SOLICITOR AND OWN CLIENT ASSESSMENTS: PROPORTIONALITY CONSIDERED

November 4, 2017 · by · in Appeals, Assessment of Costs, Conduct, Costs, Proportionality

In October last year I wrote how a speaker at the Association of Cost Lawyers Conference predicted a rise in the number of solicitor and own-client assessments. It has to be said that there have been some interesting cases in recent times.  In  Dechert LLP v Eurasian Natural Resources Corporation Ltd [2016] EWCA Civ 375 the two parties instructed five QCs between them just to argue one issue of how public the assessment process should be.  In the past week we have the decision in Richard Slade And Company Solicitors v Boodia & Anor [2017] EWHC 2699 (QB)*   However if you are looking for a behemoth of solicitor and own client assessments it will probably be  Bloomsbury Law Solicitor v Macpherson [2017] EWHC 2708 (QB).  There have been three appeals (to date). There are several interesting aspects of this case. Here we look at the question of proportionality. In particular how far the issue of conduct should be considered on the initial question of whether the costs are proportional.

 

“…Master Simons was right to reach his preliminary view without conducting any detailed investigation of the procedural squabbles and mutual recrimination which riddle the parties’ Points of Dispute and Replies. Looked at overall, this is a practical and fair approach. A party which has been forced by its opponent’s conduct to incur disproportionate costs will not lose out. Such a party will be able to show at the second stage that individual items in its bill were necessitated by the conduct of the other side.”

THE CASE TO DATE

The appellant solicitors issued  Part 7 proceedings in 2012 for sums due, that is legal work where the unpaid sum was £416,000. After a complex procedural history  in which the assessment process came to be known as the “Part 8 claim” there was a 7 day assessment in June 2014.  There was an appeal against the costs order made in that direction which was successful. It was subsequently ruled that two of the bills were non-compliant with the Solicitors’ Act as they did not adequately identify what the client was being charged for. The solicitors appealed that order, that appeal was dismissed.

There was then an assessment of the costs of bringing the claims. This case was the solicitor’s appeal against the assessment of those costs.

 

THE ISSUES AT  THE  APPEAL HEARING

    1. On this third appeal Bloomsbury raises six issues about the Master’s decisions and orders of 23 August 2016.
(1) Proportionality. Bloomsbury challenges the Master’s finding that, as a starting point, its bills for the Part 7 Claim and the Part 8 Claim were both disproportionate.
(2) Hourly Rates. Bloomsbury complains that the hourly rates adopted by the Master for the assessment of its senior “Grade A” fee-earner’s costs were too low.
(3) Costs associated with the Master’s Order of June 2014. Bloomsbury contends that the Master was wrong to disallow its claim for various heads of costs related to this Order.
(4) Stay costs. Bloomsbury argues that the Master was wrong to disallow the costs of an application it made to Master Simons for a stay pending the conclusion of the First Appeal.
(5) Costs of procuring repayment. The Master disallowed a claim by Bloomsbury for costs incurred in carrying into effect his order for the payment out of the £85,000 it had paid into court. Bloomsbury contends that the Master was wrong to do so.
(6) Interest on costs. Bloomsbury complains that the Master was wrong to order that interest on its costs should run at 2% above base rate to a date in October 2015, thus depriving it of interest at the higher, Judgment Act rate for many months.

THE DECISION ON APPEAL

Mr Justice Warby considered the principles relating to appeals.

    1. Applying these principles, my conclusions on the issues raised by this appeal are, for the reasons that follow, these:
(1) Master Simons did not err in his conclusions on proportionality. He made no error of principle, or of approach. In any event I would uphold his conclusion.
(2) The Master’s decision as to the appropriate hourly rate for the Grade A fee-earner’s work involved no error of principle and was well within reasonable bounds. I uphold it.
(3) The Master was wrong to reject Bloomsbury’s claims for costs associated with his Order of June 2014. The appeal on that issue is allowed.
(4) Master Simons was right to disallow Bloomsbury’s claim for the costs of its stay application to him.
(5) The Master was right to disallow Bloomsbury’s claim for the costs of obtaining repayment of funds from the Court Funds Office.
(6) The Master was entitled to reach the decision which he did, so far as interest on costs is concerned. He made no error of principle in doing so.
  1. In the result, the appeal succeeds to a limited extent (the total sum involved in ground (3) is £5,262). Otherwise, the appeal is dismissed.

