Master should assess profit costs and unpaid disbursements at nil, but contended that he should allow the paid disbursements.
The Master held that C was not entitled to a refund in respect of disbursements D had reasonably paid out on C’s behalf even though the retainer was unenforceable. On the facts, Arata Potato Co V Taylor Joyce & Garrett [1955] 4 AIIER 695 did not apply and Hollins v Russell would be followed; paid disbursements properly incurred in the conduct of the litigation are recoverable from a paying party insofar as reasonable and proportionate, even if the CFA is defective (Brooke LJ paragraph 115). Rejecting C’s submission that Hollins v Russell is a special rule which does not apply between solicitor and client, the Master held that the paid disbursements such as fees for counsel and experts, were not tainted by D’s failure to comply with s.58 CLSA.
HIBBERD V FAWCETT OLD & OTHERS [2008] EWHC 90101 (COSTS) 17/03/2008 MASTER WRIGHT
Another challenge (in this case unsuccessful) to the validity of C’s CFA on the grounds that C’s solicitor had failed to disclose an interest in recommending an ATE insurance policy with Accident Line Direct contrary to Regulation 4(2)(e)(i) and (ii) CFA Regulations 200.
An appeal to the Court of Appeal is listed for 17 November 2008.
FORDE V BIRMINGHAM CITY COUNCIL [2008] EWHC 901045 (CSOTS) 30/04/2008 MASTER CAMPBELL
Round 2 of the housing disrepair litigation by tenants of Birmingham City Council represented by McGrath solicitors under CFAs (see Crook v Birmingham City Council – No. 15 of 2007).
C signed a CFA without a success fee; owing to technical challenges advanced in Crook and following Bowen v Bridgend County Council (SCCO 039853 – 25 March 2004), C signed a second CFA with a success fee covering the same housing disrepair claim. C’s claim succeeded; by consent, she received £5,000 plus her costs, the case settling after issue but before trial.
At the outset of the detailed assessment the parties identified various preliminary issues:
(1)Was CFA 2 unenforceable because if concerned matters contained within CFA 1? Answer – no.
(2)Was CFA 2 unenforceable because it was retrospective? Answer – no.
(3)Was C compelled by the undue influence of McGrath to enter CFA 2 on much less favourable terms than CFA 1 eg that it provided for a success fee and CFA 1 did not? Answer – no.
(4)Could the success fee in CFA 2 be retrospective? Answer – not on these facts because McGrath had failed to serve Notice of Funding.
(5)Was the success fee valid and/or reasonable? Answer – no. The success fee which was staged, if recoverable at all, would have been reduced from 50 per cent to 10 per cent if the case had concluded before issue, and from 75 per cent to 15 per cent if concluded after issue but before commencement of trial.
(6)Did CFA 2 fail for want of consideration? Answer – no.
(7)Did CFA 2 fail for breaches of Regulation 4(2)(d) and (e) – advice to client about whether other methods of funding costs were available and whether the legal representative considered any particular method of financing the costs was appropriate. Answer – no. No part of Regulation 4 required the legal representative to complete public funding application forms to any particular standard: D’s contention that they have been completed in a manner that doomed them to failure was rejected.
(8)If, (contrary to the court’s finding) CFA 2 was unenforceable, could CFA 1 still be relied upon? Answer, no – It had been terminated and replaced by CFA 2.
Appeal to High Court Judge listed for 4 November 2008.
Costs of and incidental to
McGLINN V WALTHAM CONTRACTORS LTD AND OTHERS [2005] EWHC 1419 (TCC) 24/06/2006 HH JUDGE PETER COULSON QC
Judgment was given in this case by Judge Peter Coulson QC (as Coulson J then was) and concerns “costs and incidental to”. Having reviewed the usual authorities (re Gibson’s Settlement Trusts etc) the Judge held that save in exceptional circumstances, costs incurred by a defendant at the stage of a Pre-Action Protocol in dealing with and responding to issues which were subsequently dropped from the action when the proceedings were commenced, cannot be costs “incidental to” those proceedings.
“….I should add that in my judgment, it would be contrary to the whole process of the Pre-Action Protocols, which are themselves such an integral part of the CPR, if claiming parties were routinely penalised if they decided not to pursue claims in court which they had originally included in their Protocol claim letters. The whole purpose of the Pre-Action Protocol procedure is to narrow issues and allow a prospective defendant, wherever possible to demonstrate to a prospective claimant that a particular claim is doomed to failure….”
