This judgment was handed down remotely at 10.30am on [date] by circulation to the parties or their representatives by e-mail and by release to the National Archives.
.............................
COSTS JUDGE NAGALINGAM
Costs Judge Nagalingam:
- The entirety of day one of this hearing was concerned with submissions regarding the preliminary points, which are addressed at pages 1-11 of the combined points of dispute and points of reply.
- Mr Stacey has also submitted a skeleton argument and a series of cases. I have asked for those cases to be constructed into the form of a paginated bundle and uploaded to the document upload centre by 10am on what would have been day two of the hearing.
- Mr Mason has produced his own bundle of cases and legislation extracts, which I have also directed be uploaded to the document upload centre.
- Both advocates have also been permitted to file additional documents, without further submissions, which supplement the arguments heard on day one regarding the central question raised at preliminary point 2 regarding the applicability of section 74(3) of the Solicitors Act 1974 to these assessment proceedings.
- Notwithstanding a slight delay caused by some of the bundles being uploaded using the wrong case reference number, I am satisfied that I have all the relevant bundles I require in terms of a hearing bundle and the Defendant's papers (in electronic form).
- It has also been confirmed that that the Claimant has been given access to those very same bundles.
General Point 1 Format of the breakdown
- Whilst the Claimant was served with an electronic version of the bill, this assessment proceeds on the basis of the accompanying 3-column bill which was also produced and served on the Claimant.
- It is the 3-column bill only which was filed with the court and that is the breakdown which falls to be assessed.
General Point 2 Retainer
Mr Mason's submissions
s74.3 and CPR 46.9
- Mr Mason's submissions set out to establish why he says s74(3) Solicitors Act 1974 and CPR 46.9 apply to the assessment of these costs. He says there are four categories of costs which appear in the breakdown which are both unusually incurred and unusual in amount, to the extent that those elements of costs should be disallowed entirely.
- Those categories are incoming letters, estimated time, overheads/office administrative costs, and dual attendances. In the case of dual attendances, the argument is that the fees for the attendance of the lower grade of fee earner ought to be disallowed.
- Mr Mason advised me that whilst the Defendant's agreement to his calculations had not yet been sought, the sum total of these categories would see the breakdown reduced by £62,202 if the argument was accepted.
- Citing s74 of the Solicitors Act 1974, Mr Mason argued that it was a matter of statutory construction that s74(3) of the Act applies to proceedings in the family court. In so far as the Crime and Courts Act 2013 was of any relevance, Mr Mason observed that the only change to s74(3) of the Solicitors Act was to substitute the word "the" for "a".
- Citing Oakwood Solicitors v Menzies [2024] UKSC 34, Mr Mason referred me to paragraph 43 as an example of giving effect to the words of the Solicitors Act and client protections:
"43. As to the purpose of the regime, it is apparent that the requirements that bills of costs be delivered, that the bills comply with statutory conditions, and the right to have those bills assessed are concerned with the protection of the interests of the client - the consumer of solicitors' services. The court's power to assess costs exists to ensure that excessive costs are not claimed from the client. Client protection is diminished if payment occurs before there is any opportunity to consider the bill of costs and whether and, if so, to what extent, it should be paid."
- Thereafter, citing R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents)[2023] UKSC 28, Mr Mason relies on paragraphs 40 and 43 of the same:
"40. The basic task for the court in interpreting a statutory provision is clear. As Lord Nicholls put it in Spath Holme, at p 396, "Statutory interpretation is an exercise which requires the court to identify the meaning borne by the words in question in the particular context."
"43. The courts will not interpret a statute so as to produce an absurd result, unless clearly constrained to do so by the words Parliament has used: see R v McCool [2018] UKSC 23, [2018] 1 WLR 2431, paras 23-25 (Lord Kerr of Tonaghmore), citing a passage in Bennion on Statutory Interpretation, 6th ed (2013), p 1753. See now Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), section 13.1(1): "The court seeks to avoid a construction that produces an absurd result, since this is unlikely to have been intended by the legislature". As the authors of Bennion, Bailey and Norbury say, the courts give a wide meaning to absurdity in this context, "using it to include virtually any result which is impossible, unworkable or impracticable, inconvenient, anomalous or illogical, futile or pointless, artificial, or productive of a disproportionate counter-mischief". The width of the concept is acceptable, since the presumption against absurdity does not apply mechanistically but rather, as they point out in section 13.1(2), "[t]he strength of the presumption
depends on the degree to which a particular construction produces an unreasonable result". I would add that the courts have to be careful to ensure that they do not rely on the presumption against absurdity in order to substitute their view of what is reasonable for the policy chosen by the legislature, which may be reasonable in its own estimation. The constitutional position that legislative choice is for Parliament cannot be undermined under the guise of the presumption against absurdity. There is an issue between the parties whether the presumption against absurdity provides relevant guidance in the circumstances of this case."
- Mr Mason submits that it would be an absurd result were I to conclude that s74(3) does not apply to the circumstances of the disputed costs in this matter.
- Mr Mason then invited me to consider the case of ZYN v Walsall Metropolitan Borough Council [2014] EWHC 1918 (Admin), and in particular paragraphs 39 and 44, which fall under the general heading "Historical and updating interpretations" within the ZYN judgment:
"39. On one view which I will call the 'historical' approach the meaning of legislation is fixed at the time when it is made and must be determined solely by reference to the circumstances which then existed and not to anything that happens afterwards. An example of this approach is The Longford (1889) 14 PD 34, a case where the court had to construe an Act of Parliament which provided that "no action in any of His Majesty's courts of law" should be brought against certain shipowners without a month's notice. The question was whether this provision was apt to cover an Admiralty action in rem. In holding that it was not, Lord Esher said (at pp.36-37):
"The first point to be borne in mind is that the Act must be construed as if one were interpreting it the day after it was passed.
The word 'action' mentioned in the section in question was not applicable, when the Act was passed, to the procedure of the Admiralty Court. Admiralty actions were then called 'suits' or 'causes'; moreover the Admiralty Court was not called and was not one of His Majesty's Courts of Law.""
- ZYN, at paragraphs 40-43 proceeds to give other legislative examples of how parliament's words may have taken on one meaning at the time of enactment, but were capable of an updated interpretation years later.
- Then at paragraph 44:
"44. An 'updating' approach if appropriate in this case would therefore permit the court to interpret the term "Court of Protection" in paragraph 44 as applying to the new Court of Protection created by the 2005 Act, even though the new Court of Protection was not yet in existence at the time when that provision (in its current form) was introduced. It would not, however, justify an inference of the kind which Mr Wise invited the court to draw from a later event, namely, the fact that paragraph 44 was left unchanged when the legislation creating the new Court of Protection was brought into effect."
- Mr Mason submits these decisions highlight the ordinary principles of statutory construction. In the context of the index matter, Mr Mason submits that the Crime and Courts Act 2013 was to formalise the structure of the courts. That was the primary function of the legislation, not to remove a consumer's rights under the Solicitors Act to challenge their solicitor's costs in family proceedings.
- Mr Mason warns against a decision which would mean that a client in 2012 had more rights under the Solicitors Act 1974 than the same client in 2013 or later. It must be that those pre 2013 rights survived the implementation of the Crime and Courts Act 2013, and as such s74(3) of the Solicitors Act must apply to proceedings in the Family Court.