 

PROPORTIONALITY
“Proportionality
    1. The bill in respect of the Part 7 Claim (“the Part 7 Bill”) was £48,557. The Bill in respect of the Part 8 claim (“the Part 8 Bill”) was £183,996.43. The Master was unequivocal in his description of these figures. At [22] he described the Part 7 costs as “grossly disproportionate”. At [23] he said the Part 8 bill involved costs “at a level that … is something outside of my experience” given the nature of the claim. The time spent was “vastly disproportionate”, he said: [24].
    2. The test of proportionality which the Master rightly applied was the test that applied to cases commenced before 1 April 2013 (it is preserved, for the purposes of this case, by CPR 44.3(7)). The test was set out in CPR 44.5 which provided, so far as relevant:
“(1) The court is to have regard to all the circumstances in deciding whether costs were—(a) if it is assessing costs on the standard basis— (i) proportionately and reasonably incurred; or (ii) were proportionate and reasonable in amount …
(2) In particular the court must give effect to any orders which have already been made.
(3) The court must also have regard to—

(a) the conduct of all the parties, including in particular—(i) conduct before, as well as during, the proceedings; and (ii) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;

(b) the amount or value of any money or property involved;

(c) the importance of the matter to all the parties;

(d) the particular complexity of the matter or the difficulty or novelty of the questions raised;

(e) the skill, effort, specialised knowledge and responsibility involved;

(f) the time spent on the case; and

(g) the place where and the circumstances in which work or any part of it was done.”