LEGAL SERVICES COMMISSION V AARONSON [2008] EWHC 90096 (COSTS) 14/01/2008 MASTER WRIGHT
This decision addressed “Costs of and incidental to proceedings” with regard to matters which were the subject of adjudication in three arbitrations.
NEWELL V NORTH LEWIS [2008] EWHC 910 (CH) 30/04/2008 BRIGGS J
This appeal dealt with two principal issues (1) the extent to which (if at all) evidence of pre-contract negotiations are admissible in resolving an issue on the construction of a consent order, (2) the meaning of “costs of and incidental to” proceedings.
On (1) Brigss J reversed the Master’s decision to look at the pre-settlement correspondence in order to make sense of the consent order.
On (2) at paragraph 18 Briggs J said this:
“It follows that, subject to the question of proportionality and burden of proof, the modern standard basis of assessment is broadly equivalent to the old common fund basis of taxation, so that, by parity of reasoning, an order for costs of proceedings on the standard basis picks up costs “of and incidental to” those proceedings”.
PETROMEC INV V PETROLEO BRASILEIRO SA PETROBRAS (UNREPORTED) 3/06/2008 CRANSTON J SITTING WITH ASSESSORS
This costs appeal concerned the principles to be applied when delineating between the costs of preliminary issues and the general costs of an action.
The bill in question concerned a very large claim for the recovery of monies spent in respect of an oil rig platform which had been supplied to the defendants and upgraded for use on a particular oilfield. The claim form was issued in January 2002 and the Particulars of Claim, Defence and Counterclaim, and the Reply and Defence to Counterclaim had all been served by June 2002. In September 2003 the parties formulated a list of preliminary issues and, by a Consent Order made in October 2002, 23 of those issues were listed for trial in the following year. At that trial, which lasted 16 days, most of the issues were found in favour of the defendants and an order for costs was made entitling them to 80 per cent of the costs “of and incidental to the preliminary issues, such costs to be assessed if not agreed”. The claimants appealed unsuccessfully to the Court of Appeal and they were also ordered to pay the costs of that appeal. The proceedings were ongoing at the date of the appeal, the main events to date being as follows:-
* A lengthy trial of issues of misrepresentation, based upon stand-alone pleadings, in which judgment was given for the defendants;
* A substantial case management conference giving directions for the resolution of the remaining issues (determining the expenditure incurred by the claimants in upgrading the oil rig);
* An unsuccessful appeal which the claimants brought against those directions;
* Further directions intended to lead to a trial of the remaining issues which is likely to last about six weeks.
In August and November 2007 the Costs Judge conducted a detailed assessment of the costs awarded in the preliminary issues trial and in the unsuccessful appeal against it. In August the Costs Judge gave a preliminary indication that the costs of the preliminary issues trial ought not to be restricted by reference to any particular date, since they could have arisen at any time during the defendants’ solicitors’ instructions. However, in November, the Costs Judge made a different ruling. He expressed concern that the defendants were claiming all the costs they had incurred prior to the preliminary issues trial, thereby claiming costs of action as well as costs of preliminary issues. Also, he felt that, contrary to the impression he had been given in August, the preliminary issues trial had by no means covered all of the issues raised in the litigation, as was demonstrated by the subsequent events. The Costs Judge therefore ruled that the detailed assessment must proceed on the basis that, unless special grounds were shown, the defendants would not be entitled to claim any costs in respect of periods before the preliminary issues had been formulated (i.e. before a date or dates in September 2002: the exact date might vary in respect of different issues). The bill in question amounted to £2.1 million. About £600,000 related to the period before the preliminary issues were formulated. Of the remaining £1.5 million, the Costs Judge allowed £1.1 million, about 70 per cent.
