“DIVIDING THE BILL” WHEN TWO MATTERS PROCEEDED TOGETHER; THE AMOUNT OF INFORMATION NEEDED ON COUNSEL’S FEE NOTES & HOURLY RATES: A LOT IN ONE CASE

In  R v Barts Health NHS Trust [2022] EWHC B3 (Costs) Costs Judge Rowley considered a number of interesting issues relating to the problem of apportioning costs where two actions had been run alongside each other.  There are interesting observations in relation to hourly rates (and the amount of information needed on counsel’s fee notes).

“The events of this case all took place during a short period in 2019. The guideline hourly rates (“GHR”) operative from 1 October 2021 are, in my view, likely to be the preferred starting point in most cases (rather than the 2010 version). Where the work is as recent as 2019, it seems to me there is really no argument that the correct starting point is the 2021 guideline figures.”

THE CASE

The claimant had run two cases involving the defendant, a judicial review and proceedings under the Children Act.  The cases were managed together. The defendant was ordered to pay the claimant 80% of the costs of the judicial review proceedings but nothing in relation to the Children Act proceedings.  The judge was considering the appropriate approach where two actions were run alongside each other.   The judge was considering preliminary issues in relation to how the assessment should be approached.

CONSIDERATION OF HOW TO ASSESS THE COSTS

The judge first considered the appropriate approach to the issues of costs and “common costs”.

14.              It is apparent from the wording of MacDonald J’s order that the claimant is entitled to her costs of the judicial review proceedings but not in respect of the Children Act proceedings, save for any legal aid costs which are not relevant here.

15.              The defendant challenges the costs claimed in the bill on the basis that work done and disbursements incurred (particularly in relation to counsel’s fees) relate, at least in part, to the Children Act proceedings and as such are not recoverable.

16.              In its points of dispute, the defendant argues that the Children Act application was the central issue and that the judicial review application was subservient to it. Based on the House of Lords decision in Medway Oil and Storage Co Ltd v Continental Contractors Ltd [1929] AC 88, the defendant says that only the costs which are over and above those which would be incurred in the Children Act proceedings anyway may be recovered. As such, the defendant draws a comparison with the lion’s share of the costs being allowed where there is a claim and only any additional costs incurred by a counterclaim in circumstances where both parties receive some form of order for costs.

17.              Mr Mallalieu amplified this challenge in both his written and oral representations. Mr Sachdeva responded similarly forcefully as to why the judicial review proceedings were at least as important as the Children Act proceedings. Having had the chance to consider matters since the hearing, it seems to me that this was a cul-de-sac down which neither advocate nor the court needed to travel.

THE JUDGMENT ON HOW THE ISSUE OF TWO ACTIONS SHOULD BE ASSESSED

21.              Consequently, it does not seem to me that Medway Oil, or the line of authority running from it, has any bearing on the circumstances of this case. The defendant’s point of dispute therefore gets off on the wrong foot by making an assumption that the two sets of proceedings which the court, for entirely understandable reasons, decided to manage together must inevitably require Medway Oil to apply in some shape or form. This flawed starting point then leads to the need to attempt to describe one or other set of proceedings as being the superior or more central proceedings so that it can equate to a claim and therefore that the other inferior or peripheral application takes the place of the counterclaim. No such classification is either appropriate or required in this case.

22.              It is common ground that if the costs only relate to the judicial review proceedings, then they may be recovered subject to the usual test of reasonableness and proportionality. Equally, if the costs only relate to the Children Act proceedings, then they are not recoverable. Should the costs be “common” between the two sets of proceedings then they should be divided so that only the element which relates to the recoverable judicial review proceedings is allowed on assessment.

23.              This description of what needs to be done on assessment does not deal with common costs which are not divisible, such as a court fee, which has to be paid in its entirety in order to pursue the successful claim. In its points of dispute, the defendant says that the claimant has no entitlement to recover indivisible common costs. That statement is the culmination of the point of dispute and, as I understand it, is the result of its argument that the judicial review proceedings are the peripheral proceedings when compared to the Children Act proceedings in accordance with Medway Oil. Since I have concluded that Medway Oil does not apply to this case, then the position taken in the point of dispute is one I reject.

24.              It is my experience that common costs are rarely non-divisible in any event.  Almost all work which is common between two issues or two parties et cetera can properly be divided between the recoverable and unrecoverable element. Even the level of some court fees will depend on the extent of the claims brought and may be divided between successful and unsuccessful claims or parties. The only problem is a practical one.  It is extremely time consuming to contemplate each attendance note or other documentation in order to come to a conclusion on where to divide each piece of work. The authorities are keen to stress that a blanket approach to the percentage that is recoverable is not the way the court should proceed. This approach was taken by Master Simons in Jean Mary Doris Haynes (personal representative of the estate of Brian Haynes deceased) v Department for Business Innovation and Skills [2014] EWHC 643 (QB) and was only upheld by Jay J in the absence of any other option.  In practice, the allowance of the same percentage may become the de facto approach when a similar proportion appears to be appropriate on reviewing a number of items of work.

25.              To the extent that there are any non-divisible items however, then it seems to me that the receiving party is correct in saying that they are recoverable in full. That is the tenor of the authorities in cases such as Haynes (see paragraph 37).

26.              As, I have said, I expect most of the common costs to be divisible. Indeed, I think that this is the heart of the defendant’s real complaint. The points of dispute give item 107 regarding document time as an example where work that has been done must relate to both sets of proceedings but no attempt to divide the work between the two proceedings has been attempted. Mr Sachdeva’s response was that the claimant was in invidious position in the absence of the defendant making it clear as to which entries were said to be susceptible to division. That is not necessarily a very helpful submission, but it was more informative than the reply which simply refers to the submissions to the preliminary points generally.