    1. The Costs Practice Direction gave guidance about the application of that test, explaining that “11.1 In applying the test … the court will have regard to rule 1.1(2)(c).” Rule 1.1(2)(c) provided that
“the overriding objective of dealing with cases justly includes, so far as practicable, …
(c) dealing with the case in ways which are proportionate (i) to the amount of money involved; (ii) to the importance of the case; (iii) to the complexity of the issues; (iv) to the financial position of each party.”
    1. The Costs Practice Direction went on to say the following:
“11.1 … The relationship between the total of the costs incurred and the financial value of the claim may not be a reliable guide. A fixed percentage cannot be applied in all cases to the value of the claim in order to ascertain whether or not the costs are proportionate.
11.2 In any proceedings there will be costs which will inevitably be incurred and which are necessary for the successful conduct of the case. Solicitors are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a large claim, and may even equal or possibly exceed the amount in dispute.”
    1. As is well-known, further, authoritative, guidance on the right approach for the costs judge to adopt when assessing proportionality was given by the Court of Appeal in Lownds v Home Office [2002] EWCA Civ 365, [2002] 1 WLR 2450 [31]-[39]. Lord Woolf CJ (giving the judgment of the Court) explained that a two-stage approach is necessary. At the first stage, the Court must take a “global approach”, which will indicate whether the total sum claimed is or appears to be disproportionate, having particular regard to the considerations listed in CPR 44.5(3). A preliminary judgment on this issue must be made at the outset. Where the Court determines at this stage that the costs globally are or appear disproportionate it will want to be satisfied that the work done in relation to each item was necessary and, if it was, reasonable in amount. Otherwise, the questions are whether it was reasonable to do the work and if so, whether the costs are reasonable in amount. Thus, a more rigorous test is applied to the bill if the preliminary assessment is that the global picture is one of disproportionate costs. At the second stage, if it has found the overall bill to be proportionate, the court may nevertheless conclude that parts of the bill are disproportionate.
    2. Master Simons adopted the two-stage approach, and reached the initial global view that both bills appeared to be disproportionate. He therefore went on to apply the more rigorous necessity test to individual disputed items. In reaching his initial view, the Master addressed in turn each of the criteria specified in CPR 44.5(3). In doing so he had regard to conduct. He held that the parties’ conduct had increased the overall costs. But he declined to make any positive findings as to whether Bloomsbury or Mr Macpherson or both were at fault for bringing about what he found to be a disproportionate level of costs.
    3. Bloomsbury’s first and main ground of appeal against the decision on proportionality is that this was an error of principle. The argument is that the conduct of the other party is highly relevant, and must be taken into account at this first stage; it should have been assessed; Mr Macpherson’s conduct was highly unreasonable, and led to an increase in the level of costs incurred; accordingly, the costs should not have been held to be disproportionate.
    4. Bloomsbury also identifies what it contends are further errors in the Master’s application of the criteria in CPR 44.5(3). Its case has been somewhat fluid, in that the Appellant’s Skeleton Argument goes beyond the Grounds of Appeal, and Mr Marven (who is not the author of those documents) has skilfully developed additional points in his oral argument. But Mr Mallalieu makes no complaint of any of this. Accordingly, there are now four further criticisms of the Master to be considered, namely he was wrong (a) to find that the proceedings were not complex; (b) to find that they were not difficult; (c) having held that they were important to both parties, to find that this did not affect proportionality; (d) in his approach to the assessment of the value involved.
    5. I do not accept any of Bloomsbury’s criticisms of the way in which the Master undertook his task.
    6. Bloomsbury’s main ground of attack is not supported by the passage from Lownds on which particular reliance is placed. The Master said that it was “quite clear that these costs have increased considerably because of the antagonism between the parties” but he did not propose to make any findings as to whether this was Mr Ahmud’s fault or Mr Macpherson’s fault; the parties “were at loggerheads” and it would be against public policy to allow increased costs for that reason.
    7. It is said by Bloomsbury that the Master’s approach was “contrary to the approach laid down in paragraph [38] of Lownds.” In that paragraph, Lord Woolf CJ said this:
“38. In deciding what is necessary the conduct of the other party is highly relevant. The other party by co-operation can reduce costs, by being unco-operative he can increase costs. If he is uncooperative that may render necessary costs which would otherwise be unnecessary and that he should pay the costs for the expense which he has made necessary is perfectly acceptable. Access to justice would be impeded if lawyers felt they could not afford to do what is necessary to conduct the litigation. Giving appropriate weight to the requirements of proportionality and reasonableness will not make the conduct of litigation uneconomic if on the assessment there is allowed a reasonable sum for the work carried out which was necessary.”
    1. As its opening words make clear, however, this passage is directed to the second stage of the two-stage process, at which the Court (having reached the preliminary view that the costs are disproportionate) is applying the test of necessity. The passage offers no support for the submission that it was wrong for the Master to reach his preliminary global view without deciding whether the paying party was at fault for driving up the costs by unreasonable behaviour. On the contrary.
    2. The passage which precedes this paragraph of Lownds tends to underline the point. In paragraph [37] Lord Woolf said this:
“37 Although we emphasise the need, when costs are disproportionate, to determine what was necessary, we also emphasise that a sensible standard of necessity has to be adopted. This is a standard which takes fully into account the need to make allowances for the different judgments which those responsible for litigation can sensibly come to as to what is required. The danger of setting too high a standard with the benefit of hindsight has to be avoided. While the threshold required to meet necessity is higher than that of reasonableness, it is still a standard that a competent practitioner should be able to achieve without undue difficulty.”
If at the second stage the Court gives due weight to conduct and adopts a “sensible standard of necessity” it is able to comply fully with CPR 44.5(3)(a) without the need to engage in a minute or detailed analysis of the parties’ behaviour before arriving at its preliminary, global view on proportionality.