Departure from the agreement
- Mr Mason then focused on concepts of approval, citing in particular paragraph 8 of Macdougall v Boote Edgar Esterkin 2001 1 Costs LR 118:
"8. Turning to my own role I have had initially to define the nature of my review, aided by helpful submissions of Mr Mark Turner QC for the Applicants and Mr Brian Leveson QC for the solicitors. My first conclusion is that what I am concerned with is not just the charging rate sought by the solicitors, but that charging rate as applied uniformly to the hours of Mr Barron: 806 as claimed, some 700 as taxed, with some 596 having accrued by the meeting of the 4th August 1992. As it seems to me, if there was client approval of that rate as uniformly applied to those hours then a presumption is raised for the purposes of r. 15(2) sufficient to displace indemnity taxation of that item whether that is a presumption under 15(2)(a) or (b) may be difficult to say but matters not. My further conclusion is that the quality of the approval has to be such as to raise a presumption. In the course of argument I talked of 'informed' approval and even with reflection I adhere to that concept. To rely on the Applicants' approval the solicitor must satisfy me that it was secured following a full and fair exposition of the factors relevant to it so that the Applicants, lay persons as they are, can reasonably be bound by it."
- It is Mr Mason's contention that the Defendant in the index matter failed to provide the "full and fair exposition" that the court in Macdougall concluded was necessary, in order to recover costs in excess of what would have been allowed on a party and party basis.
- Turning next to Herbert v HH Law [2019] EWCA Civ 527, Mr Mason cited paragraph 37:
"37. Counsel were agreed before us that the Judge was correct to hold that "approval" in CPR 46.9(3)(a) and (b) means informed approval in the sense that the approval was given following a full and fair explanation to the client (although there was dispute between them as to the reasoning and significance of the Macdougall case cited by the Judge). We agree."
- Mr Mason invited notice of the court's conclusions as to the requirement to give a "full and fair explanation" in order for informed approval to be established.
- Mr Mason contrasts such notions of the provision of a "full and fair" explanation or exposition, and section 2 of the client care letter dated 27 February 2023. That section provides:
"The general rule is that each party will pay his/her costs and the likelihood of securing an Order for costs against your opponent (or conversely being the subject of an Order for costs) is reduced to the point of being the exception rather than the rule. Those limited exceptions where the Court may order an inter party award for costs are as follows:-
When a party fails to comply with a procedural Order;
Where a party has conducted the litigation unreasonably; and
Where a party has been unreasonable in relation to an open offer to settle the case (or alternatively refused to put forward an open offer to settle the case)."
- Mr Mason submits this explanation does not go far enough to satisfy the 'onerous burden' set out in Macdougall and Herbert.
- Mr Mason says that the Claimant accepts in general terms that each party bears their own costs in Children Act and finance proceedings. However, he sought to draw my attention to various post-retainer documents.
- The first of these was "Position statement for private FDR", prepared on the Claimant's behalf by counsel and dated 8 March 2023. Mr Mason invited consideration of the 'Conclusions' section of this document, and in particular paragraph 62:
"62. But, simply, this case has no prospects of settlement if H does not move (considerably) from his position. Now that his case as to W having her own wealth has collapsed (and H looking down the barrel of a significant costs order), H cannot maintain the fiction. It was his own open position that the justification for no capital or (spousal) income orders was each parties' resources being sufficient."
- Mr Mason observed this statement came around 2 weeks after the retainer was agreed, and submits this evidences that the retainer letter did not go far enough in terms of giving "full and frank disclosure" of the likely costs orders in the matters upon which the Defendant had been instructed.
- The terminology of "full and frank disclosure" is one Mr Mason used on more than one occasion, but on being pressed for the 'authorities' which created such a burden Mr Mason confirmed it was a term of his own construction which was designed to bring together the effects of the decisions in Macdougall and Herbert.
- In furthering the Claimant's argument that the costs information provided in the retainer was insufficient, Mr Mason took me to page 1,473 of Finance Bundle 2, and in particular bullet point 5 of a 13 March 2013 draft e-mail to the Claimant, which stated "On the question of costs, if you go on with the case, it will have to be funded, but in the event that the Court considered that your proposal was reasonable then you have a very reasonable prospect of obtaining the majority of your costs since a reasonable time after he should have accepted this proposal. It will not be all the costs but maybe 60% to 70%".
- Mr Mason submits that the retainer information cannot have been sufficient if the Defendant felt the need to provide this further information regarding costs at a later date.
- Then citing page 16 of Children Bundle 1, Mr Mason submits that the e-mail of 23 February 2023 (which attached the letter found at page 21 of the same bundle) demonstrates that 4 days before the retainer letter was finalised the Defendant had already formed a good understanding of the demands of the matters upon which they were instructed.
- Mr Mason submits this letter (to the Claimant's former spouse) demonstrates what was missing from the retainer letter in terms of information that ought to have been given to the Claimant before she signed the retainer.
- Mr Mason then took me to page 217 of Finance Bundle 3, being an e-mail to the Claimant dated 4 May 2023 in which the costs of a potential application for increased maintenance is discussed. Mr Mason in particular drew my attention to the passage:
"Going to Court on such an application would probably cost at least £18,000 - £25,000 plus VAT. If you succeed, having written the necessary letter before action, and on the basis that your husband has been unreasonable, you should be able to get the majority of your costs but, if you fail, you would have to pay not only your own costs but a large proportion of your husband's costs. Therefore that has got to be considered very carefully."
- Mr Mason again queried the adequacy of the costs information provided in the retainer, when read against the examples highlighted above.
- With further reference to Finance Bundle 3, Mr Mason invited me to consider pages 785 to 787 of the same. He says this demonstrates the overlap with work in the county court.
- Mr Mason submits that the retainer does not meet a "full and frank disclosure" test because the retainer does not explain what happens in the event of the exceptions listed, nor is there any mention of a shortfall costs.
- Mr Mason sought to stress the consumer protection foundations of the Solicitors Act 1974, and the requirements of CPR 46.9.
- Mr Mason submits that all of the above must mean that the four categories of costs he identified (above and in the points of dispute) must, as a matter of principle, come out of the Defendant's breakdown of costs because they are unusually incurred and unusual in amount.
- Mr Mason submits that even if I am against him in principle, the Claimant will still maintain that the four identified categories of costs are unusually incurred and unusual in amount.
- In further citing Macdougall, Mr Mason acknowledged the absence of the precise words of "full and frank disclosure", but relies on paragraph 8 of Macdougall where the court considered the issue of the "quality of the approval" and "informed approval". The passage Mr Mason submits is key is where the judgment found that "To rely on the Applicant's approval the solicitor must satisfy me that it was secured following a full and fair exposition of the factors relevant to it so that the Applicants, lay persons as they are, can reasonably be bound by it".
- Mr Mason also drew my attention to paragraph 37 of Herbert where the notion of "informed approval" was affirmed, and "in the sense that the approval was given following a full and fair explanation to the client".
Mr Stacey's submissions
- Mr Stacey submits that before 2012, the index matter would have been brought in the family division of the High Court, therefore whether pre or post 2012, the Claimant wouldn't have been treated any differently in terms of their assessment rights. All The Crime and Courts Act 2013 did was to make clear what was already known, i.e. there was no question of the family court being a division of the County Court.
- Mr Stacey submits that section 74(3) of the Solicitors Act 1974 does not apply to this assessment. He accepts that CPR 46.9 is linked, but not inextricably so.
- Mr Stacey cited Belsner v CAM Legal Services Ltd [2022] EWCA Civ 1387, at paragraph 8, where section 74(3) is discussed. Mr Stacey observed the focus therein with regard to the assessment of items relating to proceedings in the county court.
- Mr Stacey submits that the stance adopted by the Defendant is not complicated. The index matter does not concern items of costs relating to proceedings in the county court.
- Relying on Belsner, Mr Stacey observed that similar arguments were advanced by the Claimant in that case with regards to whether the work done fell under the bracket of "proceedings in the county court" (see paragraph 48, Belsner).
- Mr Stacey observed how Belsner addressed the manner in which RTA portal claims ought to be treated for the purpose of section 74(3):
"56. In these circumstances, it is not possible for this court to hold that section 74(3) applies to claims brought through the RTA portal without county court proceedings actually having been issued.
