SUMMARY ASSESSMENT AND HOURLY RATES: “SOLICITORS PROVIDING SUCH SKILL AND EXPERTISE ARE ENTITLED TO CHARGE THE MARKET HOURLY RATE FOR THEIR AREA OF PRACTICE”

In  Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2504 (TCC) Mrs Justice O’Farrell carried out a summary assessment of costs.  She also had something to say in relation to hourly rates.  There is a succinct review of the relevant principles.

“… the technical nature of the dispute justifies the engagement of solicitors with the appropriate skill and expertise to ensure proper and efficient conduct of the litigation. Solicitors providing such skill and expertise are entitled to charge the market hourly rate for their area of practice.”

THE CASE

The defendant had succeeded in an application for a stay. The claimant was liable to pay the defendant’s costs and the judge was determining these summarily.

THE JUDGMENT ON COSTS
    1. Where the amount of costs is to be assessed on the standard basis:
i) the Court will only allow costs which have been reasonably incurred and are reasonable in amount, resolving any doubt in favour of the paying party: CPR 44.3(1)&(2); and
ii) the Court will only allow costs which are proportionate to the matters in issue: CPR 44.3(2).
    1. The claimant accepts that no issue of proportionality arises in this case.
    2. In assessing the reasonableness of the incidence and amount of the costs incurred, the Court will have regard to all the circumstances, including the conduct of the parties, the value of the claim, the importance of the matter to the parties, the complexity of the issue, and the skill, time and effort spent on the application: CPR 44.4.
    3. The defendant’s statement of costs for the hearing is in the sum of £52,152.48. Mr Pilbrow QC, for the defendant, submits that the figures claimed are within the normal range of figures for a half-day interlocutory application in the Business and Property Court. The defendant’s costs are very similar to the claimant’s costs of £45,417.78; the slightly higher figure for the defendant’s costs can be explained by the fact that it was the applicant. Any adjustment to the amount should be extremely modest, particularly having regard to the defendant’s offer to settle the application on the terms of the order subsequently made by the Court. The Court should also take account of additional costs incurred by the defendant since the preparation of the statement of costs, such as reviewing the judgment, preparing the draft order and preparing the submissions on costs (thus avoiding a further hearing).
    4. Mr Parker, for the claimant, submits correctly that the Court must carry out an assessment of the costs, albeit on a summary basis, and not simply alight upon a figure that “looks about right”. The Court should not rely on a broad-brush comparison with the other party’s costs, although it may be a useful indicator of the nature and extent of necessary preparation for the hearing.
    5. I endorse and adopt the views expressed by Leggatt J (as he then was) in Kazakhstan Kagazy plc v Zhunus [2015] EWHC 404 (Comm) at [13]:

“… it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judged objectively. The touchstone (of reasonable and proportionate costs) is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances.”

    1. As stated by Hildyard J in Re RBS Rights Issue Litigation [2017] EWHC 1217 (Ch.D.), a case in which the costs exceeded £100 million, at [134]:

“… litigants are free to pay for a Rolls-Royce service but not to charge it all to the other side.”

    1. The claimant submits that the defendant’s costs are unreasonably high and/or were unreasonably incurred in two respects:
i) the hourly rates of the defendants’ solicitors are unreasonably high, particularly when compared against the Senior Courts Costs Office (“SCCO”) guideline rates; and
ii) the time spent in relation to work done on documents is excessive.
  1. As to the first point, the hourly rates of the defendant’s solicitors are much higher than the SCCO guideline rates. It is unsatisfactory that the guidelines are based on rates fixed in 2010 and reviewed in 2014, as they are not helpful in determining reasonable rates in 2019. The guideline rates are significantly lower than the current hourly rates in many London City solicitors, as used by both parties in this case. Further, updated guidelines would be very welcome.
  2. The dispute in this case concerns claims and counterclaims arising out of the development and implementation of a digital online platform for buying and selling investment funds. Although the value of the case is not particularly high for this Court, the technical nature of the dispute justifies the engagement of solicitors with the appropriate skill and expertise to ensure proper and efficient conduct of the litigation. Solicitors providing such skill and expertise are entitled to charge the market hourly rate for their area of practice. The hourly rates charged cannot be considered in isolation when assessing the reasonableness of the costs incurred; it is but one factor that forms part of the skill, time and effort allocated to the application. It may be reasonable for a party to pay higher hourly rates to secure the necessary level of legal expertise, if that ensures appropriate direction in a case, including settlement strategy, with the effect of avoiding wasted costs and providing overall value.
  3. There may be cases where the hourly rates are disproportionate to the value or complexity of the case. However, in this case, proportionality is not an issue. The hourly rates claimed by the defendant must be considered together with the time spent on necessary work to assess overall reasonableness of the costs incurred.
  4. The hourly rate of the grade A fee earner is high but very limited time has been charged; less than five hours reviewing documents, one letter/email and in attendance. That level of involvement and the overall cost is reasonable and does not require any adjustment. Likewise, the overall time and cost of the grade D fee earner is limited to 8.61 hours on document preparation and is reasonable.
  5. As to the costs incurred in respect of the grade B and grade C fee earners, I accept Mr Parker’s submission that the time spent in relation to work done on documents is excessive. Although the defendant was the applicant and, as such, will have had the additional burden of preparing the application and the bundle, that does not justify the defendant expending nearly twice as many hours as the claimant.
  6. I have considered item 1 (preparing the application and draft order) and item 2 (preparing the witness statement and exhibit) together. I adjust the total hours for those preparation activities by deducting: (i) 4.22 hours spent by the grade C fee earner (£1,877.90) and (ii) 6 hours spent by the grade B earner (£3,930), a total of £5,807.90.
  7. Those adjustments reduce the total solicitor fees from £27,842.90 to £22,035 and produce a total net of VAT of £37,695.
  8. If the defendant is unable to recover any part of the VAT as input tax, the total VAT would be £7,488, giving a total sum of £45,183.
  9. That total is increased to £46,000 to reflect the claimant’s failure to accept the defendant’s offer that would have avoided the contested hearing.
  10. I summarily assess the costs payable by the claimant to the defendant in the sum of £46,000 (on the basis that the VAT is irrecoverable as input tax), such sum to be paid by 1 October 2019.