Hourly Rates – How far can you depart from the Guideline Hourly Rates?

The case of Sir Philip Green & Ors v Telegraph Media Group Limited [2019] EWHC 96 (QB)

Background

This matter revolved around the Claimant and two companies seeking an injunction against the Defendant to restrain them from publishing information about the Claimant. The information related to the alleged misconduct of the Claimants which had been subject to non-disclosure agreements.

A number of pre-trial applications were addressed by Warby J, including the issue of costs budgeting . Given the time-sensitive nature of proceedings, the issue of costs budgeting could only be addressed two weeks before trial.

The hourly rates claimed by the Claimant’s City of London-based solicitors ranged from £190 (for a Grade D trainee) to £690 (for a Grade A lawyer – a Partner). Other Partners’ rates claimed by the Claimants were between £510 and £635 per hour. Warby J noted that all these figures were well in excess of the guideline rates, which are £126 for Grade D and £409 for Grade A (emphasis added).

Warby J recognised that, due to the late stage of costs budgeting, the majority of costs were incurred, and as such he was restricted from budgeting incurred costs due to CPR PD 3E 7.4, and was limited to only making comments.

Warby J said he did not consider that hourly rates of more than £550 could be justified, and proportionate reductions should also be made to the lower Partners’ rates.

The Judge added: ‘Of course, fees in excess of the guidelines can be and often are allowed, and in this case the defendants (who themselves claim up to £450 per hour) and I both accept that fees above those rates are justified. But not to the extent of the differences here.’

Comment

The outcome of this hearing raises two interesting topics for discussion: the level of hourly rates in general, and, the approach the Court can take in respect of hourly rates in costs management.

Hourly rates in general

As a starting point, and as referenced by Warby J indirectly, it is well accepted that Guideline Hourly Rates are just that, a guideline. They are suitable for carrying out a summary assessment and can be a starting position for detailed assessment. Following this , the Court will take into account both CPR 44.3(5), and the 8 ‘pillars of wisdom’ contained within CPR 44.4(3), when considering whether costs are proportionate and reasonable in amount (when assessing on the standard basis). These factors can be used to support an enhancement, for instance, given the complexity of the matter, or the conduct of parties.

The Court has recently commented further on a case which claimed very high hourly rates, far in excess of the Guideline Hourly Rates. In the matter of Dana Gas PJSC v Dana Gas Sukuk Ltd & Ors [2018] EWHC 332 (Comm), the Court found that hourly rates in excess of £900 were unreasonable, even in a matter which was factually/legally complex, had an international element and was of significant value. The Court considered that hourly rates of half that amount (hence being very similar to the rates referred to as reasonable by Warby J in the case of Sir Philip Green & Ors v Telegraph Media Group Limited [2019] EWHC 96 (QB)), were considered more reasonable to obtain competent representation in such a case.

There is technically no limit on the hourly rates which can be charged by a firm of solicitors, so long as the client agrees to pay them, but the Court is now taking a much tougher stance in respect of how much of that hourly rate can be recovered inter partes. This leaves the firm in an unenviable position: either write off those costs claimed, or, bill the client for the shortfall.

Perhaps this was a factor in Sir Philip deciding to abandon the claim?

Budgeting

It is well established that the Court must walk a tightrope when addressing hourly rates while setting a budget. The Court can have regard to the constituent elements of the budget, including hourly rates (CPR PD 3E 7.3), but the Court must not over step the mark and proceed to fix or approve hourly rates (CPR PD 3E 7.10). Warby J’s comments appear to strike the right balance between the two. Unfortunately, shortly after the hearing, the Claimants abandoned the claim, and we will therefore not see at detailed assessment stage how much weight is given to comments made at costs management stage.

The interplay between hourly rates, costs budgeting and detailed assessment is an interesting one, and a topic which will, no doubt, continue to develop as more and more budgeted cases proceed to detailed assessment.