57. None of the client's arguments come close, in my judgment, to changing that stark conclusion as a matter of statutory construction. An updating or "always speaking" construction of a statute does not permit the court to ignore the statutory language used in order to include within its meaning something that is expressly excluded (see News Corpn UK & Ireland Ltd v Revenue and Customs Comrs [2021] 2 All ER 1276 at paras 5964per Simler LJ).
58. I do not accept that any of the client's eight points actually support the proposition that, applying an updating construction, claims made within the RTA portal should be regarded as "proceedings in the county court" within the meaning of section 74(3). It is true that the RTA portal is an official process introduced by the Ministry of Justice, but that does not make claims within it into proceedings in the county court. Lord Sumption JSC's statement in Plevin [2017] 1WLR 1249 that the word "proceedings" is not a term of art under the general law cannot allow "proceedings in the county court" to include claims that are never going to be in the County Court. Section 51(2) of the Senior Courts Act 1981 does, of course, allow rules to prescribe scales of costs to be paid to legal representatives, but that cannot change the proper meaning of either section 74(3) or rule 46.9(2). The fact that rules of court make various provisions for cases brought within the RTA portal may be illogical (as I have already said), but it does not convert portal claims into county court claims. Hughes J's statement in Lynch [2004] 1 WLR 1753 that section 74(3) was still intended to bite wherever there were fixed costs was only referring to the county court proceedings to which the subsection applied."
- Mr Stacey submits that the same logic applies to the index scenario. Proceedings were in the family court, not the county court, when the Claimant came to instruct the Defendant.
- Mr Stacey accepts the general notion that one looks through the lens of the consumer, and that consumer protection is important.
- Mr Stacey also accepts what is said in PACCAR and the notion that one should interpret legislation in a manner which avoids an absurd result. However, he submits that the absurd result in this matter would be to conclude that the costs in this assessment were costs incurred in proceedings in the county court.
- With regard to consumer protections, Mr Stacey invited consideration of sections 60 to 70 of the Solicitors Act 1974, and CPR 46.9, and submits that regardless of which court the proceedings were brought in these sections of legislation build in consumer protections which the Claimant always had the benefit of.
- Regarding the notion of informed consent, Mr Stacey observed the points of dispute do not descend into any level of detail such that the Defendant can usefully respond. Reliance is instead placed in the retainers.
- Mr Stacey acknowledged there were two retainers at play, one for the finance matter and one for the children matter, but that it was common ground that both retainers were otherwise identical.
- Taking the finance matter retainer as an example, Mr Stacey took me to page 3 of the same and the section "Costs Orders against other parties" which provides:
"The general rule is that each party will pay his/her own costs and the likelihood of securing an Order for costs against your opponent (or conversely being the subject of an Order for costs) is reduced to the point of being the exception rather than the rule. Those limited exceptions where the Court may order an inter party award for cost are as follows: -
When a party fails to comply with a procedural Order;
Where a party has conducted the litigation unreasonably; and
Where a party has been unreasonable in relation to an open off er to settle the case (or alternatively refused to put forward an open offer to settle the case)."
- Mr Stacey submits that not only is this information accurate in terms of typical costs outcomes in family cases, arguably the provision of this information within the retainer letter goes further than was in fact necessary.
- In so far as the Claimant relies on Macdougall, Mr Stacey submits that the retainers amount to a "full and fair exposition" such that the Claimant was able to provide informed approval.
- In response to the position statement of counsel (in the underlying actions) which Mr Mason referred to, Mr Stacey observed that was the position statement produced for a mediation in the finance proceedings. It was a "shot across the bow" to which little weight ought to be attached, and in any event the majority of the work billed concerned the children matter.
- With respect to page 1,473 of Finance Bundle 2 (referenced above), Mr Stacey submits that the information provided would have been read as being entirely consistent with the wording of the retainers.
- Mr Stacey then addressed Mr Mason's reference to page 21 of Children Bundle, the letter to the Claimant's former spouse dated 23 February 2023 (i.e. not to the Claimant). Mr Stacey queried the relevance of that letter to the central questions before the court today, the letter itself mainly addressing practical matters.
- I am inclined to agree with Mr Stacey as to relevance. The 23 February 2023 letter was indeed 4 days before the date of the retainer letters and demonstrates the Defendant's grasp of the issues concerning arrangements involving the children. However, it goes no further than that. It simply reflects the state of play at that moment in time, and 4 days later the retainers reflected the limited circumstances in which costs orders in the Claimant's favour might be capable of being achieved.
- Mr Stacey also observed that throughout the period of the Defendant's involvement, all draft orders exchanged by the parties were on terms of 'no order as to costs', with both sides acknowledging that the bar for unreasonableness is higher in the family court (which takes into account context, high running emotions and an often fractious or testing period for those involved).
- Mr Stacey takes issue with the reference to Finance Bundle 3, pages 785 to 787, which he says is a 'red herring' in that those pages concern the Claimant's application for a decree nisi, being distinct and outside of the finance and children matters upon which the Defendant was instructed. Mr Stacey also submits that such applications are in any event family proceedings outwith the county court.
- Mr Stacey further submits that CPR 46.9 does not assist the argument the Claimant is seeking to advance, and that none of the examples cited by the Claimant demonstrate unreasonably incurred costs.
- Citing Core Bundle page 313, e-mail to the Claimant dated 7 June 2023, Mr Stacey submits the costs information provided remained consistent with what the Claimant had been told throughout, i.e. "..there is normally no order for costs i.e., each party pays their own costs".
- With reference to Re:T (A Child) [2005] EWCA Civ 311, Mr Stacey drew my attention to paragraph 31, where the court observed "Against this background it is in one sense unfortunate that we have to resolve an outstanding issue of costs. It is, however, an issue of considerable importance to both parties, and has implications, we think, beyond the narrow ambit of the instant case."
- That led to an analysis of "The principles relating to costs in family proceedings relating to children" which were expressed (and adopted by the court) at paragraph 36 of the judgment as follows:
"36. The principles, which fall to be applied, are not, we think, in dispute. The judge summarised them succinctly in the following way: -
2.1 The Civil Procedure Rules apply. Under normal circumstances, according to rule 44.3(2) (a), the general rule is that costs should follow the event, although the court can make a different order. (Rule 44.3(2) (b))
2.2 However, this general rule does not apply to proceedings. (Family Proceedings (Miscellaneous Amendments) Rules 1999)
2.3 It is suggested that even in family proceedings, the general rule is probably the starting point but can more easily be displaced. (Gojkovic v Gojkovic (No 2) [1992] Fam 40)
2.4 In cases involving children in particular, costs awarded against one parent or another are exceptional since the court is anxious to avoid the situation where a parent may feel "punished" by the other parent which will reduce co-operation between them. This will only impinge ultimately on the welfare of the child or the children concerned. (London Borough of Sutton v Davis (Costs) (No2) [1994] 2 FLR569; Re: M (Local Authority's Costs) [1995] 1 FLR 533)
2.5 The conduct of the parties is in reality the major consideration when deciding whether or not an exceptional order for costs should be made. It should only be made if the penalised party has been unreasonable in his or her conduct. Moreover the "unreasonableness" must relate to the conduct of the litigation rather than the welfare of the child. (R v R (Costs: child case) [1997] 2 FLR 95)
2.6 One has to be very careful in this distinction when, as in the case of (the mother), the apparent unreasonableness is as a result of the personality of the relevant party. In such circumstances, there is often an overlap of that party's conduct of the litigation and the conduct relating to the welfare of the child.
2.7 At the beginning of my involvement (the father) was applying for contact in relation to A as well as J. His welfare has also been a concern from time to time throughout. However, the costs in dispute have been incurred in relation to J's welfare alone."
- Mr Stacey submits this underlines the policy reasoning why, as a general rule, costs orders are outwith the norm in family proceedings.
- Mr Stacey also submits that the Claimant has another difficulty because ultimately the index matters were concluded on the basis of no order for costs.
