TEN MINUTES IS A LONG TIME IN LITIGATION: SOLICITOR AND OWN-CLIENT ASSESSMENT OF COSTS CONSIDERS BILLING PRACTICES IN DETAIL

I am grateful to Shimon Goldwater  for sending me a copy of the judgment of Master Rowley in Breyer Group Pie -v- Prospect Law Limited (A copy of which is attached Costscase).  There are significant observations made in relation to solicitor and own-client costs.  This post deals with the issue of “unusual” costs.  The judgment also deals with the relevance of costs estimates. I hope to cover that issue in a later post.

THE CASE

The action was a solicitor and own client assessment of costs. The defendant solicitors had represented a large number of claimants in judicial review proceedings against the Secretary of State for Department of Energy and Climate Change. There were detailed terms of retainer. There was a costs sharing and litigation agreement.  The Master was giving a preliminary ruling on matters of principle in relation to the assessment.

THE RULES

The Master first considered the relevant rules relating to solicitor and own client assessments.

” The assessment of solicitor and client costs is governed  by  CPR  46.9.  In particular, 46.9(3) states:

‘·(3) Subject to paragraph (2), costs are to be assessed on the indemnity  basis  but are  to be presumed-”

• to have been reasonably incurred if they were incurred with the express or implied approval of  the client;

• to be reasonable in amount if their amount was expressly or implied!y approved by the client;

• to have been unreasonably incurred if

• they are of an unusual nature or amount; and

• the solicitor did not tell the client that as a result the costs might not be recovered from the other

12. This provision is supplemented by paragraph 6 of the Practice Direction to Part 46 and which includes the following paragraph:

“6.1 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. “

13. The claimant says that a provision in the between-the-parties’ assessment procedure is also relevant. In the Practice Direction to Part 47 at Paragraph 5, directions  are given  as to the drafting of  a bill of costs. Within  those directions is the following:

“5.22 The following provisions relate to work done by legal representatives     “

• Routine letters out, routine e-mails out and routine telephone calls will in general be allowed on a unit basis of 6 minutes each, the charge being calculated by reference to the appropriate houri y rate. The unit charge for letters out and e-mails out will include perusing and considering  the routine letters in or e-mails”

TEN MINUTE UNITS AN UNUSUAL ITEM AND NOT ALLOWED

The defendant solicitors had charged the claimants on the basis of 10 minute units. The Master held this  practice of 10 minute units was unusual and not recoverable.

“Category  1 –   various  items of “unusual” work

10.The claimants take issue with a number of items ultimately charged to them under these terms and conditions. Some of the challenges are of a contractual nature and relate to whether the solicitors can charge those items at all. Some of the challenges relate to whether the items charged are sufficiently unusual for it to be the case that they  needed to be brought to the claimants’ attention in order to recover them.  Some  of  the challenges have both aspects to them and so before getting to the challenges themselves,

l need to set out the provisions of the Civil Procedure Rules which are said to be relevant to these points.

 The assessment of solicitor and client costs is governed  by  CPR  46.9.  In particular, 46.9(3) states:

‘·(3) Subject to paragraph (2), costs are to be assessed on the indemnity  basis  but are  to be presumed-”

• to have been reasonably incurred if they were incurred with the express or implied approval of  the client;

• to be reasonable in amount if their amount was expressly or implied!y approved by the client;

• to have been unreasonably incurred if

• they are of an unusual nature or amount; and

• the solicitor did not tell the client that as a result the costs might not be recovered from the other

12. This provision is supplemented by paragraph 6 of the Practice Direction to Part 46 and which includes the following paragraph:

“6.1 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. “

13. The claimant says that a provision in the between-the-parties’ assessment procedure is also relevant. In the Practice Direction to Part 47 at Paragraph 5, directions  are given  as to the drafting of  a bill of costs. Within  those directions is the following:

“5.22 The following provisions relate to work done by legal representatives     “

• Routine letters out, routine e-mails out and routine telephone calls will in general be allowed on a unit basis of 6 minutes each, the charge being calculated by reference to the appropriate houri y rate. The unit charge for letters out and e-mails out will include perusing and considering  the routine letters in or e-mails

(a) 10 minute units

14. The second bullet point quoted at paragraph [6] above refers to routine communications being charged  at one sixth  of  the hourly  A routine item is defined  in the CPR as being a communication of such simplicity that it should not be considered to be a communication of substance which would amount to a personal attendance. The provision from PD 47 referred to in paragraph [13] above expects the charging of a standard time for such items. It refers to 6 minutes, or in other words one tenth of an hour. By charging routine items at one sixth of an hour the defendant here has charged 10 minutes for each item.