This blog was prepared by Kris Kilsby who is an Associate Costs Lawyer at Clarion and part of the Costs Litigation Funding Team. Kris can be contacted at kris.kilsby@clarionsolicitors.com or on 0113 227 3628.

 

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Consequences of beating a Part 36 offer may be varied by the Court

Senior Courts Costs Office extends the principle in JLE v Warrington & Hamilton Hospitals NHS Foundation Trust [2018] EWHC B18 (Costs).

In JLE  Master McCLoud held that where a Part 36 offer is beaten at a hearing, the Court has the power to consider the justness of each of the consequences of CPR 36.17 individually. In that case, the Court held that whilst it would not be unjust to allow costs on the indemnity basis or interest at the rate of 10% over base rate, it would be unjust to allow the uplift of 10% (often known as the “penalty payment”) given the amount by which the offer was beaten.

Following judgment in Andrews & Anor -v- Retro Computers & Anor [2019] EWHC B2 (Costs), there was a hearing to determine consequential orders on 5th March 2019.

Prior to the Oral Assessment of the Claimants’ costs, the Claimants had made Part 36 offers in the sum of £40,000. The bill of costs was ultimately assessed in the sum of a little more that £43,000 (inclusive of interest). Accordingly the Claimants submitted that they were entitled to the full range of orders under CPR 36.17. After finding that the Claimants should be entitled to additional interest and costs on the indemnity basis, Maser Friston considered whether or not to allow the “penalty payment” of 10% of the amount of the bill as assessed.

The Deputy Master pointed out that the Claimants had beaten the amount of the assessed bill by “only” 7.5%, and therefore considered that the uplift of 10% would be too high and therefore was minded to disallow the uplift under CPR 36.17(4)(d) on the basis that to do so would be unjust.

The Claimants submitted that pursuant to JLE the court had the power to “deconstruct” CPR 36.17 and to consider the unjustness or otherwise of each consequence individually, and that Master McCloud had held that the consequences of CPR 36.17 were not “all or nothing”. Therefore, they argued, that the Court had a general discretion not only to allow or disallow the penalty uplift, but where it considers that an uplift of 10% would be unjust, the Court may reduce the amount of the penalty uplift to a just level. The Court is therefore not constrained to disallow the penalty uplift in full if it considers that 10% is too high.

Following these submissions, Deputy Master Friston allowed an uplift of 7.5%, commensurate with the proportion by which the Claimants had beaten their offer.

Summary

The Court has the power to vary the percentage level of the uplift proscribed at CPR 36.17(4)(d). The proscribed rate is therefore a cap, not an entitlement, but if the Court finds that to allow the entirety of the 10% uplift would be unjust it is not bound to disallow the uplift entirely.

Every case will be decided on its own merits, but it seems reasonable that where a Claimant has beaten its own offer by less than 10%, the uplift should in principle be allowed in proportion to which the offer has been beaten.

The Claimants were represented by Richard Wilcock of Exchange Chambers, assisted by Matthew Rose of Clarion Solicitors.

The new statement of costs goes live on 1 April 2019

I have further updates regarding the new statement of costs following on from our January newsletter. The pilot scheme will operate from 1 April 2019 to 31 March 2021 and will apply to all claims in which costs are to be summarily assessed, whenever they were commenced. There will be two statements of costs which may be used whilst the scheme is in force; the N260A when the costs have been incurred up to an interim application and the N260B when the costs have been incurred up to trial. The N260 will be available in paper/pdf form and in electronic form. Parties are able to use the paper/pdf form only, however if they use the electronic spreadsheet form this must be filed and served in paper form and electronic means. The format has changed and the document schedule now requires the time entries to be dated. 