- Mr Stacey questions what exactly is the Claimant saying would have been different if the Claimant is correct about the costs advice provided. Mr Stacey posits that if one is told they are unlikely to recover costs from their opponent, one naturally becomes very careful about the costs they are incurring. Mr Stacey observed that the Claimant was indeed very careful and questioning about costs during the relevant period of conduct.
- Mr Stacey then questioned in what way the Claimant says she would have acted differently had she been told that costs could be recovered from her opponent, and she would only be pursued for a shortfall.
- Mr Stacey also queried how could the Claimant seek approximately £62k of costs be struck out in circumstances where there is no order for costs, because by definition there is no shortfall.
- In all the circumstances, Mr Stacey submits the fair and just approach is to dismiss this primary point not on terms that the costs under the four categories identified by Mr Mason are allowed as claimed, but rather they be dealt with in the line by line assessment.
- Mr Stacey then referred me to the decision in Lynch v Paul Davidson Taylor (a firm) [2004] EWHC 89 (QB), where the court faced a similar invitation to the one now before me, i.e. what would the recovery have been on an inter partes basis? The summary of that judgment is set out at [2004] 1 WLR 1753:
"Section 74(3) of the Solicitors Act 1974 did not have the effect of making an assessment of costs between the parties to county court proceedings under CPR r 44.4 into a cap on costs as between solicitor and client assessed under CPR r 48.8. Section 74(3) existed to limit the costs as between solicitor and client to "the amount which could have been allowed" as between party and party where costs were fixed under the Civil Procedure Rules, such as they were for fast track and small claims track cases, and in such cases the solicitor was limited to that sum as against his own client, unless there existed a written agreement under CPR r 48.8(1A) permitting the payment of an amount of costs greater than that which the client could have recovered from another party (post, paras 19,20).
Where, therefore, a costs judge ordered the client to pay the costs of the solicitor on an indemnity basis in the usual way in an amount greater than that which had been deemed reasonable and proportionate by the district judge when awarding costs on the standard basis against the unsuccessful party to the litigation in the county court proceedings, and the client appealed-
Held, dismissing the appeal, that the costs judge was correct in holding that, in the absence of a rule fixing costs, section 74(3) of the 1974 Act did not limit the award of costs between solicitor and client to the amount awarded by the district judge as between the parties (post, paras 20,22)."
- Mr Stacey also cited paragraph 16 of the judgment where the different bases of assessment were highlighted as between a solicitor/client assessment and a party/party assessment. Paragraph 16 also identified the nature of the relationship between a solicitor and client, for example "
the fact that the solicitor may receive instructions from his client which he is obliged to follow, and that he has a duty to give advice and in particular to draw attention to unusual expense," and that "It is by no means infrequent for solicitor and own client costs to exceed those recoverable from the other party."
- Paragraph 17 recognises that costs incurred with the client's authority, whether expressly or impliedly, will be presumed reasonable for the purpose of a solicitor / client assessment but not necessarily recoverable from the losing party in an inter partes assessment, with several examples then given.
- Mr Stacey relied on paragraph 18 in particular, which sets out:
"18. This was a case in which the client succeeded, recovered her costs, and had them assessed by the court. There are, however, a great many cases, perhaps the majority, where the client has to pay the solicitor but there has been no costs assessment between the parties. That will be so if the client has lost the case. It will also apply if he won, but did not recover his costs, or if the costs were agreed and never assessed. In the great bulk of family cases relating to children, for example, there is no order for costs. Costs are agreed in a large tranche of cases in all jurisdictions. The argument here advanced on behalf of the client carries with it the proposition that in all the county court cases where there has for whatever reason been no assessment of costs between the parties, the costs judge who comes to deal with an assessment between solicitor and client must, because of section 74(3) of the 1974 Act, embark on a hypothetical enquiry into what costs would have been allowed between the parties. That is not a practicable exercise for the costs judge to carry out. He will not have the other party before him. He will not know what it's comparable costs were. He will have no knowledge of many of the factors which would be relevant to assessment between the parties. Among the things which would usually be impracticable, if not impossible, would be to determine whether the hypothetical assessment should be carried out on a standard or on an indemnity basis. If such a hypothetical exercise were not carried out, however, then there would arise a gaping difference between on the one hand the assessment of solicitor and client costs in a case where the client won and had his costs between parties assessed, and on the other the assessment of solicitor and client costs where no party and party assessment has taken place. In the former, the assessment between parties would create a cap on the costs payable to the solicitor and, in the usual case, they would effectively be governed by a standard basis appraisal. In the latter, there would be no such cap, and the solicitor and client costs would be assessed on the indemnity basis in the usual way. The correct reading of section 74(3) cannot possibly be such as to lead either to the consequence of the necessity for a hypothetical assessment between parties, or to the consequence of a wholly unjustifiable distinction between cases where there has been an assessment between the parties and those where there has been none."
- Thereafter citing paragraph 19 of the judgment, Mr Stacey observed the effect of section 74(3) was capable of creating an effective cap on costs "where there are limits under the Rules to the level of costs as recoverable between the parties". Paragraph 19 proceeds to explain the history of scale costs and fixed costs, and the application of section 74(3) in those specific circumstances.
- However, the point Mr Stacey wished to stress is that the Claimant cannot rely on any such scale or fixed costs arguments in the matters before this court today, because such schemes do not apply to the proceedings in which the Defendant acted for the Claimant.
Mr Mason's response
- Mr Mason clarified that his references to the divorce petition filed in the county court was to signal the possibility of overlapping work. In that respect, regardless of whether I'm with the Claimant on the statutory interpretation point, Mr Mason submits that if the Claimant can establish some elements of the fees she has been charged relate to proceedings in the county court then section 74(3) applies.
- With regards to CPR 46.9, Mr Mason had three further points he wished to clarify. Firstly, that post retainer explanations regarding costs were an attempt to put a gloss on the retainer, and revealed the shortcomings in the retainer information. Secondly, that the test was not what the Claimant would have done differently had it been clear she was liable for any shortfall in costs citing the fact that the Claimant couldn't have known any of the fees were estimated until she had sight of a breakdown of costs which stated as such. Thirdly, that Lynch could be distinguished because it addressed scale costs, and because we are in a different consumer climate to the one we were in 20 years ago.
General Point 3 Managing Clerks
- I observed that the parties ought to be capable of resolving this point without the court's assistance, but otherwise the point could be determined at the continuation of this assessment, once re-listed.
General Point 4 Costs Estimates
Mr Mason's submissions
- Mr Mason agreed with the Defendant that Guest Supplies International Ltd v Ince Gordon Dadds LLP [2022] EWHC 2652 (SCCO) may be adopted as the test for this court to apply (as per paragraphs 131-133 of that decision).
- Mr Mason relies on the points of dispute as pleaded, and maintains that "the position on estimates is both chaotic and confused".
- Mr Mason submits that every estimate was exceeded with no real explanation why.
- In relation to the Children matter, he cites four different dates in which the costs information altered. The retainer letter set out figures of £20,000 for profit costs and around £40,000 for counsel's fees (plus VAT and disbursements). Around 6 weeks later, the estimate had been increased by £15,000 plus VAT each for counsel and solicitor costs.
- Around 1 month later, the estimate was increased by a further £7,500 plus VAT. A further month on and the estimate was increased by £10,000 plus VAT.
- Mr Mason cited Finance Bundle 2, page 1,474, and a draft e-mail to the Claimant dated 13 March 2023, and in particular the passage of the same which reads "I enclose herewith a note of my firm's charges for dealing with the matters in finance. The actual costs are double what I anticipated because of all the documentation and developments that have occurred since then, but I will keep the original figure I quoted on the basis that if there is any saving in relation to the Children Act costs, it will be added to the financial costs because of the increase of work that I did."
- Mr Mason submits this is one of many examples of the Defendant failing to keep to estimates or providing inadequate costs information to the Claimant.
