HOURLY RATES ALLOWED SHOULD BE INCREASED, AT LEAST, BY INFLATION: APPEAL AGAINST SUMMARY ASSESSMENT OF COSTS ALLOWED.

I am grateful to Sean Linley for drawing my attention to the judgment of HHJ Hodge QC in  Cohen v Fine & Ors [2020] EWHC 3278 (Ch).That judgment has some interesting things to say in relation to current hourly rates and also the procedure to be adopted in relation to the summary assessment of costs to avoid them becoming too “robust”.

“In my experience of sitting in the Business & Property Courts, both in the North-west and in the Rolls Building, the present Guideline Hourly Rates are considerably below the rates actually being charged by the solicitors who practise in those courts. Likewise, the Table of Counsel’s Fees bears no relationship to the fees which the courts see being charged for counsel appearing in the Business & Property Courts. In my judgment, pending the outcome of the present review, the Guideline Hourly Rates should be the subject of, at least, an increase that takes due account of inflation”

 

THE CASE

The claimant appealed against a decision to allow £27,000 in costs on a summary assessment.  On appeal the judge  carried out a “line by line” assessment of the claimant’s bill and costs came to £35,703.  The judge allowed the appeal.  However the judge was not critical of the decision made by the District Judge who was faced with a difficult situation.  Detailed guidance is given both in relation to hourly rates and the procedures to be adopted when there are difficulties arising from the summary assessment of costs.

THE JUDGMENT ON APPEAL

The judge set out the facts and legal principles in detail, then considered whether he should allow the appeal.

    1. The appeal court will only allow an appeal where the decision of the lower court was either wrong or unjust because of a serious procedural or other irregularity in the proceedings in the lower court: CPR 52.21 (3). Both features are present in the instant case. The District Judge correctly analysed the applicable provisions of the Civil Procedure Rules. However, in the light of the authorities I have referred to above, and for the reasons advanced by Mr Fletcher, the approach of the District Judge to the summary assessment she undertook was wrong. While summary assessment can be “broad brush”, a judge still has to consider the individual elements of the bill item by item: seFlowersMcLinden v Redbond, and Morgan v Spirit Group. What is meant by “broad brush”, in the present context, is that, unlike the detailed assessment procedure under CPR 47, there is no need for any formal notice of commencement of the assessment, or any detailed bill of costs, or any points of dispute, or any points of reply. But the court must nevertheless address individually each separate objection that may be taken to particular items in the N260 statement of costs.
    2. Having now revisited the District Judge’s summary assessment, with the result recorded at paragraph 15 above, it can also be seen that the District Judge’s approach had produced an unjust result. The claimant’s costs were summarily assessed at £27,000 whereas, having considered the individual elements of the bill item by item, I have assessed the total costs at £35,703. In effect, the District Judge had assessed the claimant’s costs at only some 75.6% of the figure that I have arrived at by using the approach mandated by binding authority.
    3. Having determined that I should allow the appeal, I then had to decide what course I should take in relation to the assessment of the claimant’s costs. Mr Fletcher invited the appeal court to direct that there should be a detailed assessment hearing, to be reserved to a Regional Costs Judge in Manchester. It seemed to me that that would be an unattractive course, and that I should myself undertake a summary assessment of the costs, and substitute my own assessment for that of the District Judge, for a number of reasons.
    4. First, as in MacDonald v Tare Holdings Ltd, my decision on costs will hopefully put an end to this whole case because the claimant has succeeded obtaining an order for the sale of the estate property so the assessment of his costs will the end of the matter (unless it is necessary to come back to court, at further expense, for further directions in connection with the sale). For things to be drawn out further by a detailed (and costly) assessment of the costs seemed undesirable if it could be at all avoided. Secondly, and in agreement both with Neuberger J in MacDonald v Tare Holdings Ltd and Evans-Lombe J in McLinden v Redbond, it seemed to me that a summary assessment would further the overriding objective of dealing with the case justly and at proportionate cost. It would save expense, deal with the case proportionately, ensure that it was dealt with expeditiously and fairly, and allot to the case an appropriate share of the court’s resources. It would also be consistent with the direction in CPR 1.4 (2) (i) to deal with as many aspects of the case as the court could on the same occasion. Thirdly, I was concerned about the ability of the defendants, as litigants in person, properly to address the requirements of a detailed assessment, in particular in terms of formulating focussed points of dispute. I was concerned that a detailed assessment might, in consequence, produce a less just outcome than a summary assessment. Fourthly, I was concerned that, without conducting a summary assessment, the appeal court would be in no position to deal justly with the costs of the appeal. Although the claimant had been successful in having the summary assessment of the District Judge set aside, until the costs had been finally determined, it would not be possible to identify the ultimately successful party to this appeal. If a detailed assessment were to result in an award of less than £27,000, it would be difficult to characterise the claimant as the ultimately successful, and the defendants as the ultimately unsuccessful, parties to the appeal. Determining the incidence of the costs of the appeal would therefore have to be deferred until after the conclusion of the detailed assessment. I also understood Mr Fine, at least, to favour the appeal court undertaking a summary assessment; and neither of the other two defendants positively opposed that course. However attractive it might have been for the appeal court not to have to embark upon a two-hour, line-by-line assessment of the costs, the interests of justice dictated that, however reluctantly, I should do so.
    5. In undertaking that summary assessment, the appeal court had regard to the applicable principles in CPR 44. Where the amount of costs falls to be assessed on the standard basis, the court will only allow costs: (1) which have been reasonably incurred and are reasonable in amount: CPR 44.3 (1); and (2) which are proportionate to the matters in issue: CPR 44.3 (2) (a); and it will resolve any doubt in favour of the paying party: CPR 44.3 (2) (b). By contrast, where (as in the present case) the amount of costs is to be assessed on the indemnity basis, proportionality is not an issue; and, although the court will still only allow costs which have been reasonably incurred and are reasonable in amount, the court will resolve any doubt it may have as to whether costs have been reasonably incurred, or are reasonable in amount, in favour of the receiving, rather than the paying, party: CPR 44.3 (1) and (3). In assessing the reasonableness of the incidence and the amount of costs incurred, the court will have regard to all the circumstances, including the conduct of all the parties, the value of the money or property involved, the importance of the matter to all the parties, the particular complexity of the matter, the skill, effort, and time spent on the case, and the specialised knowledge and responsibility involved: CPR 44.4.
    6. I have already indicated the outcome of that summary assessment. I gave reasons for my line-by-line decision on each individual element of the statement of costs as I went through it item by item. Those reasons were (hopefully) recorded on Teams; and it is unnecessary for me to address the process in this reserved judgment, subject only to one matter: that of the applicable hourly rates for two of the eleven fee earners who featured in the statement of costs. It was necessary for the appeal court to determine the applicable hourly rates for those two fee earners in order to address the question whether each affected item in the costs statement was reasonable in amount because those rates exceeded the applicable (Band One) Senior Courts Costs Office Guideline Hourly Rates.
    7. Prior to 2010 the Guideline Hourly Rates were increased each year, broadly in line with inflation; but they have not been revised since then. After much deliberation, the Foskett Sub-Committee of the Civil Justice Council (of which I was a member) reported on the Guideline Hourly Rates in 2014, after which further consequential consultation took place with the Law Society and the Ministry of Justice. However, the then Master of the Rolls (Lord Dyson) concluded, in April 2015, that the existing rates (at 2010 levels) should “remain in force for the foreseeable future and will remain a component in the assessment of costs, along with the application by the judiciary of proportionality and costs management”. More recently, in Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2504 (TCC), [2019] Costs L.R. 1533 at [14] O’Farrell J said that:

