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	England and Wales High Court (Senior Courts Costs Office) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Senior Courts Costs Office) Decisions >> Toyota Financial Services (UK) Plc & Anor v Sharma & Anor [2002] EWHC 9040 (Costs) (22 August 2002) URL: http://www.bailii.org/ew/cases/EWHC/Costs/2002/9040.html Cite as: [2002] EWHC 9040 (Costs)

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SUPREME COURT COSTS OFFICE

		Royal Courts of Justice Strand, London, WC2A 2LL
		22 August 2002

BACKGROUND

1. The first Defendant Shiv Kumar Sharma was at all relevant times a director of Bridge House Motors Limited, which held a dealership from the Claimants for the display and sale of their vehicles in their showroom in the West Midlands. They received financial assistance in connection with the obtaining of vehicles from the first Claimants, the vehicles themselves being supplied by the second Claimants. As part of the arrangement made, the first Defendant entered into certain guarantees with the Claimants.
2. It was his alleged default in respect of those agreements that led to meetings in 2000 to re-arrange the finance of the company, but, here again, there were alleged defaults by the first Defendant, as a result of which proceedings were begun. That led to the hearing before Master Leslie in October of last year, which is the subject matter of the assessment of costs in respect of which these written reasons are written.
3. The second Defendant is the first Defendant's wife. She entered into one guarantee only at a later stage, limited to £71,500, whereas the claim against the first Defendant was around £353,000. The exact amount was never crystallised, but that plays no part in these proceedings. A much fuller account of the dealings between the parties is to be found in the transcript of the judgment of Master Leslie, to which any appeal Judge will doubtless be directed.
4. As can be seen from Master Leslie's judgment, there were, in fact, two quite separate proceedings before him on that occasion. The first was an application for summary judgment against the first Defendant on the basis that, although he had served a defence, there was, in truth, no real defence to the claim. The second Defendant had, it was said, due to inadvertence, allowed a default judgment to be obtained against her. The second application before Master Leslie was, on her behalf, to set aside that judgment and to be allowed to defend the proceedings, as the first Defendant also hoped to be allowed to defend them. Although, perhaps, different procedural considerations might apply, as is again clear from Master Leslie's judgment, all parties were content to deal with the matter on the basis that there were no material differences.
5. At the end of a full-day hearing lasting some 6 hours, Master Leslie found in favour of the Claimants in respect of both matters; in other words, he granted the Claimants summary judgment and he refused to set aside the judgment in default against the second Defendant. He also awarded the Claimants their costs against both Defendants on the standard basis and refused permission to appeal.
6. The first Defendant did seek to appeal part of Master Leslie's judgment, but, although permission to appeal was granted, I was told that the appeal was subsequently dismissed and the costs of that appeal were summarily assessed by the Court and were not before me at this hearing.

CLAIMANTS' BILL

7. The bill which came before me for detailed assessment was divided into 3 parts. The first part claimed common costs against both Defendants; the second part was restricted to costs payable by the first Defendant only and the third part dealt with costs payable by the second Defendant only. The figures were for part 1, £118.961.34*; for part 2, £28,538.77; and for part 3, £2,896.25.
8. Lengthy but not particularly informative Points of Dispute were put in on behalf of both Defendants, who, at that stage, were separately represented, although at the formal detailed assessment hearing before me, they were represented jointly by Mr Deepak, a partner in Shakespeares, on behalf of the first Defendant, and Mr Faquir, a cost draftsman instructed by him, but also representing the second Defendant. These Points of Dispute were met with a massive document dealing in considerable detail, with the points raised, running to no less than 61 pages.