In cases which have been subject to a costs management order, any party filing the form N260B must also file and serve the precedent Q (which is a summary that details any overspend/underspend for each phase of the budget). Now that the court can identify overspends in the budget, will this additional layer of information result in more costs being summarily assessed and less detailed assessments? Will this assist with applications for payments on account? Will we see the N260B being used at trials that are listed for more than one day, to demonstrate that there hasn’t been any overspend in the budget and resultantly the budgeted costs being allowed in full? Possibly, but only if the incurred costs are identified separately to the estimated costs, please see my earlier blog for a more detailed analysis in that regard.

Sue Fox is a Senior Associate and the Head of Costs Management in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.

 

Confused by QOCS? A brief summary of everything you need to know…

Qualified One way Costs Shifting (QOCS) was introduced in April 2013 for personal injury matters and it is essentially a rule that means a successful defendant cannot recover their costs from an unsuccessful claimant except in specific circumstances (such as the claim being fundamentally dishonest).

2018 saw 3 decisions of interest; one from the Court of Appeal, and 2 County Court decisions that conflicted each other. It is likely that the issues in the County Court decisions will be tested again, hopefully with binding authority.

Court of Appeal – 28/06/18: Cartwright v Venduct Engineering Limited [2018] EWCA Civ 1654

This was a NIHL (Noise Induced Hearing Loss) claim where the claimant pursued 2 defendants (as is often the case with industrial disease matters).

The claimant successfully negotiated settlement against defendant 1, and dismissed the claim against defendant 2. Defendant 2 argued that their costs (following the discontinued claim) could be enforced against the claimant up to the level of damages recovered from defendant 1. It was argued that the purpose of QOCS was to ensure that the claimant was no worse off after litigation had been conducted than before it had started. The court of appeal agreed – defendant 2 was entitled to their costs, limited to the amount of damages recovered from defendant 1.

This decision confirmed that a claimant was not entitled to QOCS protection when they issued against a defendant (in a multi defendant case where they succeeded against a different defendant) and their claim was ultimately unsuccessful (prior to this decision, the rule had been if no fundamental dishonesty had been proven by a successful defendant, then the claimant would be protected by QOCS in this scenario – the county court decision of Bowman).

The Cartwright decision means that litigators now need to be extremely vigilant when deciding against which defendants to issue their claim. If they do not adequately consider and evaluate the risks against each and every defendant, there is potential for a professional negligence claim.

The second issue decided in Cartwright was whether a successful QOCS defendant could enforce a tomlin order (remembering that a tomlin order is a record of settlement and not an order of the court). The rules state that QOCS applies to orders for costs made against the Claimant and therefore Cartwright found that defendants would not be able to enforce a tomlin order or Part 36 agreement in order to benefit from QOCS on the basis they are not orders made by the court. The order must either have been made at trial, or be within a consent order or provisional damages order.

Ketchion v McEwan – Jun 2018 (County Court decision)

This was an RTA matter where the claimant brought a claim for financial loss (but not personal injury). The defendant denied liability and issued a part 20 counterclaim for personal injury. The matter proceeded to a fast track trial – the judge found the defendant to be 100% at fault and therefore entered judgment and dismissed the counterclaim.

The claimant sought their costs but the judge ordered that the defendant was protected by QOCS (given the existence of his unsuccessful counterclaim). Therefore, despite the claimant succeeding in full, their costs were not recoverable as the defendant had QOCS protection. The claimant sought permission to appeal but this was dismissed – the judge found that the rules referred to “proceedings” and that this captured the claim AND counterclaim. It should not be limited to just the claim – any successful claim could be precluded from recovering costs by an unsuccessful counter claim.

Waring v McDonnell – Nov 2018 (County Court decision)

This was a claim involving 2 cyclists. One brought a claim for personal injury, the other a counterclaim for personal injury. The counterclaim was unsuccessful and the court found that the defendant/Part 20 claimant was not protected by QOCS. This decision was to deter the bringing of frivolous counter claims in order to avoid a costs order/benefit from QOCS. It was found that the defendant was not an unsuccessful claimant, but an unsuccessful defendant and that he would only have been entitled to QOCS protection if he had brought his own PI claim.