- Mr Mason then directed me to Finance Bundle 2, page 1,504, which is the 13 March 2023 e-mail to the Claimant:
"In relation to costs, I vastly underestimated the costs of the work to be done but that was up to the FDR and now all further work is charged at £500 an hour. I will have to give you an estimate in due course when I know which way you are going."
- Mr Mason also cited Finance Bundle 3, page 62, being correspondence dated 11 April 2023, as an example of an estimate being exceeded after the event. This is a draft e-mail to the Claimant in which the Defendant stated "I am going to have to write to you now regarding costs. I gave you estimates in my letters of 27 February. They have been exceeded by at least twice the amount because of the enormous amount of work that has been done", and then requests a payment on account of £45,000.
- Mr Mason also invited comparison between the sum total of the estimates provided, and sums now sought from the Claimant, which on his calculations represent an increase of around 50% (estimates of £121,000 plus VAT as compared with claimed sums of £185,647.54 plus VAT).
- Mr Mason submits that the Defendant engaged in a pattern of giving costs estimates, exceeding them and then providing a new estimate with inadequate explanation. He says this pattern of behaviour was a consistent feature of the Children Act proceedings and the financial remedy proceedings.
- With regards to the Guest Supplies decision at paragraphs 130-133 of the same, Mr Mason accepts it is a matter of judicial discretion as to what is reasonable.
- Helpfully, Mr Mason also clarified that he is not instructed to argue that the Defendant be restricted to the sum totals of the estimates calculated by the Claimant, but rather the estimates should be 'taken into account' and ultimately the assessed sum should be closer to the estimate total than the claimed total.
- Thus in all the circumstances Mr Mason reiterated the Claimant's view that whatever sums the court allows, they should be in amounts closer to the estimates provided rather than the sums now claimed (where they exceed the estimates without adequate explanation).
Mr Stacey's submissions
- Mr Stacey says it is unclear what the Claimant hopes to achieve from this point of dispute. He observes that the Claimant is sensibly not asking for a cap based on estimates, but rather an assessment which results in a figure closer to the estimates than the sums claimed.
- Citing paragraph 30 of Guest Supplies International Ltd v Ince Gordon Dadds LLP [2022] EWHC 2562 (SCCO), Mr Stacey observed the court's finding therein that "If a solicitor is contractually obliged to provide a client with estimates of future costs, it does not follow that costs not anticipated by estimates will, on assessment between the solicitor and the client, be irrecoverable.", and submits there is no rule that a solicitor is to be held to an estimate as though it were a cap or fixed costs arrangement.
Further citing Guest Supplies at paragraph 131:
"If however on the assessment of costs between a solicitor and a client, it is found (a) that the solicitor has never provided the client with an estimate of the costs and disbursements that the client was likely to pay, or that an estimate given was inadequate, and (b) that if a proper estimate had been given, the client would have paid less than the solicitor is claiming, it may be appropriate to limit the amount payable by the client to the solicitor to an amount that it is reasonable, in all the circumstances, to expect the client to pay. That may be less than would otherwise be payable for work reasonably done by the solicitor at a reasonable rate."
- Mr Stacey wished to make it clear that the Defendant does not dispute some of the estimates turned out to be inadequate with the benefit of hindsight but submits there is no case nor evidence advanced that the Claimant "would have paid less" had adequate estimates been consistently provided.
- In this regard, Mr Stacey observed that the court had not been taken to a single contemporaneous piece of correspondence from the Claimant in which the updated estimates or information about costs had been queried or clarification sought.
- Mr Stacey also observed that the Claimant had not stated what they would have done differently, but helpfully drew my attention to paragraph 132 of Guest Supplies, where it was observed that:
"In order to demonstrate that it is right to limit the solicitor's recoverable costs in that way, it is not necessary for the client to prove on the balance of probabilities that they would, if adequately advised, have acted in a different way which would have turned out more advantageous for the client. It may be sufficient that the failure to provide adequate advice deprived the client of an opportunity of acting differently, though that is likely to carry less weight, particularly where it is not possible to do more than speculate as to the way in which the client might have acted, if properly advised."
- Mr Stacey submits that the absence of evidence from the Claimant means that I am being invited to speculate, and in circumstances where the Claimant is not in fact advancing a 'deprivation of opportunity' argument.
- Mr Stacey endorses the finding at paragraph 133 of Guest Supplies that "The ultimate aim will always be to identify the sum that, in all the circumstances, it is reasonable for the client to pay."
- Rehearsing the chronology of the Claimant's engagement of the Defendant, Mr Stacey observed that instructions were received for the first time around mid-February 2023, in circumstances whereby a 4-day hearing was listed to take place towards the end of March 2023.
- Mr Stacey submits that the pending hearing created a pressure of time such that whilst estimates were provided, they were caveated with warnings (as quoted in the replies to points of dispute).
- In the case of the Children Act proceedings, the 27 February 2023 retainer letter set out:
"Work may have to be done which is quite unforeseeable at this stage, as a result of issues which arise in the case, the strategy of our opponents, the requirements of the Court or your own requirements. Any estimate we give is largely based on our experience of other cases. Accordingly, any estimates we give are only broad estimates."
- Further referencing the points of reply, Mr Stacey observed that on 20 February 2023 the Defendant had requested a payment on account of £74,000 in respect of the Children Act proceedings for the specified costs up to the fact finding and welfare hearing listed for 27 March 2023.
- The Defendant prepared for the hearing but an unexpected adjournment arose on the day, with the time instead utilised in conference with counsel, with the hearing then commenced on 28 March 2023 before being adjourned part-heard on 30 March 2023.
- Mr Stacey submits the Defendant was subsequently open as to initial estimates having been exceeded but provided an explanation and when a bill was rendered 7 days later, on 18 April 2023, that bill was paid and instructions continued.
- Mr Stacey then cited a discussion between the parties dated 19 April 2023 in which the Claimant was advised the volume of work required was going to necessitate some weekend working, that it was difficult to assess how much further work would be required, and that additional estimates were required to account for the part-heard hearing (adjourned to May 2023).
- Mr Stacey observed that on 4 May 2023 the Defendant provided an estimate of up to £25,000 for an application for maintenance pending suit, and that a further estimate provided on 16 May 2023 was "an attempt to give an indication of costs" but is to be read in the context of discussions between the parties on 22 May 2023.
- In this regard, the replies explain:
"On 22 May 2023 the claimant set out her concerns with regard to the accumulation of costs and estimates given. This was addressed the same day in a meeting with the Claimant and her father. It was again explained that far more work was involved than originally envisaged and the position was accepted by the claimant and her father."
- Finally, Mr Stacey referred to an exchange of e-mails on 16 June 2023 in which the Claimant raised concerns about counsel's fee of £6,000 for a 3pm hearing. A meeting regarding costs followed in which the Defendant advised of the difficulties in budgeting the matter in light of the level of involvement the Claimant wished to engage in the litigation.
- Mr Stacey gave several examples of how the Claimant was closely involved in her case. This included video she had recorded of an argument with her former spouse, which had subsequently been disclosed and required translation and editing into a transcript.
- Mr Stacey also cited the Claimant's hands on approach to the litigation, including a large volume of e-mails in and becoming involved in amending or perfecting documents drafted by the Defendant and instructed counsel.
- Mr Stacey submits that the Defendant's files demonstrate that the Claimant's own conduct in becoming highly involved in matters contributed to the generation of more costs than were estimated, and that the level of the Claimant's involvement could not have reasonably been anticipated.
- He submits that only by going through the papers can one properly appreciate the context in which instructions were being given and advice provided, and thus understand why estimates were exceeded. Only the line by line assessment will demonstrate that context.
- In so far as matters related to the county court have been relied on by the Claimant, Mr Stacey cited Core Bundle page 242-243, being an attendance note dated 22 May 2023 of a meeting with the Claimant and her father in which the agenda was "1. Divorce, 2. Finance, 3. Children, 4. Costs".