15. The claimants say that this approach is extremely unusual and that is particularly so in conientious business. As a result of the practice direction, the prospects of recovering 10 minute units between the parties is non-existent and as such the claimants ought to have been warned specifically before such costs were incurred that they were unlikely to be recovered in accordance with CPR 46.9(3)(c). That has not taken place and as such the costs of the routine items should not be recoverable as they stand. The claimants say that each 10 minute item should be reduced to 6

16. I should say at this point that Mr Williams’ skeleton goes on to say that all timed items should also be reduced. Whilst he did not repeat that point at the hearing, I appreciate he was also relying on the written arguments. The terms of the client care  letter indicated that timed items have been claimed with reference to the time actually spent. Whilst I can see that times might have been rounded up to the next 10 minute unit so ihat a 34 minute attendance would become 40 minutes rather than 36 minutes if 6 minute units had been used, but I am not convinced that the problem goes any further than that. In any event, that is a matter for the detailed assessment in my view. I am treating the preliminary issue as solely being in relation to routine items claiming individual

17. The defendant’s argument is that it was a time period expressly agreed by the claimants and as such ought to be presumed to be reasonable. In Mr Bacon’s submissions, claiming 10 minutes rather than 6 minutes could not be described as unusual in amount. The concept of claiming a proportion of an hour for routine items could not be considered to be unusual in nature. His skeleton describes this approach as being entirely common and reasonable and makes reference to a brief article by Professor Penny Cooper of the City Law School which suggests that units of either 6 or 10 minutes are

18. Mr Bacon also relied upon what he said was the low hourly rate claimed by the defendant to justify the 10 minute routine items. The lengthy time period simply brought a routine communication up to the sort of fee that a firm charging a higher hourly rate would charge for the same communication based on a 6 minute unit.

19. If I were against him on these points, Mr Bacon’s position regarding warning the client was covered, in any event, by his submission that an indication had been given to the clients on several occasions that costs recoverable on a between-the-parties’ assessment would probably be around 70% of the costs

20. I am aware that some firms of solicitors, and not just the defendant, charge their clients on the basis of 10 minute units. My understanding is that this tends generally to be in transactional, non-contentious work. I certainly do not have any doubt that this is an uncommon practice in contentious work and do not recall having seen any bill, whether solicitor and client or between-the-parties, claiming 10 minutes for routine items. The invariable practice is for bills to claim routine items at 6 minutes.   Occasionally,  bills are produced that do not have routine items as such because every communication is specifically timed. I have little doubt that the expectations of the CPR have a large part to play in shaping the nature of arrangements between solicitors and their clients.

21. Given that this is an uncommon practice, it seems to me that the express agreement of the claimants to the terms of the client care letter is not the end of the matter. The claimants needed to be told that routine items claimed at 10 minutes were unlikely to be recovered on that basis. Whilst a routine letter could hardly be described as being unusual in nature, it seems to me that charging a 10 minute unit for such a communication could quite properly be described as being unusual in nature. It is beyond doubt that it is unusual  in amount.

22. The warning given by the defendant to the claimants about recoverability is couched in the general terms given by solicitors in their client communications. It reflects the process of detailed assessment where almost every bill is reduced from the sum claimed and a factor of 30% envisaged by the defendant’s warning is a common percentage used. But it does not seem to me to cater for the use of the 10 minute unit for two reasons.

23. The first is that in order to come within 46.9(3)(c), it seems to me that the defendant must specifically point to the unusual aspect and give specific advice upon it. The warning relied upon is entirely general and I do not see that it can provide any assistance to the defendant in this

24. Secondly, a reduction of 30% of the costs claimed might be explained to the client by saying that if 100 letters were written, only 70 of them had been allowed as being payable by the opponent. But those 70 would be paid in fulL Here, if the 70 were allowed, only 60% of those 70 items would be recovered because they would be allowed at one tenth of the hourly rate rather than the one sixth claimed in the bill. In practice, therefore, the value of only 42  letters would be allowed of the original 100.