  1. The Court is bound to have regard to conduct when assessing proportionality, at the first and at the second stage. But it cannot be said, and is not said, that the Master failed to do this. The criticism is the much narrower one, that he was duty bound to make findings as to fault. In my judgment, no such hard and fast rule can be laid down. The extent to which, and the way in which conduct falls to be taken into account at the first stage will be fact-sensitive. There may be cases in which it is possible swiftly to reach a clear conclusion on one or two discrete and straightforward issues, and thereby attribute responsibility to one side or the other for the fact that costs have been driven beyond what is proportionate. But that will by no means always be the case. In my judgment Morland J was right to conclude, in Giambrone v JMC Holidays Ltd [2003] 2 Costs L R 189 [37]-[38], that the Court in Lownds never envisaged that the costs judge giving a preliminary judgment on proportionality would “plough through in detail” a mass of factual material. The initial global view should be taken without recourse to excessively detailed examination of the available material.
  2. I have reviewed the list of matters which it is said the Master should have assessed in this case, and heard some limited argument about them. That is enough to make it clear that a proper assessment of the ten items advanced as justifying the size of the bills would have necessitated the resolution of several substantial factual disputes, requiring quite a detailed review of a number of aspects of the case. Accordingly, I reject the contention that the Master’s approach involves a failure to comply with CPR 44.5(3)(a).
  3. To approach the matter in the way advocated by Bloomsbury would risk the first stage becoming, in itself, a disproportionate exercise. Here, Master Simons was right to reach his preliminary view without conducting any detailed investigation of the procedural squabbles and mutual recrimination which riddle the parties’ Points of Dispute and Replies. Looked at overall, this is a practical and fair approach. A party which has been forced by its opponent’s conduct to incur disproportionate costs will not lose out. Such a party will be able to show at the second stage that individual items in its bill were necessitated by the conduct of the other side.
  4. I would also endorse the observation of Morland J in Giambrone at [56] that “it should be almost never necessary to appeal the preliminary decision, at the first stage, of proportionality.” Those observations have added weight in a case such as this, where the costs judge has, as he himself put it, “a unique knowledge of [the] case, having carried out the detailed assessment over seven days and … dealt with numerous interlocutory applications.”
  5. There is a further reason for rejecting this ground of appeal, which has to do with the way that Bloomsbury put its case before Master Simons. The transcript makes clear that the argument for Mr Macpherson had become quite heated at times, with some quite serious allegations being levelled at Mr Ahmud. In response, Counsel for Bloomsbury expressly adopted a detached approach, which eschewed an invitation to make findings of fact as to misconduct. The Master was expressly told that “we are not seeking findings” and that some of the allegations “would require witness evidence or cross-examination.” There has been some dispute on this appeal about just how far Counsel was backing away from inviting findings as to conduct. It appears to me, however, that there is an uneasy mismatch between the way the case was conducted before the Master and the grounds of appeal which fresh Counsel have formulated and argued before this Court.
  6. I am not persuaded that the Master erred in his approach to complexity or difficulty. He was extremely well placed to assess such matters, and the conclusions he reached were in my judgment well within legitimate bounds. Indeed, I would expressly endorse his findings.
  7. The Master acknowledged that the case was important to Bloomsbury for cash flow reasons, and important to Mr Macpherson as he would have to pay the bills. He went on to say that “those things negative themselves out”. Mr Marven submits that this is to be read as a finding that the importance of the case to one party cancels out its importance to the other. That involves an error of principle; the two findings should have been treated cumulatively, as support for a finding of proportionality. This is a point with some superficial attraction. In the end, however, I think the force of the criticism is more semantic than substantive. I accept Mr Mallalieu’s interpretation of the Master’s reasoning, namely that he was treating the importance of the matter to both parties as insufficient to justify an otherwise disproportionate bill.
  8. I turn to Bloomsbury’s final point on proportionality. In its written Grounds of Appeal Bloomsbury contends that the Master erred by taking into account on this issue the fact that Mr Macpherson had been successful in reducing the firm’s bills by over 20%. This is said to be wrong in principle because the decision of Males J on the First Appeal rested on the substantial reduction in the bills which the client had achieved on assessment. The effect of the Master’s approach was to expose Bloomsbury to double jeopardy on that question, it is said.
  9. In my judgment, this is misconceived. The reason that Males J decided that Bloomsbury should receive 75% of its costs of the Part 8 Claim was that this broadly represented the extent to which it was the successful party on that claim. In paragraph [20] of his judgment the Master was carrying out a different exercise. He was considering “the amount or value of the property which was involved”. He was seeking to identify what had really been at stake in the Part 8 Claim. Nominally, it was the entire amount of the disputed bills. Mr Macpherson had made no offers. But in reality, everyone knew that the true issue was how much of a reduction should be imposed. The reduction actually achieved was a factor to which the Master was fully entitled to have regard when making his assessment of the value of what was in dispute. There is no element of double-counting or double jeopardy.
  10. I add that in my judgment the Master’s initial global views on proportionality were undoubtedly right. Costs of nearly £50,000 reflecting (for instance) more than 99 hours work on documents alone are, on the face of it, grossly disproportionate to the nature, complexity and value of the Part 7 claim, its importance to the parties, and all the other factors listed in CPR 44.5(3). This was properly assessed as an essentially straightforward debt-collection exercise involving a substantial but not enormous sum. It was hard fought, but it was not legally or procedurally complex, and had no truly exceptional features.
  11. The figure of £183,996.43 for the Part 8 proceedings is equally startling. The attempt to justify costs on this scale on the basis that this costs assessment was comparable to a 7-day trial fails utterly, for the reasons given by the Master. Even if that were a reasonable comparison, the time and costs claimed would still be substantially over the top, in my judgment. The tasks involved should not have been complex or particularly time-consuming, if reasonable records had been maintained. Yet here, the receiving party’s solicitor claims remuneration for no less than 489 hours, in addition to the costs of costs lawyers, and counsel. The claim includes as much as 131 hours on drafting and checking the breakdowns of the solicitor’s own bills.”

 

OSTS ON PROPORTIONALITY ON THIS BLOG

 

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