- The note in relation to the divorce is brief, stating only "So far as the divorce, we said it did not matter in relation to the Statement in support and getting the decree nisi what one put in about his conduct having an effect upon her. One line was quite sufficient. We would not have to go into any greater detail.".
- On the issue of costs, the note records:
"On the question of costs, we said that we were not like the other lawyers just charging without regard. Our costs were entirely reasonable. We had done far more work that was envisaged either originally or now.
- Mr Gorenstein Senior accepted that and said that he did trust us, as did Mrs Gorenstein. We said we had to have the payment and they accepted that situation. We would keep it under review."
- Mr Stacey invited me to consider whether the Claimant had met the test set out in Guest Supplies, and if so how that could practicably be applied to the assessment of costs.
Mr Mason's response
- Citing Core Bundle page 300 as an example, Mr Mason submits the transcript of an attendance on the Claimant dated 16 June 2023 demonstrates the Claimant's awareness of costs, and her robust approach to challenging the costs information provided at the time, rather than after the event.
- Mr Mason reiterated his submission that the attendance note dated 15 February 2023 (Core Bundle page 156), i.e. pre-retainer, demonstrates the Defendant's level of knowledge of the issues before they provided any estimates and therefore undermines the Defendant's case as to the adequacy of the estimates subsequently provided.
- Mr Mason maintains that the Defendant provided estimates in "full knowledge" of the case facts and likely future matters to be addressed.
- With regard to the burden on the Claimant, Mr Mason relies on paragraph 32 of Guest Supplies (quoted above) in terms of the burden on a Claimant to prove a certain course of action.
General Point 5 Estimated Time
Mr Mason's submissions
- Mr Mason confirmed that the Claimant's primary case is that all estimated time should be disallowed. The Claimant's secondary argument is as per Brush v Bower Cotton & Bower [1993] 4 All ER 741, such than any estimated time should be viewed with extreme caution.
- Mr Mason submits the sheer amount of estimated time is very high given a conduct period of around 6 months and the proportion of time which is estimated as compared with the overall time billed.
- As to the effect of estimated time, Mr Mason cited Core Bundle pages 6 to 9 to demonstrate two things. This is the bill dated 12 April 2023. Firstly, that the Defendant's fees were discounted from £27,465,83 to £25,000 plus VAT. Secondly, that despite all of the time in this bill being broken down by fee earner, category of work, and the amount of time claimed, nowhere in the bill is there any indication that any of the time was estimated. The Claimant was therefore being billed absent the knowledge that a proportion of the time was estimated until she sought and received a breakdown of costs.
Mr Stacey's submissions
- Mr Stacey said the Defendant had been candid when informing the Claimant they did not use a computerised time recording system. He acknowledged that the absence of such a system is unusual in modern practices.
- Mr Stacey also observed that given this is a solicitor / client assessment, one must account for the level of client involvement and therefore knowledge of the work that was being done.
- The Defendant acknowledges that the period of time covered is relatively short but relies on the intensity of work required, which meant that on occasions the time was not recorded at the precise point in time when the work was done but instead estimated at a later date. That does not mean the work wasn't done, or that the time claimed is a fiction.
- Mr Stacey submits it would be erroneous to simply look at the raised invoices and compare them to the estimated elements of the breakdown. He endorses an approach whereby the court takes into account all of the information the Claimant had at the time and the Claimant's knowledge of the work done on her behalf.
- In this regard, the Defendant effectively contends it would be too draconian a measure to simply disallow the estimated time. The proper approach would be as per the points of dispute, i.e. to "review the relevant correspondence, documents and attendance notes on the Defendant's file in order to assess the reasonableness of the costs sought under the estimated time entries, the vast majority of which are very conservative allowances reflecting the time spent by the personnel concerned."
Decision
General Point 2 Retainer
- Point 2 is a discrete point which invites consideration of the relationship between section 74(3) of the Solicitors Act 1974 and Part 46 of the Civil Procedure Rules, and the question of whether some of the fees in dispute may categorically be classified as arising out of proceedings in the county court.
- The Claimant's argument is advanced in two stages. Firstly, that some of the fees claimed relate to proceedings in the county court (such that section 74(3) of the Solicitors Act 1974 applies). Secondly, that there is no CPR 46.9(2) written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.
- The ultimate goal of Point 2 is far reaching, in that "the court is requested to assess the costs on the presumption that all such items have been unreasonably incurred". What is meant by "all such items" is elaborated upon within the points of dispute, but generally seeks to import inter partes principles to the assessment of solicitor and client costs regarding any costs which could said to be unusually incurred or are unusual in amount. That is on the basis that no such warnings were given to the Claimant.
- I am advised that were I to find for the Claimant on this point, it would lead to a reduction of tens of thousands of pounds (relating to items already identified in the points of dispute).
- 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, except in so far as rules of court may otherwise provide, exceed the amount which could have been allowed in respect of that item as between party and party in those proceedings, having regard to the nature of the proceedings and the amount of the claim and of any counterclaim."
- The Crime and Courts Act 2013 set out wide ranging legislation but it is its interaction with section 74(3) of the Solicitors Act which has occupied much of counsels' submissions on day one of this Solicitor and client assessment.
- In terms of s74(3) in particular, the pre 2013 reference to "a" county court was recognition of a system under which there were numerous 'local' county courts, which was replaced with the concept of a 'single' county court, hence the post 2013 references to "the" county court in s74(3).
- The Crime and Courts Act 2013 also 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) (which seek to peg solicitor and client costs to the same levels that might otherwise have been recovered on an inter partes basis) do not apply to costs incurred in the family court proceedings in this matter.
- Mr Mason raised the concern that such an interpretation would mean a Claimant's rights differed pre or post the implementation of the Crime and Courts Act 2013. I disagree.
- Firstly, the proceedings in the index matter would have taken place in the High Court pre 2013, such that for the actual Claimant in this matter s74(3) would not have applied in any event.
- Secondly, in terms of a hypothetical claimant, their consumer rights under the Solicitors Act would, pre 2013, very much depend on the type of family proceedings which were being pursued. Pre 2013, the magistrates court and the Family Division of the High Court (as well as county courts) had jurisdiction over family cases. Accordingly, section 74(3) could only have extended to family cases brought in the county court.
- Additionally, if one considers other parts of the act, such as section 68(2), there are references to the jurisdiction of the "county court" and the "family court", i.e. they are not treated as one. That may be contrasted with section 69(3), by way of example, where reference to "the county court" only is made, i.e. that provision does not apply to proceedings in the family court. Section 70 on the other hand has wide ranging application.
- Looked at collectively, I also agree with Mr Stacey's observation that sections 68 to 70 of the Solicitors Act 1974 build in consumer protections that widely apply to these proceedings, and that CPR 46.9 is not drafted to draw dividing lines between different courts but rather to have general application save for where s74(3) of the Solicitors Act 1974 does not apply.
- In any event, I do not consider my conclusion would lead to any "absurd result" in the circumstances of the assessment before me. Further, in so far as much was made of the consumer protection elements of the Solicitors Act 1974, the reality is the act is designed to protect solicitors and clients alike. On the one hand the act provides circumstances in which an absolute right to assessment arises, but also circumstances in which all rights to assessment are lost.
- The act also sets a fairly low bar, i.e. the one fifth rule, in terms of a client's ability to recover the costs of assessment, yet also mandates the assessment of costs on the indemnity basis (by virtue of the Solicitors Act's interaction with the Civil Procedure Rules).
- Notwithstanding my finding that s74(3) of the Solicitors Act has no relevance in this matter in respect of the children and finance matters, I have in any event considered the Claimant's submissions regarding the retainer.
Retainer terms
- In this regard, I observe that CPR 46.9(2) provides:
"(2) Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings."
- It being accepted that both retainers are identical in their key terms, I note the following with respect to the retainers.