THE DETAILED ASSESSMENT PROCEEDINGS

9. The matter was balloted to me and listed for hearing on Wednesday 7th and Thursday 8th August, when the Defendants were represented as already indicated and the Claimants by Mr Smyth, an assistant solicitor, who had been intimately involved in the underlying proceedings, and Mr Bean, an experienced costs draftsman. After a hearing lasting one and a half days, I assessed the costs payable by the first Defendant in the sum of £58,304.74, with interest, down to 8th August, of £3,693.16, and against the second Defendant in the sum of £39,867.72, with interest, down to 8th August, of £2,525.31. In view of the considerable reduction that these figures represented on the amounts claimed, and notwithstanding that the recovered sums were, in fact, greater than a late offer made on behalf of the Defendants, I awarded the Claimants only half their costs of the detailed assessment.

THE MATTERS IN RESPECT OF WHICH PERMISSION TO APPEAL WAS SOUGHT

10. At the conclusion of the assessment, I asked both parties if they wanted permission to appeal. The Defendants did not seek permission to appeal, but the Claimants did seek permission to appeal in respect of both my decision on proportionality and on some of the hourly rates which I allowed. To assist the Judge deciding whether to grant permission and, if permission is granted, the Judge hearing the appeal, it seemed to me helpful to set out the reasons for my decisions on those two points, in some detail,.

PROPORTIONALITY

11. In the forefront of the Defendants' argument was the fact that the costs as claimed, in a total sum of £150,396.16, were disproportionate and I ought to so find and then conduct the detailed assessment in accordance with that ruling.
12. I was, of course, referred to the still recent but by now increasingly familiar Court of Appeal judgment in the case of Home Office v Lownds, reported at [2002] 2 Costs LR, 279, a minor clinical negligence case that settled for £3,000, but the costs of which were claimed at £17,126.78.
13. The judgment of the Court was given by Lord Woolf CJ. It seems appropriate for me to quote extensively from the relevant parts of that judgment, which starts at paragraph 21, which in this report is at the bottom of page 286.

"The approach Required by the CPR

21. In view of the impact of the transitional provisions we do not consider that we should interfere with the conclusions as to the amount of the bill reached by the District Judge which were endorsed by His Honour Judge Lightfoot. If, however, the entire bill had related to expenditure which occurred after 26 April 1999 we would have taken a significantly different view. To do otherwise would have bene to negate the changes in the approach to litigation which the CPR are intended to bring about. Although this does not affect the result of this appeal we have had the benefit of full argument by counsel on the issues and we are grateful for their assistance.

22. We consider that the importance of applying the new approach is illustrated by the figures for costs in this case. Although we recognise that clinical negligence cases are usually complex we do not consider that on any approach the amount of costs assessed in this case can be regarded as being proportionate. They are not ...

23. In our judgment what cases of this sort call out for is a recognition at the outset that the case could easily result in disproportionate costs being incurred. The nature of the claims required the parties conducting the litigation to plan how it should be carried out so as to minimise expense ...

24. Based on his experience, the Senior costs Judge considered that, normally, a Costs Judge could be reasonably satisfied that the costs for conducting this litigation up to the stage when the proceedings were settled, instead of amounting to over £15,000, were in the region of £6,500 to £7,000 there would be no significant issue as to proportionality. To this sum there would have to be added some additional cost to reflect the fact that the claimant was in prison which would make it more difficult to take instructions.

25. Under Part 44.5 the court is required to have regard to 'the conduct of all the parties'. In this case neither side paid proper attention to the clinical negligence protocol ... There should have been offers to settle by both sides.

26. Of course the protocols require a considerable amount of work to be done and the claimant is entitled to be paid proportionately for this. Here the Costs Practice Direction is relevant. We refer to paragraphs 11.1 and 11.2. They provide:

'11.1 In applying the test of proportionality the court will have regard to rule 1.1(2)(c). The relationship between the total of the costs incurred and the financial value of the claim may not be a reliable guide. A fixed percentage cannot be applied in all cases to the value of the claim in order to ascertain whether or not the costs are proportionate.

11.2 In any proceedings there will be costs which will inevitably be incurred and which are necessary for the successful conduct of the case. Solicitors are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a large claim, and may even equal or possibly exceed the amount in dispute.'

27. ...