25. Consequently, I accept the claimants’ challenge to the use of 10 minute units on routine items and at the detailed assessment they will be reduced to 6 minute units where they are allowed as recoverable.

26. I have taken this item first because it seems to me to illustrate the situation where costs expressly agreed can nevertheless be disallowed to some extent because of the provision at 46.9(3(c) regarding their unusual nature. This argument was Mr Williams’ fall-back position on almost all of the following items in this category, such as client care letters and invoicing and credit

27. Mr Williams’ arguments on these other items were grounded in the position the court usually takes on between-the-parties’ assessments. Sometimes that position  follows from case law such as Motto (see later). For other items, it is simply common practice  in the SCCO which becomes more widely accepted from experience and from legal commentaries. The overall effect of Mr Williams’  submissions on these points seems  to me to reduce markedly the ability of solicitors to charge their clients any more than can be recovered on a between-the-parties’ assessment. That renders  the  indemnity basis assessment  expected in a solicitor and client assessment  to be of limited

28. It might be said that the remedy is in the solicitors’ own hands by making sure that the client is aware of the possible non-recovery of costs from the opponent. But it seems to me that it is quite possibie to take that approach well beyond what is practicable or reasonable. The length of the client care documentation already provided tests many clients’ endurance in considering their contents. If each item were to be separately considered in the client care documentation in the manner that underlies Mr Williams’ submissions on these points, then the documentation would grow considerably

29. The starting point of both Rule 46.9 and the accompanying Practice Direction is that the solicitor and client are free to agree such terms as they see fit. That approach, in my view, includes enabling clients to instruct solicitors to carry out work that they would wish the solicitor to do rather than someone else who might alternatively do it. An example in this case would be the wish for the solicitors to be involved in the collection of potential claimants rather than the PR consultant who was engaged to do some work or, arguably, the clients themselves. It cannot be right that such work is not recoverable between the solicitor and client on the basis that the costs of collecting clients and sorting out the terms of retainer are unlikely to be recovered at a between-the-parties’ assessment.

30. It seems to me to be unrealistic in such circumstances that the client is given a warning before every instruction that such work may not be recoverable from the opponent. In my view, the client safeguard in 46.9(3)(c) operates at a higher threshold than this. It is designed to protect the client from, as I have found, matters such as 10 minute units being claimed which could not possibly be recovered from the opponent on a between­ the-parties’ assessment. It is not a method of importing all of the expectations of a standard basis between-the-parties’ assessment into a solicitor and client

31.I have dealt with this argument in one place to avoid unnecessary repetition under the headings that follow. Consequently, I have expressed my view as to whether or not Mr Williams’ fall-back applies under    each heading but the essential reasoning can be found in the paragraphs I have just set out

INCOMING CORRESPONDENCE

The Master then went on to consider whether charging at full rate for incoming correspondence was an “unusual” practice.

 (b)Incoming  correspondence

32.As with the 10 minute units, the claimant says that the Practice Direction allows for routine letters out and routine emails out but does not allow for considering routine letters in or emails in. Given this clear indication in the Practice Direction, the decision of the defendant to charge for such items, which will not be recoverable on a detailed assessment against the opponent, needs to be explained to the client before such costs are incurred.

33. The defendant refers to the fact that this was agreed expressly by the claimants. The charging of incoming correspondence on a solicitor and client basis is not at all uncommon and as such there is no reason for holding it to be otherwise. Nor is there any need to warn the clients before incurring those charges.

34. Perhaps unlike any of the other items challenged by the claimants, the charging for incoming correspondence is a practice of long-standing. As Mr Williams pointed out, where it occurs it has traditionally been charged at half of the outgoing letter rate. In practice this represents 3 minutes or one twentieth of an hour.

 35.It is a practice that still survives where clients have the benefit of Legal Aid representation and since claims on the Legal Aid Fund are only made where costs cannot be recovered from another party, they are a clear demonstration of costs that might be allowed on a solicitor and client basis.