So, what’s next? 

It is recognised that there is currently some tension in the drafting of the QOCS rules, and that they need to be re-worded in order to iron out issues.  Currently, the term “proceedings” in Cartwright encompasses multiple defendants, however, in the county court decisions, “proceedings” do not include counterclaims.

There is also an increasing trend in defendants arguing fundamental dishonesty in order to set aside QOCS. There is currently limited authority on what constitutes fundamental dishonesty, however, the Court of Appeal decision of Howlett v Davies & Another [2017] EWCA Civ 1696 concluded that fraud did not have to be pleaded for the Court to make a finding of dishonesty. The defendant merely had to have given adequate warning to the claimant of their intention to submit evidence that could lead to the Court making such a finding, such as within their defence.

Finally, there is talk about extending the QOCS regime to non-clinical professional negligence claims, and also private nuisance proceedings. It, therefore, appears that QOCS is going to expand beyond the realms of personal injury in the not too distant future.

Joanne Chase is a Senior Associate Costs Lawyer in the Costs and Litigation Funding Department at Clarion Solicitors.

You can contact her at joanne.chase@clarionsolicitors.com and 0113 336 3327, or the Clarion Costs Team on 0113 246 0622.

 

THE INDEMNITY PRINCIPLE – WHAT IS IT? IS IT IMPORTANT?

What is the Indemnity Principle?

A long-established principle which effectively means that a successful party cannot recover more in legal costs then they are liable to pay their solicitor under the terms of the contract with their solicitors.

Why does it exist?

To indemnify the winner for the reasonable legal costs incurred on the matter. In practice, the loser contributes to those costs.

If the indemnity principle did not exist, then a losing party could face a costs liability higher than the winner is liable to pay his solicitor. This would mean that a client would make a profit from the costs of the litigation which is not the intention of costs awards. The intention is to reasonably compensate the winner for the legal costs they have incurred.

Please note that there are some exceptions to the indemnity principle, for example, inter-partes claims for costs where the matter was funded by way of a Legal Aid Certificate, and fixed costs claims i.e. where the costs incurred are lower than the costs that can be claimed inter parties.

Key Case Law

Harold v Smith [1860] 5 H & N 381

Costs orders inter-partes are awarded as an indemnity to the receiving party. They are not awarded to impose a punishment on the party who pays them.

Gundry v Sainsbury [1910]

The Court of Appeal confirmed the underlying principle set out in Harold v Smith. The solicitor had acted for no charge and tried (unsuccessfully) to seek costs from the opponent. The court held that the solicitor was not entitled to recover costs as there was no agreement from the client to pay.

J H Milner & Son v Percy Bilton Limited [1966] 1 WLR 1985

Retainer (contract for services by the solicitor) is fundamental to the right to recover costs. No retainer equals no entitlement to recover costs from clients (and therefore no entitlement to costs inter-partes).

Is the Indemnity Principle important?

Taking into account the above cases (which remain good authorities) the indemnity principle is clearly very important and something which every contentious lawyer should have a sound knowledge and understanding of. Failure to do so can lead to serious professional consequences.

The importance of the indemnity principle is best illustrated by the case of Bailey v IBC Vehicles Limited [1998] 3 All ER 570 where the Court said that the signature of a Bill of Costs is that of an officer of the Court and that mis-certification of the Bill is a serious (disciplinary) offence.

In that case Lord Justice Henry said:

“the signature of the Bill of Costs under the rules is effectively a certificate by an officer of the Court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge under a contentious business agreement. The Court can (and should unless there is evidence to the contrary) assume that his signature to the Bill of Costs shows that the indemnity principle has not been offended”.

When lawyers sign costs budgets, statements of costs for summary assessment and Bills of Costs it is therefore fundamentally important to ensure that there is no breach of the indemnity principle.

