Neutral Citation Number: [2009] EWHC 1397 (Admin)

CO/8290/2008 
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION 
DIVISIONAL COURT 
Royal Courts of Justice 
Strand
London WC2A 2LL 

Wednesday, 3 June 2009
 
B e f o r e:

LORD JUSTICE SULLIVAN 

MR JUSTICE WILKIE 
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Between: 
LUKE SCHWARTZ 
Claimant

v 

HIGHBURY CORNER MAGISTRATES' COURT 
Defendant 
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Computer‑Aided Transcript of the Stenograph Notes of  
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Mr D Sonn (Solicitor Advocate) appeared on behalf of the Claimant
The Defendant did not appear and was not represented
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J U D G M E N T
1.	MR JUSTICE WILKIE:  This is a claim by Luke Schwartz commenced on 2 September 2008 seeking judicial review of the decision of the determining officer at the Highbury Corner Magistrates' Court, made on 3 June 2008, only to allow, by way of taxation of a bill of costs pursuant to a defendant's costs order made by the court, a reduced hourly rate in respect of those hours spent travelling and waiting by those whom he instructed to represent him in relation to the relevant matter.  
2.	Permission to seek judicial review was given on 7 October 2008.  The defendant has served an acknowledgment of service dated 11 September 2008 but has not appeared.  
3.	The background facts of the matter are that on 26 April 2007 the applicant was charged with an offence of failing to provide a specimen of breath for analysis in connection with an investigation under the Road Traffic Act 1988.  He instructed solicitors prior to his first appearance at the Magistrates' Court on 8 May.  On 30 April, the solicitor wrote to him in the following terms: 
"My hourly rate for dealing with this matter will be £200 plus VAT.  There will be a fixed fee of £400 plus VAT for the hearing on 8 May.  That will include all travel, waiting and hearing time."  
4.	In all there were six hearings prior to the trial, which took place on 27 November 2007, at the conclusion of which the claimant was acquitted, following upon which he was granted a defendant's costs order in accordance with section 16 of the Prosecution of Offences Act 1985.  On 25 February 2008, the claimant's solicitor submitted their bill of costs to the Magistrates' Court, together with a covering letter, which stated, amongst other things, as follows: 
"Please note that this firm charges a composite hourly rate in respect of all work undertaken on a file whether it be preparation, attendance and advocacy or travel and waiting.  That approach has been approved by both the Administrative Court in the North Sefton Justices case and also by the Costs Judge in the case of Villiers."  
5.	On 25 April 2008, the determining officer wrote to the claimant's solicitors advising that she had undertaken a provisional taxation of his claim.  In that letter she said, amongst other things, as follows: 
"I have considered your application for costs alongside the current guideline rates for Solicitors from the area and am willing to grant a total sum of £200 per hour on the basis of a Grade B Fee Earner examining both the nature of the proceedings as well as your experience and locality of your practice in reference to the Guideline Rates for summary assessment of costs.  
The amount claimed for travel and waiting has been reduced to £135 per hour, as these areas are not subject to the 50% uplift for care and conduct which has been added to the hourly rate allowed.  Although you have claimed a composite rate I am not satisfied that it is reasonable to allow a similar amount for travel and waiting as it is for the time spent in preparation and advocacy and the amount allowed is appropriate in the circumstances given the nature of the work involved." 
6.	On 7 May the claimant's solicitors responded by letter, which included the following passages: 
"As we stated in our letter of 25 February 2008, this firm charges a composite hourly rate.  That approach has been approved by both the Administrative Court and the Costs Judge in the cases to which we referred.  For that reason, there is no justification in reducing the hourly rate allowed in respect of travel and waiting.  
You have purported to reduce the amount allowed in respect of travel and waiting 'as these areas are not subject to the 50% uplift for care and conduct'. With respect, that is to misapply the decisions to which reference has been made.  As the Costs Judge made clear in Villiers, it is not unreasonable for a client to agree a composite rate which would include travel and waiting.  When solicitors are claiming an enhanced hourly rate to take into account such matters as the complexity of the case, it is not reasonable for the solicitors to charge such enhanced rate for travelling time.  
In that case as in this, the hourly rate was not enhanced.  In fact, as your letter of 25 April 2008 makes clear, £200 is the guideline rate.  On that basis, there is no justification for not paying the composite rate for all work undertaken on the file." 
