INCREASES IN HOURLY RATE AMOUNTS TO “SPECIAL REASONS” IN SOLICITORS ACT ASSESSMENT OF COSTS

In Raydens Ltd v Cole [2021] EWHC B14 (Costs) Costs Judge Leonard found that an increase in hourly rates meant that “special circumstances” established in a Solicitors Act assessment.

“I do not believe that anyone in her position could reasonably have anticipated that before it was over, she would be paying the senior fee earner and his assistant hourly rates that had increased by over 30% and 65% respectively.”

THE CASE

The defendant had been a client of the claimant solicitor in divorce proceedings.  Proceedings were issued for sums due.  The defendant was outside the time that gave her an automatic right to assessment of the costs.  For the costs to be assessed there had to be a finding of “special circumstances”.  The judge was considering this as a preliminary issue.

THE INCREASE IN HOURLY RATES

The judge observed the increase in rates over the period of the retainer.

 

Increases in Hourly Rates
  1. The Claimant’s engagement letter provided for hourly rates to be reviewed at the beginning of April each year. Mr Bremner has helpfully set out in table form the annual increases in his hourly rate, all of which were notified to the client in accordance with the Claimant’s contractual obligations. I am reproducing it here:
Date of increase
Date letter/email sent
Increase
1 April 2014
28 March 2014
Old rate – £245
New Rate – £260
1 April 2015
30 March 2015
Old rate – £260
New rate – £265
1 April 2016
23 March 2016
Old rate – £265
New rate – £295
1 April 2017
29 March 2017
Old rate – £295
New rate – £320

 

  1. There were no increases in 2018 or 2019.
  2. Mr Teasdale points out that the increase in Mr Bremner’s hourly rate between 2013 and 2017 exceeded 30% (it would seem that, in her formal complaint of 2 December 2019, the Defendant overstated the increase). Mr Meakins’ hourly rate also increased, from £100 to £165, an increase of some 65%. The Defendant, however, signed up to the hourly rates set out in the engagement letter. A standard annual review provision did not give the Claimant carte blanche to impose unilateral hourly rate increases on this scale. They are properly subject to scrutiny and challenge: the Defendant could not be taken, by reference to CPR 46.9(3), to have approved those rates. There is a real case for the Claimant to answer here: the increases call for an explanation.

THE JUDGE’S CONCLUSION: UNUSUAL INCREASE IN HOURLY RATES AMOUNTED TO SPECIAL CIRCUMSTANCES

The judge concluded that the increase in hourly rates amounted to special circumstances on the facts of this case.

Conclusions: Hourly Rates
74.              I am exercised by what seems to me to be a quite exceptional increase in the Claimant’s hourly rates between 2014 and 2017.
75.              Whilst I have already come to the view that it would be inappropriate for present purposes to make any finding on estimates, it is pertinent that these increases took place against a background of exceptionally high accruing costs, originally anticipated in tens of thousands but ultimately exceeding £260,000, the sheer scale of which inevitably had a significant impact of the assets that were to become available to the Defendant following her divorce.
76.              Mr Griffiths submits that, as with estimates, Mr Teasdale’s submissions on hourly rates represent an entirely new case. I do not agree. These hourly rate rises inevitably must have contributed significantly to the overall scale of costs of which the Defendant complains, and her specific complaint about hourly rate increases is included in the body of the evidence. The fact that the Claimant recognises that this is a significant part of the Defendant’s case is reflected in the detailed evidence given by Mr Bremner in response.
77.              The Defendant’s litigation was managed by a partner and junior assistant team. At the time she signed the engagement letter she agreed to specified hourly rates payable over a period estimated at up to 18 months. In those circumstances she might reasonably have anticipated one annual hourly rate review before the litigation concluded. I do not believe that anyone in her position could reasonably have anticipated that before it was over, she would be paying the senior fee earner and his assistant hourly rates that had increased by over 30% and 65% respectively.
78.              Mr Bremner says that the Claimant, on reviewing hourly rates, took into account the rates charged in the local legal services market as well as rates charged by similar specialist matrimonial firms in London, so that their hourly rates tracked those in London (albeit at a lower figure) and would generally have been higher than the rates charged by local non-specialist competitors.
79.              That offers a broad context for the rises, but not an explanation. I do not know why Mr Bremner’s and Mr Meakins’ hourly rates increased to such an extent over four years, or whether any consideration was given to the extent to which those very substantial increases were going to exacerbate the difficulties that the Defendant experienced from the outset with funding very difficult and expensive litigation.
80.              I appreciate that the rise in Mr Meakins’ hourly rate may have had something to do with increasing seniority and experience, although the Claimant’s evidence does not address that. If however that were the basis for such a substantial increase in his hourly rate, it would give rise to the question whether Mr Meakins should have been replaced by someone whose hourly rate would have been closer to that originally agreed.
81.              It does not seem to me to be an answer to any of these concerns to say, as Mr Griffiths submits, that the Defendant had the choice of discussing these increasing rates with the Claimant or just ceasing to instruct the Claimant.
82.              With regard to discussion, if there is an explanation to justify such exceptional hourly rate increases it does not seem to have been offered to the Defendant, who was presented with a fait accompli.
83.              It is common ground that the Defendant’s experience of the matrimonial litigation has, over the years, taken a severe toll on her mental health, for which she has needed treatment. The Defendant herself has said that she felt at the time that she had no choice but to accept the increases, and I find that quite credible. It seems clear from the evidence that she was unable to stand up to the Respondent, even to the extent of enforcing occupation and ancillary relief orders that the Claimant had obtained for her benefit. I can accept that in her distress, she did not have the will to pick a quarrel with her solicitors as well.
84.              To suggest that the Defendant could just have parted company with her solicitors in the midst of such difficult and stressful litigation, whilst struggling with funding difficulties, does not seem to me to be realistic, especially given her state of mental health.
85.              These increases, in my view, do call for explanation, and there has to be an issue about informed (or any) approval by the Defendant of the hourly rate rises imposed by the Claimant.
Conclusions: Timing
86.              I appreciate that the Defendant, other than by complaining, has done little to advance her case, but again one must take into account her state of mind. I can accept that she did not feel able to enter into a battle with her solicitors until forced to do so by finding herself, yet again, in court.
87.              It seems to me in any event that the principle to be derived from Rippon Patel and French LLP v Mowlam is that, if special circumstances are found, the court has a discretion to order detailed assessment. Delay on the client’s part in applying may weigh against the exercise of the court’s discretion in the client’s favour if that delay has given rise to significant prejudice. That is not a real factor in this case.
Summary of Conclusions
88.              It seems to me that a finding of special circumstances is justified in this case by exceptionally large increases in the Claimant’s hourly rates, charged to a client who was already struggling to fund her matrimonial litigation, against a background of quite exceptionally high overall litigation costs.
89.              Having made a finding of special circumstances I shall, as anticipated by DJ Ayers’ order of  26 October 2020, give directions for an assessment. I should make it clear, to that end, that this judgment addresses only the question of special circumstances, based on the evidence I have before me at present. It is not intended to limit the case that either party may choose to advance on assessment.