- Each retainer clearly names the fee earners intended to work on the case, and refers to an attached schedule so that the rates to be applied are clear.
- In terms of service levels, the Defendant committed to the provision of regular progress updates which would include explaining the legal work required as the matter progressed, and the timescales for work to be done.
- With regards to costs, two commitments are made in section B. That is to provide costs updates "at least" every six months. In reality the updates were much more frequent. There was also a commitment to keep the matter under regular review and provide costs updates where there was a material change in circumstances.
- The Claimant invites this court to conclude that section 2 of the retainer does not provide a "full and fair" explanation or exposition with respect to costs. It also seems to me that I am being invited to consider section 2 in a vacuum, with little to no reference or acknowledgement having been made by the Claimant to sections D and E1 of the same retainer document.
- Section D deals with "Legal Costs", and has been largely ignored in the Claimant's submissions. In terms of the types of work the Claimant could expect to be charged for, the retainer states:
"The charge for work done by our staff will be calculated mainly by reference to the time spent by me and any other solicitors or executive staff who deal with your matter. This will include time spent in meetings with you and others, telephone calls, correspondence, dealing with papers (including considering and preparing documents), and attending Court as well as all time spent travelling and waiting for the purpose of your case. Time is charged in minimum units of 6 minutes; consequently, by way of example, every e-mail received or sent incurs a minimum charge of 6 minutes."
- Thus not only does the retainer distinguish between correspondence out and in, it in fact goes so far as to categorically state that a charge will be raised for incoming e-mails.
- The existence of section E2 of the retainer does not create a scenario by which section D becomes redundant. To put it another way, regardless of whether the retainer descended into scenarios where the Claimant might have been able to seek a contribution to her costs from a losing opponent, such scenarios would not have extinguished the Claimant's primary liability to the Defendant to meet the Defendant's costs.
- The Claimant's argument is there was no agreement for the Defendant to receive more by way of payment than the Claimant could have recovered in costs from her former spouse (CPR 46.9(2)).
- The nature of the proceedings in which the Defendant acted for the Claimant are such that, save for limited circumstances, nil in costs would recovered from the opponent. This was explained in the retainer, and examples were even given of the limited circumstances in which more than nil in costs might be recovered.
- 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.
- Any risk of an 'absurd' result, or any notions of unfairness, are extinguished by operation of paragraph 6.1 of the practice direction to CPR rule 46, and the protection that provides for clients:
"A client and solicitor may agree whatever terms they consider appropriate about the payment of the solicitor's charges. If however, the costs are of an unusual nature, either in amount or the type of costs incurred, those costs will be presumed to have been unreasonably incurred unless the solicitor satisfies the court that the client was informed that they were unusual and that they might not be allowed on an assessment of costs between the parties. That information must have been given to the client before the costs were incurred."
- Those are arguments to be made on an item by item basis, and indeed the lengthy points of dispute descend into such arguments in the alternative. Those submissions can be heard and assessed when this detailed assessment is re-listed to continue.
- Returning to section D of the retainers, paragraph 3 of the same states "we charge for all the expenses incurred on your case in addition to the charge for our own time", and proceeds to set out a non-exhaustive list of disbursements that will be charged for.
- Thus, as a matter of principle, the Defendant was entitled to charge for non fee-earning expenses.
- Returning to the themes of incoming letters, overheads/office administrative costs, and dual attendances being costs of an unusual nature in principle, I do not agree with the Claimant.
- There is nothing unusual about a charge being raised to consider incoming correspondence in solicitor and client matters. Indeed, it is often a useful costs control mechanism when dealing with clients who might otherwise overwhelm their instructed solicitor with communications. That is commonly a prerogative that must be paid for, save for where a retainer unambiguously excludes raising a charge for incoming correspondence.
- Non-fee earning disbursements cannot be considered unusual in nature where the client is put on notice that a charge will be raised for the same. On an inter partes assessment, many such disbursements would be disallowed. However, a client who has agreed to be contractually bound by such expenses cannot reasonably then seek a unilateral declaration from the court that all such expenses are "unusual in nature".
- With regards to dual attendances, it is right to observe that the retainer does not explicitly state that there may be occasions where more than one fee earner will be present at an attendance. However, the retainer is clear where it sets out that a charge will be raised for "the time spent by [the lead fee earner] and any other solicitors or executive staff who deal with your matter" (my emphasis added), including "time spent in meetings with you and others
and attending Court".
- It is therefore difficult to conclude how the Claimant has reasonably arrived at the conclusion it was unusual for two fee earners to have attended meetings and/or court appointments, when this is something that is clearly provided for in the retainer.
- Further, one must recall the Claimant was present at many of these attendances or was otherwise aware of the same. The Claimant can point to no evidence of questioning or querying the presence of a second fee earner.
- In any event, even on an inter partes assessment, dual fee earner attendance claims are not unusual and in certain circumstances will be allowed. For example, where lower grades of fee earners have undertaken a significant elements of the work but have taken supervisory direction from attendance at meetings and/or hearings.
- Thus, in so far as the Claimant seeks that all costs be disallowed for communications in, "incidental" expenses, and the attendance of a junior fee earner with a senior fee earner on the grounds that all such costs would be deemed unreasonably incurred, the point fails.
- However, I wish to be clear that the Claimant is still entitled, where the points of dispute argue the point, to seek decisions on the basis that some of those related items are unusual in amount.
Post-retainer correspondence and documents
- The Claimant also seeks to characterise post retainer correspondence (which discuss costs) as attempts to 'fix' an inadequate retainer.
- However, it very much seems to me that Mr Mason's various examples do not in fact combine to undermine the costs information provided in the retainer. Whether one considers the pre or post retainer examples cited, nothing said is inconsistent with the retainer.
- For example, the position statement for private FDR is nothing more than speculative as to a potential costs order against the Claimant's former spouse. Comments as to costs are heavily caveated. In any event, this was a fast developing picture and the provision of additional costs information is entirely consistent with what the retainer promised.
- The Defendant does not dispute their own level of pre-retainer knowledge. However, the retainer simply reflects that one cannot take a snapshot in time in existing proceedings and then assume there will be no intervening factors which might otherwise impact costs.
- In my view, the post retainer examples cited by Mr Mason are simply reflective of a changing picture as the litigation developed. That cannot reasonably render the costs information in the retainer to be retrospectively inadequate.
- I don't agree that later information regarding costs was an attempt to 'repair' the Defendant's retainer. In the normal course of events, the Defendant kept the Claimant up to date with the developing picture and adjusted their costs advice accordingly. There is nothing unusual about this, in all forms of litigation (save for where costs are fixed). Indeed, it is precisely what the retainers promised to do.
Costs estimates and conduct
- I accept that the test is not what the Claimant would have done differently. However, one must be careful not to descend into hypothetical scenarios. The focus must be on what the parties agreed to, and their conduct thereafter.
- In that regard I take into account that every time a costs update was provided, the Claimant had the opportunity to question the costs, and indeed did so, for example negotiating hourly rates when the Defendant wanted to raise the same.
- In any event, costs estimates are dealt with at general point 4.
Party / party versus solicitor / client assessments
- With regards to the vexed question of the relationship between a solicitor / client assessment, and what might have otherwise happened in a party / party assessment, I disagree the Lynch case doesn't bear consideration. The decision may be some 20 years old but the principles are sound in terms of the analysis of the factors which typically differentiate a party / party costs assessment from a solicitor / client costs assessment.
- The analysis provided at paragraph 18 of Lynch is both highly instructive and highly persuasive, demonstrating prior analysis of the type of arguments the Claimant is seeking to advance in the index matter.
- Whilst paragraph 18 of Lynch is quoted above in its native form, it is helpful to reiterate the passage but broken down in a more digestible format:
"There are
a great many cases, perhaps the majority, where the client has to pay the solicitor but there has been no costs assessment between the parties. That will be so if the client has lost the case. It will also apply if he won, but did not recover his costs, or if the costs were agreed and never assessed.