In this appeal the defendants successfully challenged the ruling which defined, or appeared to define, the boundary between the costs of the preliminary issues and the costs of action by reference to a temporal restriction. Cranston J adopted and approved the well-known passages from in re Gibson’s Settlement Trusts [1981] Ch 179 in which Sir Robert Megarry V-C described the words “of and incidental” as being words of extension, not restriction. Cranston J accepted that the Costs Judge had applied the right test in his provisional ruling in August. It was possible that his reference in November to a temporal restriction, (the dates upon which the preliminary issues were formulated) was no more than a pragmatic application of those principles, having regard to all the circumstances as he assessed them in November. However, the ruling he gave in November was so emphatic as to give the impression that he had ultimately misdirected himself and applied the wrong test. There was cause to think that he had used the dates he selected as a determining factor, nor just as a guideline. In his November ruling the Costs Judge had also stated that he did not wish to fetter any discretion the trial judge would have in future or make orders dealing with the general costs of the action. Those remarks also indicated that he had applied the wrong test.
The appeal was therefore allowed with costs and the matter was remitted to the Costs Judge for him to re-assess the costs claim for periods before formulation of preliminary issues in order to determine what if any part of them were in fact reasonable costs of and incidental to those issues. Cranston J warned that, at the further hearing, the Costs Judge would have to be persuaded that the costs in question were of and incidental to the preliminary issues rather than general costs. The defendants should not assume that it was open to them to claim their whole costs of action unless it was true that all their costs of action were in fact costs of the preliminary issues. It was possible that their success on this appeal would prove to be only a Pyrrhic victory. However, this was a matter for the Costs Judge on the re-assessment.
Costs of Claim and Counterclaim (Medway Oil)
BATEMAN V JOYCE [2008] EWHC 90100 (COSTS)12/02/2008 MASTER CAMPBELL
Interpretation of the liability for costs arising under a consent order, in particular whether the costs to which D was entitled, were limited by the principle in Medway Oil.
Costs Capping
VARIOUS CLAIMANTS V CORBY BOROUGH COUNCIL [2008] EWHC 619 (TCC) 1/04/2008 AKENHEAD J
Costs capping by High Court Judge choosing to sit without a Costs Judge assessor, noteable for his authorising a contingency fee to be added of 5 per cent to the total allowed as being;
“a fair and sensible allowance to make given the nature of the litigation and the likely encountering of expenditure or increased levels of expenditure which is probably inevitable even if it cannot be specifically now foreseen ….” (paragraph 30).
At paragraph 32, Akenhead J continued;-
“Of course the parties have liberty to apply to the court for adjustment of the costs caps if unforeseeably and beyond the reasonable control of the party in question, circumstances so change or new circumstances arise such that there is a genuine need to adjust the figures”.
Disclosure of Documents
VINAYAK V LOVEGROVE & ELLIOT [2007] EWHC 90096 (COSTS) 10/01/2007 MASTER CAMPBELL
This case concerned an application by D (paying costs) for C to disclose its CFA and, if C declined, for an order that C serve “such other evidence as they intended to rely on”.
The Court held that a “genuine issue” which merited further investigation had been raised because the CFA claimed a success fee (applying Hollins v Russell, paragraph 74, per Brooke L). C was directed to lodge the CFA for inspection by the Court under CPD 40.14; if it disclose a case for C to meet, C would be put to an election whether to waive privilege and show the CFA to D, or to prove the case relying on other evidence; if, following inspection, no further investigation was justified, D could either accept the Court’s view or put C to election whether to disclose the CFA or call evidence.
In the event, C waived privilege and handed over the CFA; the case is included in the summaries because it was added to the SCCO website having been the subject of an article about disclosure of CFAs.
GOWER CHEMICALS V NEATH PORT TALBOT COUNTY BOROUGH COUNCIL [2008] EWHC 735 (QB) 17/04/2008 DAVIS J
This judgment addressed a claim for undisclosed experts’ reports amounting to £30,000, the paying party on detailed assessment having contended that he was entitled to see what he was being charged for. Davis J reviewed all the old cases on disclosure and s.40.14 Costs Practice Direction (Pamplin, Goldman v Hesper, South Coast Shipping, Dickinson v Rushmer etc). A real issue had been identified which was not a sham or fanciful dispute (Pamplin). Accordingly the Master had been right to put the receiving party to its election under s40.14, whether to disclose the reports or to rely on other evidence.