7.	On 3 June 2008, the determining officer issued the decision letter.  In relation to the issue of travel and waiting time, she said as follows: 
"I have fully considered your representations regarding the case of R v North Sefton Magistrates' Court ex parte Phillip Hale, regarding reductions in the amount allowed for travel time, however I am satisfied that the amount granted for travel and waiting is appropriate in the circumstances, given the nature of the work that this involves.  I have had regard in this matter to the Justices' Clerks' Society Good Practice Guide: Taxation of Costs, August 2007 which at page 22 dealing with composite rates states: 'the composite rate incorporates any higher uplift ... The uplift will be deducted from the composite rate for travelling and waiting time.  See Villiers above.'" 
8.	The law as far as this matter is concerned is principally contained in section 16 of the Prosecution of Offences Act 1985 and the Costs in Criminal Cases (General) Regulations 1986 (as amended).  Section 16 of the Act provides, amongst things, that: 
"(1) Where‑
... 
 (c) a magistrates' court dealing summarily with an offence dismisses the information; 
that court ... may make an order in favour of the accused for payment to be made out of central funds in respect of his costs (a 'defendant's costs order')."  
9.	Sub‑section (6) provides: 
"A defendant's costs order shall, subject to the following provisions of this section, be for the payment out of central funds, to the person in whose favour the order is made, of such amount as the court considers reasonably sufficient to compensate him for any expenses properly incurred by him in the proceedings."  
10.	The taxation of the amount to be paid by way of such a costs order is governed by the 1986 Regulations.  At the time of the events in this case, Regulation 6(2) identified the relevant or the appropriate authority as being the designated officer for the court in the case of proceedings in a Magistrates' Court.  Since these events, those regulations have been further amended by amendment regulations coming into force on 13 October 2008, and it is now the case that the relevant authority for taxing a central funds order is now the National Taxing Team of, as we are told, the Ministry of Justice.  But at the time of these events, the determining officer was based at the Magistrates' Court, hence the identity of the defendant.  
11.	Regulation 7 of those regulations provides, amongst other things, as follows: 
"(1) The appropriate authority shall consider the claim, any further particulars, information or documents submitted by the applicant under regulation 6 and shall allow such costs in respect of‑
 (a) such work as appears to it to have been actually and reasonably done; and ...
as it considers reasonably sufficient to compensate the applicant for any expenses properly incurred by him in the proceedings. 
 (2) In determining costs under paragraph (1) the appropriate authority shall take into account all the relevant circumstances of the case including the nature, importance, complexity or difficulty of the work and the time involved. 
 (3) When determining costs for the purpose of this regulation, there shall be allowed a reasonable amount in respect of all costs reasonably incurred and any doubts which the appropriate authority may have as to whether the costs were reasonably incurred or were reasonable in amount shall be resolved against the applicant." 
12.	Reference has been made in the correspondence to the two relevant judicial authorities.  The first is R(Hale) v the North Sefton Justices [2002] EWHC 257 (Admin).  At paragraphs 13 and on of the judgment of the court given by Auld LJ, he said as follows in relation to the method of calculation: 
"13.  They derived this method of calculation from paragraph 3.13 in the 1995 Notes for Guidance and from a document entitled 'Determining Officers Notes for Guidance', intended to encourage consistency in the taxation of costs awarded from central funds in the Crown Court and in Magistrates' Courts. Those sources indicated that for the purpose of assessment a solicitor's remuneration should be regarded as consisting of two factors, (a) and (b): (a) was the average hourly expense rate prevailing in the area for all work properly undertaken; (b) provided for profit and supervision and was likely to vary according to the professional skill and responsibility in the work involved.
... 
15.  Mr Davies has submitted, in reliance on further affidavit evidence of Mr Learmonth, that since about April 1999, when the Civil Procedure Rules were introduced, solicitors have generally moved, in criminal as well as civil work, away from the system of broad average direct cost plus mark‑up mode of billing their work to a flat hourly rate applicable to all types of work. The change came about, it seems, to secure the necessary simplicity required for summary assessment of costs under the new Civil Procedure Rules' regime, and for the benefit of lay clients who had found the old system confusing." 