I am now going to consider two recent cases regarding the indemnity principle:

Gempride v Jagjit Bamrah & Law Lords of London Limited [2018] EWCA CIV 1367

In this matter, the receiving party’s bill of costs claimed hourly rates higher than those which the client had agreed to pay their solicitor within the retainer. Furthermore, misleading information was provided in Replies to Points of Dispute in respect of the availability of before the event insurance.

The matter proceeded to the Court of Appeal where the Court imposed a penalty for the mis-certification of the Bill of 50% (Part 1 of the Bill of Costs only). Whilst the penalty in the end was not too severe, the real damage for the law firm was to its reputation.

HMRC v Gardiner and Others [2018] EWHC 1716 (QB)

This matter related to an appeal by HMRC in respect of an order for them to pay the Respondents’ costs in tax appeal proceedings. The Respondents were amongst several tax payers challenging penalties imposed by HMRC for incorrect tax returns.

The Respondent’s tax advisors were at the forefront of the work carried out. Counsel was instructed to represent the Respondents and the fees were paid by their tax advisors. HMRC alleged a breach of the indemnity principle (no direct retainer). That argument failed and the key points were as:

  1. There was never an agreement that the Respondents would never pay Counsel’s fees;
  2. Counsel was there to represent the Respondents, not their advisors;
  3. No difference to a trade union funding arrangement; and
  4. The key is a liability to pay (the Respondents were liable to pay the fees that were incurred, but the tax advisors paid them).This is a useful case to rely on where costs have been paid by a third party and a challenge is raised that there has been a breach of the indemnity principle as a result.


    Summary

    As you can see from the authorities, the indemnity principle has been with us for some time. Lord Justice Jackson recommended the abolition of the indemnity principle in his Final Report in 2010. He was of the opinion that the indemnity principle caused more problems than it solved. However, in my view the indemnity principle should always be in place whilst we have a cost shifting environment in England and Wales. Otherwise, it could encourage inflated claims for costs and allow clients to profit on the costs of litigation and therefore increase claims for costs – which would be contrary to the whole purpose of the Jackson Reforms!

    Do you have any views? – please feel free to share them.

    This blog was prepared by Andrew McAulay who is a Partner at Clarion and the Head of the Costs and Litigation Funding team. Andrew can be contacted at andrew.mcaulay@clarionsolicitors.com or on 0113 336 3334 or 07764 501252.

The Local Authority seeks orders to restrict the Husband’s contact with the Protected Party.

The case of SR v A Local Authority & Anor (2018), involves the Protected Party (SR), who was an 83-year-old woman who suffered from late onset Alzheimer’s, which was of moderate to severe intensity.

The Protected Party resides at a care home and lacks capacity to decide who she has contact with and to decide on any arrangements for such contact. The Local Authority raised awareness that the Protected Party may be at risk of harm in her husband’s sole care, due to his expressed views on euthanasia, which involved reference to throwing himself and his wife into a river and supplying her with tablets. The Protected Party’s husband also had restrictions placed on the care that he could provide to the Protected Party, such as having to be accompanied if he took her out of the care home. The Protected Party’s family wished for her to return home and the Protected Party has allegedly stated her wishes to be with her husband as she becomes distressed when he leaves her.

In determining whether the Protected Party would be at risk, the court reached the conclusion that the restriction sought by the Local Authority was neither justifiable, proportionate or necessary. They therefore declined to make the Order sought. It was believed that the Protected Party’s husband would most likely not harm the Protected Party, as he had been previously been with her many times unaccompanied. The Protected Party’s daughter also stated that her mother and her father were a happy and loving couple with no allegations of domestic violence ever having been made between them.

Unusual Granting of an Order to Prevent the Protected Party from knowing the full details of his Personal Injury Settlement following an application made by his Professional Deputy.

In this personal injury case, the judge had to grapple with an unexpected question – should a Deputy, appointed to manage the personal injury payment made to a brain-injured claimant, be allowed to not tell the claimant the exact amount that was awarded to him?