Estimates
REYNOLDS v STONE ROWE BREWER [2008] EWHC 497 (QB) 18/03/2008 TUGENDHAT J
Estimates by solicitors to client. No error on the part of the Master who has held the solicitors to their original estimate, having found that subsequent revised estimates did not entitle the solicitors to claim further costs because they had simply corrected earlier “underestimates” and were no attributable to any change in the facts. The Master had added a 15 per cent “margin” under Wong v Vizards [1997] 2 Costs LR 46. Tugendhat J did not interfere with that allowance either but at paragraph 72 said this:
“I would not purport to take a particular estimate and to apply to it a percentage margin. Nor did Toulson J purport to do that in Wong v Vizards. Toulson J arrived at the figure he arrived (sic) and then noted that it represented a margin of 15 per cent …”
[To that extent, Tugdendhat J appeared to agree with Morgan J in Master Cigars v Withers (No. 18 of 2007) that Wong did not lay down a general principle about a margin. Those observations nonetheless give the appearance of being in conflict with Sir Oliver Popplewell’s judgment in Anthony v Ellis and Fairburn (a firm) [2000] 2 Costs LR 277 at 284:
“… Toulson J (as he then was) took the view that a margin of approximately 15 per cent over the worst case estimate was a proper figure. In our judgment that is a figure that we are perfectly prepared to adopt in the instant case and for the reasons given we take the view that the estimate was the figure concerned and to that can be properly added a sum of 15 per cent ….”]
AMBROSE APPELBE V HELVADJAN (UNREPORTED) 13/05/2008 EVANS-LOBE J (SITTING WITH A COSTS JUDGE ASSESSOR)
This was an appeal against a decision of the Costs Judge arising in proceedings under the Solicitors Act concerning an estimate given by the Claimant firm of solicitors to the Claimant, their former client. The solicitors had been retained to handle an appeal to Munby J in matrimonial proceedings from decisions of a District Judge concerning the disposition of matrimonial assets.
The facts were that on 21 April 2006 the Claimant had telephoned the solicitors who had agreed to act for her for £25,000. They prepared a handwritten attendance note which was subsequently expanded when typed. The solicitors envisaged that there would be an appeal and cross-appeal lasting three days and that reading would take two days. On 24 April 2006, the solicitors had prepared a client care letter and had attended a meeting with the client when she had been asked for £25,000 on account.
The Claimant also consulted the solicitors about an appeal to the Court of Appeal from a decision of a Circuit Judge. This was not mentioned at the meeting nor in the client care letter. No work was done by the solicitors with regard to the appeal in the Court of Appeal or any other hearing.
The costs of the appeal to Munby J were in the region of £35,000. Further charges to 7 June 2006 amounting to £2,704.37 were invoiced for work which fell outside the estimate.
Ruling on a preliminary point in respect of the estimate, the Master had limited the solicitor’s recovery to £17,500. He had been guided by the £25,000 estimate and had deducted from it the sum of £10,000 in respect of the Court of Appeal appeal which did not proceed. E did so having heard submissions on behalf of the parties but without any formal witness statements. The solicitors appealed.
The Judge held that proceeding without any formal witness statements was not a legitimate way of dealing with the case and accordingly grounds existed to set aside the order. He drew attention to the decisions of Toulson J in Wong v Vizards and Morgan J in MasterCigars v Withers to which he had been referred and expressed the view that these authorities decide that where an estimate is given to a client, this may be:
(i) an offer which can be accepted by the client which is in fact a contract;
(ii) a situation which may give rise to estoppel where the client has acted upon the estimate given; and
(iii) an estimate, ie what the solicitors believe will be charged.
On the appeal the court was dealing with (iii). On the facts of the case it was appropriate to impose a cap of £30,000 on the amount that the client could be asked to pay in respect of her disputes in the matrimonial proceedings, plus any of the work charged under the 7 June 2006 invoice that fell outside the estimate. The assessment would be remitted to a different Costs Judge and any sum in excess of £30,000 which had already been deducted from the proceeds of sale of the matrimonial home by the solicitors would need to be repaid with interest.
Accordingly, the appeal was allowed and the Master’s order set aside. Since the estimate had been given to the client on 21 April 2006 but there had been no warning or notice that the costs had approached £35,000, the Judge made no order as to costs of the appeal.