13.	Then at paragraph 22 and 23: 
"22.   If, as I would find, it was reasonable for the claimant in the circumstances of this case to instruct Mr Learmonth, it is necessary to consider whether it was reasonable to pay him on the then emerging general basis of a flat hourly rate instead of the old and diminishing practice of a broad average cost plus mark‑up.
23. In my view, the information before the court, to which I have referred, shows that it was at least reasonable in the transitional period of 2000 for the claimant to incur costs in the proceedings at a flat hourly rate and to do so at the claimed hourly rate ..." 
He then went on to deal with the specifics of that case.  
14.	The second case cited is the case of Villiers [2005] 4 Costs LR 732.  That is a decision of the costs judge.  At paragraphs 10 and on of his judgment under the heading "Travelling and Waiting Time", he said as follows: 
"Throughout the bill, the Determining Officer allowed this time at one‑half of the hourly rates allowed for the preparation and attendances.  He maintained that it was not reasonable to expect the client to pay the same rate for travel and waiting as for preparation time, as such time does not involve the degree of responsibility upon the solicitors in terms of complexity, importance and difficulty, that there is when preparing the case or for attending on others. 
11.  The solicitors submit that the retainer with their client was that Mr Villiers should pay an hourly rate for their time and that included travel time.  They further submitted that the application of an agreed 'across the board' rate is now standard practice within the Civil Procedure Rules ... 
12.  I agree with the solicitors' submissions.  It is not unreasonable for the client to agree an "across the board" rate, which would include travel time.  Furthermore, the Civil Procedure Rules no longer differentiate between reasonable travel time and time charged for other work.  If the solicitors were claiming an enhanced hourly rate to take into account such matters as the complexity of the case, then, in my judgment, it would not be reasonable for the solicitors to charge such enhanced rate for travelling time.  In this instance, having seen the hourly rates charged and heard the submissions from Mr Benson, I am satisfied that the hourly rates that have been claimed have not been enhanced and accordingly I allow travel time at the rates claimed in the bill.  Accordingly, this part of the appeal succeeds." 
15.	In addition, in the correspondence, reference was made to the Justices' Clerks' Society Good Practice Guide: Taxation of Costs issued in August 2007.  In particular, we have had our attention drawn to paragraph 2.4 headed "Taxing a bill", which says as follows: 
"A claim has traditionally been made up of four elements:  
• The broad average direct cost ‑ the cost to the solicitor's firm of doing the case
• Care and conduct ‑ the profit element 
... 
For the purpose of assessment, therefore, a solicitor's remuneration may be regarded as consisting of two elements: 
 (1) a rate per hour reflecting the Broad Average Direct Cost, that is, the average expense rate of undertaking the work (this is sometimes known as the A factor) to which should be added, 
 (2) a sum for Care and Conduct which reflects such items as supervision and commercial profit (this is sometimes known as the B factor).  
In civil matters, the Practice Direction of the Senior Costs Judge PT Hurst 26.4.1999 stated that 'The Lord Chancellor has decided that this method of calculating charges is to be discouraged and solicitors will therefore be urged to claim costs at a single charging rate which will normally be the rate which they have agreed to charge their client'. 
Either method ‑ A and B factor or flat rate is acceptable.  The A & B approach has been sanctioned [he then refers to certain authorities].  More recently in the case of R v (Hales) v North Sefton Justices (2002) EWHC 257, the flat rate has been approved in criminal matters and acknowledged in R v Villiers ... 
Many solicitors do not now refer to Care and Conduct and use a composite fee instead.  Where this happens the reasonableness of the rate can be checked by means of using a back calculation incorporating care and conduct.  As the composite rate is meant to include a mark‑up for care and conduct (normally 50%), this rate should not be applied to travel and waiting." 
16.	Further on in this guidance at page 21 of the document, there is a separate paragraph headed "The composite hourly rate".  This reads as follows. 
"As an alternative to a claim based on the broad average direct cost plus uplift for care and conduct, solicitors may make a claim based on a composite hourly rate.  In determining the reasonableness of the composite rate, determining officers will take it to represent the appropriate rate of broad average direct cost plus an uplift of 50%.  If the composite rate incorporates any higher uplift, this should be explained and justified when the claim is submitted.  The uplift will be deducted from the composite rate for travelling and waiting time.  See Villiers above." 