28. The reference in 11.2 to costs 'which are necessary' is the key to how judges in assessing costs should give effect to the requirement of proportionality. If the appropriate conduct of the proceedings makes costs necessary then the requirement of proportionality does not prevent all the costs being recovered either on an item by item approach or on a global approach. The need to consider what costs are necessary is not a novel requirement. It was reflected by the former provisions of RSC order 62 which applied to the taxation of costs prior to 1986. Rule 28(2) dealt with costs on a party and party basis and stated:

' ... there shall be allowed all such costs as were necessary or proper for the attainment of justice ...'

29. In assessing costs judges should have no difficulty in deciding whether, in order to conduct the litigation successfully, it was necessary to incur each item of costs. When an item of costs is necessarily incurred then a reasonable amount for the item should normally be allowed. Any item that was not necessary should be disallowed.

30. In his advice the Senior Costs Judge drew attention to the problems that can arise from 'double jeopardy'; in other words from making a deduction when considering the bill item by item and then looking again at the situation as a whole and making a further global deduction. This danger will be avoided if a party receives at least a reasonable sum for the items of costs which were necessarily incurred.

31. In other words what is required is a two-stage approach. There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which Part 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner. This in turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner."

14. That seems to me to be a very clear direction to Costs Judges as to how they should approach this problem in future cases.
15. I turn now to the facts of this particular case which led me to the decision which I reached, which was that the costs, as claimed, were not proportionate. First, it is perhaps worth mentioning that all the costs were incurred during 2001, so the proviso referred to by Lord Woolf in Lownds about pre-CPR costs is not applicable.
16. On the figures, the Claimants were seeking against the first Defendant costs totalling £147,500.11 in respect of a claim which, exclusive of interest, was pleaded at approximately £353,000. Those proceedings were concluded in less than a year by way of a summary judgment application, in which the Queen's Bench Master took a robust view that, notwithstanding the various issues raised by the first Defendant in his defence and in his evidence in opposition, there should be summary judgment. In my opinion, to incur costs of that magnitude in pursuing a claim for £353,000 is not proportionate.
17. The position is even starker in relation to the second Defendant, where it is admitted that her liability never exceeded £71,500, plus interest, yet the claim for costs (jointly and severally with her husband the first Defendant) was for £118,961.34, and the total claim against her was £121,857.59.
18. I acknowledge that there were numerous documents which had to be considered and, in many cases, exhibited to the witness statements. These filled 3 lever-arch files before the Queen's Bench Master, but, essentially, the first Defendant was taking "technical" points, such as that one of the guarantees had not been signed and that insufficient credit had been given for parts handed back when the company went into liquidation. There was also an issue about some other legal costs, which I will deal with next.
19. When the Claimants sought a winding-up petition against Bridge House Motors Group Limited, the first Defendant's solicitors applied for a stay of advertisement, but that application was ultimately abandoned because it turned out that HM Customs & Excise had presented their own petition. The Claimants' costs of those proceedings, which Jacob J ordered the company to pay, were around £40,000. Those costs were never quantified, in the sense that they had been formally assessed by a Costs Judge or a District Judge, but the Claimants' solicitors had got the liquidator of the company to agree that those costs were not unreasonable and would be admitted to proof at the figure claimed.
20. I was told during the course of the detailed assessment that, in fact, a lower figure was negotiated between the parties as part of the final quantification of the funds due under the guarantee. One of the issues, which the first Defendant raised in his defence, was that these sums, which were quantified in the claim at the figure mentioned, should not have been so quantified.
21. Rather at the last minute, the Claimants sought to put in additional evidence explaining why one of the guarantees had not been signed.
22. The proposed defence of the second Defendant was even simpler. She said that she ought not be liable because she had been misled by her husband into believing that he had no other indebtedness to the Claimants, whereas this was not, in fact, true. She alleged that, had she known that, she would not have agreed to enter into the guarantee that she did enter into. That is a familiar defence, but, as can be seen from his judgment, Master Leslie did not consider it to be relevant.
23. I next have to consider how the Claimants conducted the litigation. Mr Graham, a senior partner who was very familiar with the Claimants' business, ran the case, with assistance from Mr Smyth and no less than 15 other fee earners. It was explained to me at the detailed assessment that there was never a time when all 15 fee earners were involved in the case at the same time, and I fully accept that. Nevertheless, it does seem to me to be using a sledgehammer to crack a nut to involve no less than 15 fee earners on a relatively small case which, if not a debt-collecting exercise, was certainly not a particularly complex piece of litigation.
24. I accept also that the bulk of work was carried out by Mr Graham, the partner, and Mr Smyth, but there was much reference to counsel, which, in my judgment, should not be necessary for solicitors of that seniority in that sort of firm. This coupled with the inevitable checking of work done by others in the "team" must necessarily have increased - in my judgment substantially increased - the costs which were incurred in this matter.
25. My initial view, just looking at the figures before reading any of the papers, was that the costs were disproportionate, and that view was strongly confirmed when I had had the opportunity to read all the papers lodged with me in advance of the hearing. It was apparent to me that the Claimants' solicitors had carried out a deluxe job and, equally apparent, that the Claimants were very satisfied with that deluxe job and were happy to pay for it. My job, however, was to ascertain what proportion of those costs should be recoverable from the unsuccessful Defendants and I considered that the total claimed was disproportionate. For that reason, in going through the bill on an item by item basis, I reduced or disallowed items that I considered were not necessary, and that, largely, accounts for the substantial reduction which I made in the bill as claimed to the bill as assessed.