In the great bulk of family cases relating to children, for example, there is no order for costs.
Costs are agreed in a large tranche of cases in all jurisdictions. The argument here advanced on behalf of the client carries with it the proposition that in all the county court cases where there has for whatever reason been no assessment of costs between the parties, the costs judge who comes to deal with an assessment between solicitor and client must, because of section 74(3) of the 1974 Act, embark on a hypothetical enquiry into what costs would have been allowed between the parties.
That is not a practicable exercise for the costs judge to carry out.
He will not have the other party before him.
He will not know what it's comparable costs were.
He will have no knowledge of many of the factors which would be relevant to assessment between the parties.
Among the things which would usually be impracticable, if not impossible, would be to determine whether the hypothetical assessment should be carried out on a standard or on an indemnity basis.
If such a hypothetical exercise were not carried out, however, then there would arise a gaping difference between on the one hand the assessment of solicitor and client costs in a case where the client won and had his costs between parties assessed, and on the other the assessment of solicitor and client costs where no party and party assessment has taken place.
In the former, the assessment between parties would create a cap on the costs payable to the solicitor and, in the usual case, they would effectively be governed by a standard basis appraisal. In the latter, there would be no such cap, and the solicitor and client costs would be assessed on the indemnity basis in the usual way.
The correct reading of section 74(3) cannot possibly be such as to lead either to the consequence of the necessity for a hypothetical assessment between parties, or to the consequence of a wholly unjustifiable distinction between cases where there has been an assessment between the parties and those where there has been none."
- In my view, Lynch underlines the importance of CPR 46.9(2) and what the parties actually agreed to.
- 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."
- The starting point was to inform the Claimant she would be 100% responsible for her own costs, but that there might be limited scenarios in which a contribution to those costs could be recovered from her litigation opponent. In that regard, it is less a case of the absence of the framing of the concept of a shortfall, and more the provision of information regarding hypothetical scenarios in which some of the Claimant's outlay might be capable of being clawed back.
- That is very different from say a personal injury claim where, from the outset, the presumption is the losing opponent will be pursued for costs as well as damages, i.e. the presumption is the 'winning' party will not have to pay the costs.
- Taking page 1,473 of Finance Bundle 2 as an example, being a document both advocates took me to, I agree with Mr Stacey that the information provided at point 5 is consistent with the retainers. In my view, the key portion of point 5 is "..if you go on with the case, it will have to be funded..". That is unambiguous.
- The fact that the Defendant went on to explain that there may be circumstances in which some of the Claimant's outlay could be recouped from the Defendant is again unambiguous in my view.
- It told the Claimant she would be primarily responsible for 100% of her costs, but that a certain percentage of that might be recouped from her litigation opponent in certain circumstances.
- That is very different to the language of a shortfall and clawing back a shortfall from the Claimant.
- Put another way, 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).
- I remind myself that at no stage has the Claimant sought to put in her own evidence to this effect in the form of a witness statement, nor has she offered to be cross-examined or sought to cross-examine any of the Defendant's staff.
- I confirmed that was the case with Mr Mason, and that the Claimant is content for this point to be decided based only on the papers before me and submissions of counsel. That is what I have done.
'Overlapping' work in the county court
- In so far as I was referred to work which Mr Mason described as 'overlapping' work in the county court, I take into account that the disputed invoices only concern work undertaken on the Claimant's behalf in relation to the children matter and the finance matter, neither of which are county court matters.
- As far as I can ascertain, it is not disputed that work in relation to the divorce proceedings were in the county court. However, fees for acting in the divorce proceedings are not the subject of this assessment.
- If any such fees have erroneously been included, they will be liable to strike out if not conceded. However, the mere appearance of any fees related to divorce proceedings in the county court cannot by extension have the effect of drawing all work in the children and finance matters into the county court too. The question of what level of court each set of proceedings was in is a question of fact.
Summary
- The purpose of general "Point 2" is to highlight that the points of dispute have identified categories of costs which the Claimant argues were unreasonably incurred, based on the arguments articulated above concerning the retainers and surrounding documents / correspondence as to work done and to be done, and the associated costs of the same.
- The sanction sought is that those categories of costs argued to be unreasonably incurred be struck from the bill. In so far as the general point identified five bullet pointed categories, I have addressed above the question of whether they constitute unreasonably incurred work as a matter of principle and I have concluded no.
- One of the bullet points concerns estimated time but that is addressed at general point 5.
- Thus whilst I have concluded that in this judgment I can address the question of whether the costs were unreasonably incurred as a matter of principle, the question of whether they are unusual in amount is best addressed when the line by line assessment resumes.
- In this regard, the Defendant ought to be clear that any decision above in which I have ruled that a category of disputed costs was not unreasonably incurred should not be taken to mean all costs in that category will be allowed as claimed. Where the points of dispute contain secondary arguments as to whether such costs were unusual in amount then reductions may still apply.
General Point 3 Managing Clerks
- I expressed to counsel that I expected them to be able to resolve the issue of precisely which fee earners were being billed out as "Managing Clerks" and what this term was intended to mean in terms of fee earner status.
- It is only if the Claimant is dissatisfied with the reply that further submissions and a decision will be required.
General Point 4 Costs estimates
- It seems to be that it was perfectly natural that the Claimant would want to, at times, become heavily involved in both matters upon which the Defendant was instructed. The stakes were high, both for her children and for the Claimant financially.
- I consider no criticism of the Claimant is warranted in that regard. However, it is also clear to me that save for where one is dealing with a completely dispassionate client then the possibility, if not probability, does arise that estimates may be exceeded.
- The important thing to then consider is the extent to which, if any, those estimates were demonstrably relied upon and what explanations, if any, were provided when estimates were exceeded.
- It strikes me that the Defendant did not simply wait until the end to the inform the Claimant of charges that were higher than initially anticipated, but instead was frank and open as when the excess costs had been or were about to be incurred. The Defendant engaged the Claimant with costs information and opportunities to discuss costs which the Claimant (and her father) took up.
- The points of dispute ultimately set out a list of examples accompanied by the Claimant's interpretation of what the estimates provided accounted for. There is no acceptance of any responsibility for costs exceeding the estimate.
- In so far as point 4 argues that "The estimates should be taken into account as to what might be considered a reasonable sum to pay", I am inclined to agree. However, that accounting exercise must be undertaken in the proper context of what was said and done at the time.
- In practical terms, this is not a preliminary point which is going to extinguish the need to carry out a line by line assessment of the disputed items.
- As to the argument that "The fixed quotes should apply as a matter of course", I do not consider a compelling argument has been made out that a fixed fee agreement was in place. Instead, and at best, there are limited occasions in which the Defendant provided their best estimate of costs up to a distinct stage, or to take a distinct step, but never going as far as to agree to then cap the fees up to the completion of that stage or step.
- As such, the disputed fees will not be assessed on the basis of any element of the same being capped, but rather on the basis of reasonableness (subject to where the costs are in fact challenged by the points of dispute).
General Point 5 Estimated time
- With regards to how estimated time ought to be approach I am in agreement with the Defendant. It would be far too blunt an approach to simply strike out all time marked as 'estimated' absent any regard for the work actually done to which the estimated time entries relate.
- I accept that the Claimant may have something to say regarding the costs of assessment in circumstances where not only the presence of estimated time was only divulged as a consequence of requesting a breakdown of costs, but where such a significant proportion of the time has been estimated. However, in terms of the approach to this assessment I consider the estimated time should be considered on a line by line basis and that is the approach which shall be adopted when this assessment resumes.
Next steps
- The parties shall now liaise and jointly file their mutually available dates for the period from July to December 2025 inclusive for the continuation of this detailed assessment. At the same time, the parties shall provide a time estimate.