The case of EXB v FDZ

The case of EXB v FDZ (2018) was very unusual in that it involved an application by the Protected Party’s professional Deputy, and his mother as Litigation Friend, to prevent the Protected Party from knowing the full details of his personal injury settlement, which was deemed to be in his best interests.

This was a complex matter, as the Court recognised that withholding such information inadvertently affected the Protected Party’s rights. Judge Foskett explained in his judgement that he had never come across this issue before and he called upon assistance from Ms. Butler-Cole as a ‘friend of the Court’.

The Protected Party

The Protected Party sustained orthopaedic injuries, alongside a severe brain injury following a road traffic accident. The Protected Party was a backseat passenger in a car driven by the First Defendant. The Protected Party was not wearing a seatbelt and his damages were reduced accordingly, following an admission of contributory negligence.

Why was it in the best interests of the Protected Party to withhold settlement info?

The applicants submitted evidence from both themselves and professionals which detailed the reasons as to why it was in the Protected Party’s best interests to withhold the settlement information.

The Protected Party’s neuropsychologist stated that “Such knowledge would translate and impact upon his behaviour”. It was believed that the Protected Party would become fixated by the sum of money, that it would lead to him being extremely vulnerable and placed into a situation where he was likely to be financially exploited. Interestingly, the Protected Party himself expressed to his Deputy and the Court that he would be better off not knowing the sum; however, he also stated that he was conned into making such a statement. Following the accident, the Protected Party was very impulsive, and he often became very anxious when it came to money, struggling to budget and often living beyond his means.

The Judge gave careful consideration to the evidence submitted, as well as reviewing the relevant legislation, such as the Mental Capacity Act 2005 and the UN Convention on the Rights of Persons with Disabilities (CRPD). Following this, the Judge held that the Protected Party lacked the relevant decision-making capacity, finding that it was in the Protected Party’s best interests not to be told the value of the reward. The Judge also considered whether it was within the scope of a normal Deputy Order not to reveal the sum; however, the Deputy argued that it would make the Deputy’s life more difficult if the Protected Party believed that he was personally withholding the information and it was considered more appropriate for the Deputy to state that the Court prevented him from doing so.

Costs of the application

The next issue that arose was in respect of the costs of the application. The Claimant sought the costs of the application to be paid by the Third and Fourth Defendants of the Personal Injury claim, as their tort had necessitated. The Third and Fourth Defendants objected to paying the costs. Their defence stated that “they should not be responsible for the costs because all of the issues between them and the Claimant were concluded by the Settlement which was approved in April 2018” and that this particular issue was a ‘solicitor/own client’ dispute. Within the remit of the initial Personal Injury claim, there was no claim for costs attributable to this issue within the Schedule of Loss and there was also the fear that there may be an “open-ended commitment to pay the costs associated with any repeat applications”.

As the issue had been dealt with under the Court of Protection, it was necessary to apply the Court of Protection costs rules. The general rule being that where the issue concerns financial matters, the costs of all parties are to be borne from the Protected Party’s estate (Rule 19.2). The Court does have a broad discretion to depart from the general rule, if circumstances made a different order more appropriate (Rule 19.5). In this case, the Third and Fourth Defendants had not been made formal parties to the application, but they had been provided with an opportunity to make representations regarding the Costs Order being sought.

Judge Foskett held that the costs were to be borne by the relevant Defendants, as the need to make the application arose directly from their actions following the injury caused to the Protected Party, therefore departing from the general rule.

It will be interesting to see whether there will be any similar applications and what the outcomes will be. The Judge has invited the appropriate bodies to consider these matters and decide whether a consultation on this issue will be required.

This blog was prepared by Danielle Walker who is a Costs Lawyer within the Court of Protection Team. Danielle can be contacted at Danielle.walker@clarionsolicitors.com