MASTERCIGARS DIRECT LTD V WITHERS LLP (UNREPORTED) 11/07/2008 MASTER SIMONS
The next instalment in this litigation under Section 70 Solicitors Act 1974. At the direction of Morgan J (see No. 18 of 2007), the Costs Judge was required to rule whether MasterCigars had relied on Withers’ estimate; if so, how should this be reflected in the detailed assessment?
Having considered evidence given by the former client and by the conducting partner at Withers, the Master held that MasterCigars had relied on the estimate and that the sum, in all the circumstances, it was reasonable for the client to be expected to pay (applying Reynolds v Stone Brewer (A Firm) (No. 14 of 2008), was the estimate plus a margin of 20%.
Funds paid into Court
DRANEZ ANSTALT & ORS V HAYEK & ORS [2008] EWHC 90104 (COSTS) 2/04/2008 MASTER ROGERS
The issue in this case was the extent to which funds paid into Court could validly be appropriated in satisfaction of costs orders made in the proceedings and if so, the specific orders in respect of which appropriation was permissible.
Hourly Rates
KOLDEN HOLDINGS LTD V RODETTE COMMERCE LTD [2007] WHC 1722 (COMM) 18/07/2007
Hourly rates for City firm claimed on summary assessment. Following a hearing for a declaration under Article 28 EC Regulation 44/2001, the partner claimed £525 against guideline rates of £380 and was allowed £450. The respective rates for grade C were £265, £210 and £225.
The brief fee for the “senior silk” undertaking a hearing which lasted less than a day was reduced from £35,000 to £30,000.
HOLLIDAY V EC REALISATIONS [2008] EWHC 90103 (COSTS) 31/03/2008 MASTER GORDON-SAKER
Review on appeal from the Costs Officer of (a) hourly rates claimed by C’s solicitors based in Sheffield and (b) the success fee sought by solicitors and counsel.
C’s personal representative had accepted £260,000 from D following C’s death caused by malignant mesothelioma arising from contact with asbestos when in D’s employment. Partner’s rate reduced from £220-£250 per hour to £187 composite; the success fees for counsel and solicitors claimed at 67% and 43% respectively, reduced to 33.3% and 27.5% respectively.
A V CHIEF CONSTABLE OF SOUTH YORKSHIRE POLICE [2008] EWHC 1658 (QB) 17 JULY 2008 TEARE J
Local solicitor versus London solicitor; D contended that C’s decision to instruct London solicitors in place of Sheffield solicitors was unreasonable. Review of authorities on “local solicitors” – Wraith v Sheffield Forgemasters Ltd, Sullivan v Co-Operative Insurance Society Ltd, Gasely v Wade & News Group etc. Teare J upheld the decision of the Deputy Costs Judge that a claim for damages for malicious prosecution against the police that settled for £300,000 could reasonable have been conducted by a firm in Sheffield rather than by solicitors in London.
Offers to Settle
CARVER V BAA PLC [2008] EWCA CIV 212 22/04/2008 WARD, RIX AND KEENE LJJ
The claimant (C) had beaten the Part 36 offer of the defendant (D) by £51. She had claimed £19,000 and obtained judgement for £4,686.26 but on 6 June 2006, C had been offered £4,520 plus interest accruing on that sum.
Although C had “won”, the Civil Procedure (Amendments) No. 3 Rules 2006 governed the outcome. The judgment was not “more advantageous” that the offer so C was ordered to pay D’s costs from 27 June 2006, the last date on which the offer could have been accepted.
Sting in the tail: the Court of Appeal did not interfere with the trial judge’s decision to make “no order as to costs” between November 2005 and June 2006 because he had been justified in marking his displeasure at the disparity of the costs of £80,000 which C had incurred in order to contest a claim worth under £5,000 (see para 35).
ANGEL AIRLINES SA V DEAN AND DEAN [2008] EWHC 1513 QB 30/06/2008 COULSON J
This judgement ought to be the final instalment in this litigation, Coulson J being the 24th judge to have participated in its resolution. The case concerned the detailed assessment of Dean & Dean’s bill for £444,705 under s.70 Solicitors Act 1974. The principal point to emerge was than an offer to settle under CPR 47.19 could be a “special circumstance” under s.70(9) capable of displacing the one-fifth rule. However, on the facts, the Master had been correct to hold than an offer made by Dean & Dean to accept £100,000 instead of £444,705 was not a “special circumstance” owing to its timing (far too late), its form (defective), its failure to set out a time for acceptance (none) and its amount (more than the Master had allowed, albeit not my much), so Dean and Dean’s “near-miss theory” failed – see paragraphs 23 5o 33.