17.	In our judgment, there is unfortunate ambiguity in those two passages within the JCS Guidelines.  The last sentence of the first passage to which we referred, at paragraph 2.4, rather suggests that where the composite rate is checked for reasonableness by the kind of back calculation referred to, the Justices' Clerks, in applying the guidance, should not normally allow the full composite rate for travel and waiting, but rather should exclude the mark‑up rate of the rate for care and conduct.  On the face of it, that is contradictory guidance to that which is then set out under the heading "The composite hourly rate", which makes it clear that that deduction should only occur when there has been an enhanced composite hourly rate, which would normally have to be explained and justified when the claim is submitted, and only to the extent that there is such an enhanced uplift should there be a due deduction in respect of travelling and waiting time.  
18.	In our judgment, that latter passage more accurately reflects the judicial authorities to which we have referred, and the last sentence in the first passage is inconsistent with that approach.  We may also say that it is inconsistent with what appears to have been emerging for some time and now seems to be the norm, which is that solicitors are encouraged, both in the civil and in the criminal sphere, to charge at a single composite rate which will incorporate travel and waiting time.  It is apparent to us, from the correspondence, that the determining officer, in deciding to make the reduction in the composite hourly rate in respect of travel and waiting time, was misled by the contradictory passages within the guidelines, and as a consequence has misdirected herself and has erred in law.  
19.	It is to be observed that, in the acknowledgment of service, an issue is raised as to whether the composite hourly rate of £200 had been put forward as a rate including an element of enhancement, which, had it been so, would have justified such a reduction as was in fact made.  Unfortunately, that assertion has no support whatever from the contemporaneous correspondence, and indeed as the claimant's solicitors pointed out in the correspondence, from the outset it was being accepted by the determining officer that £200 per hour was consistent with a normal charging rate for a grade B fee earner for a solicitor located at and/or dealing with a case at the Highbury Corner Magistrates' Court.  In fact, it may be that the £200 agreed between the solicitor and client was actually quite a generous rate for the client.  Reference is made in the acknowledgment of service to the relevant hourly rate being within a range between £165 and £219.  That appears to emanate from the Justices' Clerks' Society document to which we have referred.  
20.	Mr Sonn, who appears for the claimant, has also referred us to a document emanating from the Legal Services Commission, namely the National Courts Team Hardship Review Guidance, which concerns cases where an application is made on hardship grounds even though the person claiming is technically ineligible for the grant of legal aid.  In that document, for outer London category B, the going rate is £198 per hour.  The going rate for category B, where the solicitor is located in the city, which arguably this firm is, is £259 per hour.  
21.	In our judgment, on any view, the £200 was being put forward and was dealt with by the determining officer as being a normal composite hourly charging rate without any element of enhancement which would bring in the special treatment reserved for where there is such a level of enhancement.  Therefore, we have no hesitation in concluding that there is nothing in this argument raised in the acknowledgment of service, and we are therefore confirmed in our view that the determining officer was misled, did misdirect herself and erred in law.  
22.	Therefore, this judicial review must succeed.  
23.	MR JUSTICE SULLIVAN:  I agree.  In the claim you are seeking a quashing order.  So the decision of 3 June is quashed and you obtain your mandatory order to allow your composite non‑reduced hourly rate in respect of travelling and waiting.
24.	MR SONN:  I am grateful, my Lords.  The only other matter that arises is an application for costs out of central funds in these proceedings.  That arises, I believe, under section 16(5) of the Prosecution of Offences Act, where "any proceedings in a criminal cause or matter", which this plainly is, "are determined before a Divisional Court of the Queen’s Bench Division, the court may make a defendant’s costs order in favour of the accused".  I seek an order to be taxed in the usual way.
25.	MR JUSTICE SULLIVAN:  Yes, you may have that order.  Thank you very much indeed.  Thank you for your very helpful submissions.
26.	MR SONN:  I am grateful.