36. In my view, it is not an uncommon or unusual practice for solicitors to charge their clients for such communications. Where the client is particularIy prolific in communicating with his solicitor, it is something of a safeguard to be able to point out to the client that such communications come at a cost. I do not therefore consider that they are unusual in nature such that they would need to be notified to the client beforehand.

37. I do think, however, that claiming the full rate is unusual and that is exacerbated in this case by the fact that the applicable rate equates to one sixth of the hourly rate and not one I consider that this aspect of the incoming correspondence ought to have been notified to the claimants as being unusual.

38. CPR 46.9(3)(c) consists of two parts. Not only must items be of an unusual nature or amount but they must also be potentially irrecoverable from the other party. The wording of the Practice Direction regarding incoming correspondence is often taken to be an absolute prohibition and it was advanced in such terms by Mr Williams before me. But I do not accept that it is quite so black and white. As it is reflective of long­ standing practice, the traditional scene can be pictured of a routine letter being received by a solicitor who then dictates a response to his secretary and for which a charge is made to the client for the letter that is sent out. Whilst in modern times the solicitor may well now be doing all of this work, and doing it electronically, the approach has not altered. A period of 6 minutes is considered on average to be sufficient both for the consideration  of the incoming letter and the preparation of a brief letter in

39. If the incoming letter needs to be considered but, for whatever reason, no immediate response is required or the action to be taken does not involve a routine communication out, then that time can be recorded as perusal and form part of the documents item as with any other time spent by the solicitor in considering documents. Such an approach occurs all the time where  the perusal is at all

40.But what is to happen where the consideration is brief and there is no need for any letter in response? On Mr Williams’ argument no time can be claimed for  the solicitor reading (and briefly considering) the communication that has been received. That is not in my view an attractive argument. I do not see why the solicitor should not be remunerated for working on his client’s behalf  in  considering  incoming correspondence.

41. .In my view, the practice of incoming letters being charged at one twentieth of the rate rather than one tenth reflects the mixed nature of incoming correspondence such that some would be so brief as to require no charge to be made and others would justify a full routine communication in themselves. Many would be between  the two ends and be covered by a single 6 minute unit claimed for a letter in reply. The test in 46.9(3)(c) appears to assume that costs of an unusual nature or amount can be dealt with in a unitary way. I think that is right in relation to the other items in this category  but  I do not see that it can apply in that way in respect of incoming correspondence short of examining each  and every  incoming letter or email.

42. The subparagraphs of rule 46.9(3)(c) are all rebuttable   My answer  to this particular issue is that, owing to the unusual amount claimed for the incoming correspondence, it would be unreasonable for the solicitors to claim for such correspondence at the full rate sought in the absence of any specific warning given to the client before those costs were incurred. It would be likely that some of the incoming correspondence would be recoverable from the opponent where it could be demonstrated that such time claimed was in essence a short perusal of the document where no routine letter in response had been sent. Consequently, to disallow all of the incoming correspondence would be inappropriate just as allowing the full  rate  would be. On a broad brush basis, I would therefore be minded to allow incoming correspondence at half the rate of the outgoing correspondence i.e. allowing  them  at one twentieth of the hourly rate. I accept that this is a broad brush approach and would be prepared to reconsider this matter at the detailed assessment hearing if the parties wished me to do so. I have given the indication that I have in case that assists the parties in narrowing the issues.

FINDING ADDITIONAL POTENTIAL CLAIMANTS

The Master found that the costs of finding new claimants was not unusual and was recoverable. This was a multi-claimant case where increasing the number of claimants reduced the potential costs liability of each existing claimant.  The work was expressly authorised under the terms of the retainer.  The costs incurred in this respect were not unusual in nature or amount.

PREPARING AND PROVIDING CLIENT CARE LETTERS

Again the Master found that, in this case, these were not unusual in nature or amount. The existing claimants benefited from new claimants coming on board. They instructed their solicitors to achieve this. The costs involved were common costs flowing from the instruction of the existing clients.

INVOICING AND CREDIT CONTROL

Invoicing and credit control is generally speaking an administrative matter which ought to be covered by the solicitor’s overheads.  When matters arise such that the conducting solicitor has to broach matters with an individual client then the costs could be recoverable, but on the basis of each individual claimant category not within the common pool.