Premiums (BTE)
SMITH V INTERLINK EXPRESS PARCELS LTD [2008] EWHC 90099 (COSTS) 5/07/2007 MASTER HURST, SENIOR COSTS JUDGE
Staged ATE premiums: C took out after the event insurance (ATE) with Temple Legal Protection. The premium was staged; £750 prior to issues, £1,200 after issue but not more than 45 days before trial, £2,700 if settled 45 days or less before trial.
The claim settled without proceedings for £1,700 damages. D’s insurers contended that the staged premium for stage 1 was unreasonable and disproportionate. On assessment, the court allowed £450 plus APT.
(paragraph 14)
Proportionality
RESEARCH IN MOTION UK LTD V VISTO CORPORATION [2008] EWHC 355 (PAT) 17/04/2008 FLOYD J
“Shocking” costs. The trial judge directed that the Costs Judge should apply the test of reasonableness and necessity on detailed assessment under Lownds because the costs of Research in Motion were disproportionate. Research’s solicitors’ profit costs were £5.18m as compared to Visto’s at £1m.
“I have to say that the breakdown reveals some really shocking statistics. One of the senior associates has spent 2252 hours on this case in the course of fifteen months. Another associate has spent 2291 hours. These hours each represent the best part of the working day for the whole fifteen month period, assuming a 35 hour week. For just these two associates, the charges amount to nearly £2 million. For these sums of money one would be entitled to expect each of them to be able to recite all the documents in the case by heart.” (See para 21 et seq.).
Retainer (and Division of Costs)
MERETZ AND ANOTHER v ACP AND OTHERS [2007] EWHC 2635 (CIV) 4/11/2007 WARREN J
This appeal rose from a complicated percentage based costs order made by Lewison J which reflected different outcomes of different claims. The following issues arose.
(1) Retainer – One global bill was prepared for D1, D2, D3 and D4, whose costs C had been ordered to pay in various percentages. C contended unsuccessfully that as the retainer letter sent by Ds’ solicitors was addressed to D2 alone, there was no retainer between D1, D3 and D4, so they had not incurred any costs which C was obliged to indemnify. Warren J held that the presumption that there was a retainer was not rebutted (referring to the old authorities of Adams v London Improved Motor Coach Builders, R v Miller and Glennie, etc).
(2) Division of costs between the Defendants – “…. Where there is no express agreement concerning the division of costs, a general rule of thumb is to divide them equally between the relevant parties. That is only a general rule and is not to be allowed to produce injustice. Where costs can be shown to be attributable to one party rather than another, the liability falls only on that party. And where the real contest is between one part A, and another part B, injustice could arise if that were not recognised in the way in which the costs of B and other parties employing the same solicitor are apportioned”. (Paragraph 30).
Here the work had been done for use to all defendants (paragraph 33); the apportionment which the Master had adopted was “essentially a fair factual determination that equal apportionment represented a fair assessment on the facts of the case…..”. (paragraph 32).
This was not an apportionment which was one that no reasonable Costs Judge could have made (paragraph 32) so the appeal was dismissed.
(3) Witness Expenses – Mr H, a property lawyer had advised in relation to transactions giving rise to the litigation. He was not an expert witness but had drafted his own witness statement and had appeared in court.
Held – Assistance on general preparation of the case as a solicitor and attendance at court would be allowed. Time spent on the witness statement had two components, (i) work done by Mr H as a witness of fact for which no costs would be allowable, and (ii) work which would have been done by a legal team taking a proof of evidence from Mr H which would be allowable, as would work done by Mr H in his capacity as a solicitor rather than as a witness of fact.
MANCHES LLP V GREEN [2008] EWHC 915 (QB) 29/04/2008 UNDERHILL J
Queen’s Bench proceedings between solicitors and one-time clients (not under the Solicitors Act 1974).