“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.”

The same can be said for the currently hourly rates in many North-West commercial litigation solicitors’ practices. Doubtless in response to this exhortation, a working group of the Civil Justice Council has been established (under Stewart J) to conduct an evidence-based review of the basis and amount of the Guideline Hourly Rates, and to make recommendations accordingly to the Deputy Head of Civil Justice and to the Civil Justice Council. The working group recognise that the approach to, and the evidence for, fixing Guideline Hourly Rates is a complex matter (as, from my experience on its predecessor, I know only all too well). According to paragraph 27-21 of Cook on Costs, the working group was originally due to report towards the end of this year. Although the project was suspended almost immediately upon the outbreak of the Covid-19 pandemic, it still appears to be on schedule as, at the time of writing the current edition, the suspension had been lifted. The editors anticipate a consultation period early in 2021. In the meantime, what is to happen as regards hourly rates?
    1. In my experience of sitting in the Business & Property Courts, both in the North-west and in the Rolls Building, the present Guideline Hourly Rates are considerably below the rates actually being charged by the solicitors who practise in those courts. Likewise, the Table of Counsel’s Fees bears no relationship to the fees which the courts see being charged for counsel appearing in the Business & Property Courts. In my judgment, pending the outcome of the present review, the Guideline Hourly Rates should be the subject of, at least, an increase that takes due account of inflation. Using the Bank of England Inflation Calculator, it seems to me that an increase in the (Band One) figures for Manchester and Liverpool broadly in the order of 35% would be justified as a starting point (appropriately rounded-up for ease of calculation). That would produce figures as follows (with the present rates shown in brackets):

A 295 (217) B 260 (192) C 220 (161) D 160 (118)