THE HOURLY RATE POINT

26. The hourly rates that were in dispute, namely, those for Mr Graham, the partner, and for Mr Smyth, the assistant. In each case, there was a break at 31st July, which was the year end for the firm. For the partner, Mr Graham, the hourly rate claimed, down to 31st July 2001, was £309 and thereafter £351. For Mr Smyth, the rate claimed, down to 31st July, was £180 and from 31st July was £222.
27. I allowed for Mr Graham, the partner, the £309 he sought for the earlier period but restricted the hourly rate for the later period to £325. For Mr Smyth, I reduced the hourly rate for the earlier period to £170 and for the latter period to £190.
28. In doing that, I have regard to the guideline rates set out in the SCCO Guide to the Summary Assessment of Costs,, 2002 Edition. It is clear at all times that Mr Graham was a Grade A fee earner within that categorisation and, therefore, the rate would be £325 for the later period and not the higher rate which he claimed. It also seemed to me that, even though an increase from £309 might be justified, an increase of some 12 to 15 per cent could not be justified, with inflation running at its present low rate and so forth.
29. Mr Smyth, it was argued, was to be treated as a Grade C fee earner, because he had less than 4 years' post-admission experience. This was the basis for my restricting his hourly rate to £170 for the earlier period and £190 for the later period.
30. I should add that there had been an argument addressed to me on behalf of the Defendants that I ought not to allow City rates, because this was not a "City case". There have been a number of cases on the matter of the appropriate venue for conducting litigation in recent years. The most important cases seem to be Prescott v Prescott [1988][2] 1 WLR 132 and Sullivan v The Co-operative Insurance Society [1999] 2 Costs LR 158. It seemed to me that the longstanding relationship between the Claimants' solicitors and the Claimants, with the consequent familiarity which the former held with the latter's business, more than outweighed considerations that the matter could be dealt with by a firm with slightly lower overheads in a slightly less expensive part of London.
31. For the above reasons, I considered that the hourly rates which I allowed were reasonable and that the claimed rates, where reduced, were unreasonable.

CONCLUSION

32. In considering whether to grant permission to appeal, I have to consider whether I think that there is a real prospect of the appeal succeeding. I believe that my decisions were in the range of acceptable decisions for such matters coming regularly before Costs Judges and that there is, therefore, no reasonable prospect of success on either head, which is why I refused permission.

P. R. Rogers, Costs Judge

Dated 22nd August 2002

* Editorial Note : The figures given in paragraph 7 above are as corrected by Master Rogers post judgment