Manches, (“C”) acted for Green (“D”) in a substantial but unsuccessful action against an insurance company. C sued for unpaid bills of £351,307.29; by consent the bills were referred for assessment under s.70 Solicitors Act. Prior to that assessment, D pleaded by way of counterclaim, four reasons why not only did he have no liability for the outstanding sums claimed, but also that he was entitled to be paid damages equivalent to the full amount he had paid C already (circa £335,000) and the amount of his costs liability to the insurance company.
Underhill J made the following findings:-
(1) Whether or not it was an implied term of the retainer that C would comply with Practice Rule 15, with particular reference to the provision of realistic and accurate estimates, was a complaint to be raised before the Costs Judge on the Solicitors Act assessment (paragraph 6).
(2) C had not been in breach of duty to D in relation to an alleged failure by C to approach a crucial witness in accordance with D’s instructions and on advice given by leading counsel to do so.
(3) C had not been in breach of duty to D in omitting to provide D with the services of a qualified solicitor, but, rather, an unqualified managing clerk, so D’s argument under Pibrow v Pearless De Rougemont & Co [1999] 3 All ER 355, [199] 2 Costs LR 109, failed.
(4) Each bill had been signed by a partner in C under s.69(2) Solicitors Act 1974, contrary to D’s assertion that they had been signed, instead, by the unqualified managing clerk, contrary to the statutory requirement under the Act. (para 87).
Accordingly, C was entitled to judgment on the bills for any sums assessed on the Solicitors Act assessment, D’s counterclaims were dismissed.
RICHARD BUXTON V MILLS-OWEN [2008] EWHC 1831 (QB) 28 JULY MACKAY J
In this appeal MacKay J considered the circumstances in which a solicitor can terminate his retainer with his client and upheld the Master’s decision that the solicitor had “no just cause” for doing so; in the result, no profit costs were payable by the former client. The Judge declined to review the “entire contract principle” in Underwood Son & Piper v Lewis [1894] 2 QB 306 by reference to the case contended for by the Claimant solicitors, that this Victorian principle works unfairly and operates harshly against solicitors and should be modified.
The Judge also upheld the Master’s decision to reject the client’s submission that he should not be required to pay any disbursements since the Solicitors had Solicitors had terminated the retainer without cause.
“The authorities to which I have referred to (sic) deal with the inability of the solicitor to recover profit costs when an entire contract is terminated prematurely without cause. The same arguments are manifestly not applicable to monies which are disbursed for counsel’s fees, court fees and the like ….” (paragraph 33).
[It is of note that the Judge reached his decision notwithstanding that he accepted the parties had been “at loggerheads” for several weeks (Paragraphs 11 and 12), that the Solicitors had taken and followed advice from the Law Society that the firm could terminate the retainer “for good reason” (paragraph 17) and that the Court had allowed their application to come off the court record (paragraph8).
From the transcript, it appears that the possibility that the solicitors might be vulnerable to be an order for wasted costs for “pursuing a hopeless case” had the firm remained on the court record, albeit acting on the client’s express instructions (see CPR 48.7.5), was not a point argued before the Judge].
Security for Pre-Action Costs
LOBSTER GROUP LTD V HEIDELBERG GRAPHIC EQUIPMENT AND ANOTHER [2008] EWHC 413 TCC 6/03/2008 COULSON J
Security for costs; could an order for security cover pre-action costs, in particular those incurred in a failed mediation 2½ years before proceedings were issued?
As a matter of principle, pre-action costs can be the subject of an application for security for costs (paragraph 12) but on the facts, the mediation costs were costs incurred in a form of dispute which had no connection to the proceedings started 2½ years later. They were costs incurred in pursuing a valid method of dispute resolution (paragraph 17) in which the parties had agreed to share the costs of the mediation. National Westminster Bank v Feeney (No.9 of 2007) applied, although experts’ reports used in the mediation but subsequently relied on in later proceedings might be recoverable under the principle in Pecharies Ostendaises v Merchant Marine Insurance Co [1928] 1 KB 750 CA.
Solicitors Act
ANGEL AIRLINES SA V DEAN AND DEAN [2008] EWHC 1513 QB 30/06/2008 COULSON J
This judgement ought to be the final instalment in this litigation, Coulson J being the 24th judge to have participated in its resolution. The case concerned the detailed assessment of Dean & Dean’s bill for £444,705 under s.70 Solicitors Act 1974. The principal point to emerge was than an offer to settle under CPR 47.19 could be a “special circumstance” under s.70(9) capable of displacing the one-fifth rule. However, on the facts, the Master had been correct to hold than an offer made by Dean & Dean to accept £100,000 instead of £444,705 was not a “special circumstance” owing to its timing (far too late), its form (defective), its failure to set out a time for acceptance (none) and its amount (more than the Master had allowed, albeit not my much), so Dean and Dean’s “near-miss theory” failed – see paragraphs 23 5o 33.