  1. These are the rates which I decided to adopt in the present case (subject to the indemnity principle, which meant that the lower rates actually charged to the claimant applied in the case of the majority of the fee earners who have been involved in the present case). There are only two fee earners whose chargeable rates exceeded these revised guideline hourly rates: Ms Rocca (Grade B), who is the principal fee-earner and is charged out at £300 per hour, and Mr Hughes (Grade D), who is a para-legal and is charged out at £175 per hour. Mr Fletcher sought to persuade me to apply these actual rates rather than the rates of £260 and £160 respectively. I rejected his invitation. Whilst I acknowledge that in many cases pending in the Business and Property Courts, the specific factors identified in CPR 44.4 would justify the application of rates higher than the guideline hourly rates, even after adjusting for inflation, that is not so in the instant case, which does not feature any of the particularly complex, specialist or high value aspects of the work typically encountered in the Business and Property Courts.
  2. In overruling her decision to summarily assess the claimant’s costs at £27,000, I should make it clear that I have every sympathy for the difficult position in which this very experienced and diligent District Judge found herself. This was a telephone hearing, conducted at a difficult time for the courts due to the pandemic and the consequent staff shortages and rapid and dramatic changes to working practices, where only one party was legally represented and the three defendants (all siblings) were representing themselves, with the first defendant being assisted by her husband and speaking from Massachusetts, USA. The hearing had been listed for only one hour, and the District Judge would appear to have had only five minutes left to hear from everyone on the highly contentious, and important, subject of costs. Understandably, the District Judge received no assistance from any of the defendants in terms of any objections to specific elements in the costs statement. She was taken to none of the relevant authorities which I have reviewed above; nor was she even taken to the relevant commentary in Civil Procedure. The District Judge was not referred to, or reminded of, paragraph 9 of Mr Fletcher’s skeleton argument (cited at paragraph 12 above); and nor was it submitted to her that, in view of the lateness of the hour, she should either re-list the matter for a future summary assessment or direct that the claimant’s costs should be the subject of a future detailed assessment. The District Judge no doubt bore firmly at the forefront of her mind that, having regard to the overriding objective and principles of proportionality, and as submitted in the same paragraph of Mr Fletcher’s skeleton, a summary assessment was to be preferred to a detailed assessment. The District Judge had only five minutes to undertake an exercise which, in the event, has taken the appeal court about two hours. She understandably took the view that, if Mr Fletcher had considered the one hour time estimate to be insufficient, he should have notified the court in advance. The District Judge was seeking to protect the defendants from what she regarded as an unreasonable claim for costs which could not be substantiated (as Mr Fine expressly recognised in his submissions to the appeal court). The District Judge’s ability to control the level of recoverable costs was constrained by her inability to rely upon the principle of proportionality (because of the indemnity basis of assessment). The approach which she proceeded to adopt was a realistic and pragmatic one that I have frequently adopted, without objection from the relevant parties. The only alternative available to her would have been to have adjourned the costs assessment, which would have led to still further costs being incurred; and these would probably have fallen to be visited upon the defendants. Unfortunately, the claimant has objected to the District Judge’s approach to the summary assessment; and that objection is supported and justified by binding authority.
  3. What lessons are to be learned from the present appeal? How might costs assessments be conducted in future cases, consistently with the need to further the overriding objective? How can courts avoid the summary assessment procedure becoming “bedevilled by formulaic and time consuming intricacy which would often be wholly disproportionate to the exercise being carried out and the nature of the litigation in hand” (to adopt the words of Black LJ)? First, the court should establish from the paying party how many, and which, individual elements of the statement of costs are subject to challenge. If there is simply no time available to undertake an item by item consideration of those elements, the court should make this clear; and it should ask whether all relevant parties expressly consent to the court adopting a broad brush, and global, approach to these disputed items, without minutely examining them in any detail. If such consent is forthcoming from all relevant parties, it should be expressly recorded in the court’s order. If no such consent is forthcoming from all relevant parties, then the court has the options of: (1) ordering that the assessment (and, if not previously determined, the incidence and/or the basis) of the costs of the relevant hearing will be determined on paper following upon an exchange of short, sequential written submissions from the relevant parties (as O’Farrell J did in Ohpen Operations); (2) re-listing the matter for a summary assessment of the costs; or (3) directing that the receiving party’s costs should be the subject of a detailed assessment. If a detailed assessment is ordered, the court should exercise its power under CPR 44.2 (8) to order the paying party to pay a reasonable sum on account of costs unless there is good reason not to do so. This salutary power should always be borne firmly in mind as an alternative to a rushed, and procedurally improper, summary assessment.
  4. For the reasons I have set out above, this appeal is allowed; the District Judge’s summary assessment of costs in the sum of £27,000 is set aside; the costs of and leading up to the hearing before the District Judge are summarily assessed in the total sum of £35,703; and the defendants are ordered to pay the claimant’s costs of this appeal, which are summarily assessed in the sum of £8,298.12.