Success Fees
SMITH V INTERLINK EXPRESS PARCELS LTD [2008] EWHC 90099 (COSTS) 5/07/2007 MASTER HURST, SENIOR COSTS JUDGE
Staged ATE premiums: C took out after the event insurance (ATE) with Temple Legal Protection. The premium was staged; £750 prior to issues, £1,200 after issue but not more than 45 days before trial, £2,700 if settled 45 days or less before trial.
The claim settled without proceedings for £1,700 damages. D’s insurers contended that the staged premium for stage 1 was unreasonable and disproportionate. On assessment, the court allowed £450 plus APT.
(paragraph 14)
GLOUCESTERSHIRE COUNTY COUNCIL V EVANS AND OTHERS (2008) EWHC Civ 21 31/01/2008 DYSON, BUXTON, LLOYD LJJ
“Discounted” success fees; the Council’s CCFA entitled their solicitors to a basic hourly charge of £145, but discounted to £95 if the case was lost. The success fee was 100%. C won the action; C’s bill claimed basic charges of £145 plus 100% success fee, total £290 per hour. D contended that the basic hourly charge was £95, enhanced first to £145 then to £290 in the event of success. Accordingly the success fee was 290% not 100% and breached Article 4 CFA under 2000 (limiting success fees to 100%) so the CCFA was unenforceable.
The Court held that there was an agreement to do the legal work for £145 per hour, accordingly the success fee was 100% and compliant with Article 4. A CFA may provide for a discounted fee in the event of failure and a success fee in the event of success. In such a CFA, it is necessary to ascertain the amount of fees that would be payable if the agreement was not a CFA. In Evans, the answer to that question was £145 per hour, so the success fee was 100% not 290%.
HOLLIDAY V EC REALISATIONS [2008] EWHC 90103 (COSTS) 31/03/2008 MASTER GORDON-SAKER
Review on appeal from the Costs Officer of (a) hourly rates claimed by C’s solicitors based in Sheffield and (b) the success fee sought by solicitors and counsel.
C’s personal representative had accepted £260,000 from D following C’s death caused by malignant mesothelioma arising from contact with asbestos when in D’s employment. Partner’s rate reduced from £220-£250 per hour to £187 composite; the success fees for counsel and solicitors claimed at 67% and 43% respectively, reduced to 33.3% and 27.5% respectively.
SUPPERSTONE V HURST [2008] EWHC 735 (Ch) 16/04/2008 FLOYD J
The receiving party did not serve Notice of Funding in form N251 but instead had told the paying party by e-mail that the claimant’s case was being funded under a CFA with a success fee backed by ATE insurance. Floyd J gave relief from sanctions on the grounds that the failure to serve the notice was simply an omission, that there had been an intention to serve (evidenced by the e-mail) and that the paying party had not been prejudiced. For the future, where a party does not have a good explanation or his opponent is prejudiced by the failure, relief from sanctions would usually be refused.
KILBY V GAWITH [2008] EWCA CIV 21 19/05/2008 SIR ANTHONY CLARKE MR< ARDEN LI, DYSON LJ
The Court confirmed that a litigant represented by solicitors under a CFA to which CPR 45 applies (fixed success fees) is entitled to recover the success fee fixed under the Rule and the court has no discretion not to allow a success fee or to allow it at a different level. Butt v Nizami (No. 13 of 2006) and Lamont v Burton (No. 8 of 2007) applied, even though the claimant had an effective BTE policy which could have been used instead of the CFA, thereby saving the paying party from having to pay the success fee.
VAT
LEWALD-JEZIERSKA V SOLICITORS-IN-LAW LTD [2008] EWHC 90106 (COSTS) 8/05/2008 MASTER ROGERS
This appeal from a decision of the Costs Officer considered the circumstances in which VAT is recoverable on costs awarded in favour of a receiving party.