THE WAY THE BILL IS DRAFTED IS IMPORTANT

The judge set out the nature of the duty owed by the receiving party.

35.              It is, and always has been, for the receiving party to draft the bill of costs to reflect any necessary division of the work that has been done. There is no realistic way, absent the receiving party’s file, for the paying party to be able to interpret the time claimed in order to be able to challenge items in the bill in the fashion contended for by the claimant. If that division has not been carried out, bills are regularly returned in order for them to be redrawn.  Where, as here, the receiving party argues that it is not required, then it will have the effect of the court receiving more speculative arguments from the paying party and being required to spend longer on each entry before reaching a decision.

36.              The position is not, as Mr Sachdeva, contended, that all the work is recoverable unless it can be specifically shown to be additional work that would not have occurred in any event. That approach runs far too close to the non-divisible common costs situation (or even a Medway Oil approach as Mr Mallalieu pointed out) than is appropriate for dividing common costs in this case.

37.              Nor does it mean that if, for example, a brief fee would be reasonable if it only dealt with a recoverable aspect, then it will be allowed in full even if the fee also covered an irrecoverable aspect. The authorities are clear in my view that in such circumstances, the court has to assume that the brief covered both aspects and needs to be divided.  If the receiving party obtained a very good deal with counsel’s clerk on the fee, the paying party is entitled to share in that good fortune.

38.              These various examples and comments amount to a recognition that the defendant can have some expectation of a reduction of the fees claimed in this bill, notwithstanding that I prefer the claimant’s general approach.

39.              Separately, it does seem to me that, in this case, the Court’s understandable decision to run the proceedings concurrently may have saved costs in some areas but it will inevitably have increased costs in terms of the number of parties with which to communicate and the issues with which other parties considered important. As one example, videos of Tafida were provided to Irwin Mitchell by another party and they were then passed to counsel. It was not clear to the solicitors when forwarding them to counsel whether they would be of any particular assistance, but it seems to me to be unrealistic to conclude that it was unreasonable to consider such evidence provided by other parties. If there had not been concurrent proceedings, then that evidence probably would not have been provided, but that is the price for proceedings being run very quickly and in conjunction with other proceedings.

40.              During the course of the hearing, I did express the view that preliminary points such as this one often proved difficult to determine in any conclusive fashion. Notwithstanding counsel’s best efforts I have, it seems to me, only reached the position of giving some guidance in relatively broad strokes with the details needing to be filled in at the detailed assessment hearing. Nevertheless, it appeared to be the point on which the parties were most anxious to have some determination and therefore I have tried to provide some examples of the points raised and the views that I hold about them.

THE AMOUNT OF INFORMATION ON COUNSEL’S FEE NOTES

Counsel’s clerks may need to take note.

41.              In relation to the perceived inadequacy of detail in counsel’s fee notes, there is nothing in my view which requires the receiving party to provide any particular level of information regarding the fees that are claimed. The sums claimed are set out in Counsel’s fee notes and that is sufficient for purposes of the indemnity principle. Thereafter, it is a matter for the receiving party as to whether or not it can prove that the fees incurred were reasonable in nature and amount. To the extent that there is inadequate explanation on the fee notes, it is the receiving party which takes the risk since the benefit of the doubt will be exercised in favour of the paying party. I do not propose to make any form of order which requires further information to be provided.

HOURLY RATES: REASONABLE AND JUSTIFIABLE

The judge then considered the hourly rates.  This case was unusual in that the work was done in Manchester.

42. The points of dispute posit a two-stage test which is usually only employed where “distant” solicitors have been instructed by the receiving party in order to challenge the use of solicitors in a more expensive area than the location of the receiving party. In this case however, the claimant resided in a hospital in Whitechapel, London E1 and the solicitors instructed were in Manchester. The first stage of the “Wraith” test i.e. “Was it reasonable for the client to instruct solicitors in the location in which they are situated?” is easily answered in the affirmative. There can hardly ever be any criticism of a receiving party who instructs solicitors in a less expensive area of the country.

43. The second element of the test is to consider, in the context of the circumstances of the case, whether the hourly rates charged were reasonable for a firm in the location of the claimant’s solicitors?

44. The events of this case all took place during a short period in 2019. The guideline hourly rates (“GHR”) operative from 1 October 2021 are, in my view, likely to be the preferred starting point in most cases (rather than the 2010 version). Where the work is as recent as 2019, it seems to me there is really no argument that the correct starting point is the 2021 guideline figures. The hourly rates claimed by the solicitors for each GHR grade of fee earner and the National Band 1 rates in the 2021 version are as follows:

45. The central point made by the points of dispute in relation to the hourly rates claimed is that the “baton of responsibility and importance to the claimant” had been passed to leading and junior counsel and that the solicitors relied heavily upon counsel’s specialised knowledge and skill to take the case forwards. As such the defendant contends that the claimant’s solicitors did not “have to exercise any more skill, effort and specialised knowledge than that of an un-specialised solicitor.”

46. In both his written and oral submissions, Mr Mallalieu supported this point by making reference to what he described as the day to day handling of the matter by counsel. In his submission, the degree of legal complexity in the judicial review proceedings, though arising from a grave and complex case, was the sort that experienced counsel on both sides would be familiar with and primarily involved points of law which would be identified and then developed and argued by counsel. The degree of skill, responsibility and expertise reasonably required of the claimant’s solicitors was minimal.

47. In addition, Mr Mallalieu’s submissions also traversed the argument that the judicial review proceedings were tangential to the Children Act proceedings and as such were less important than if the solicitors had been instructed in the Children Act proceedings to determine the child’s best interests. In his reply to Mr Sachdeva’s submissions on this point, Mr Mallalieu referred to cases such as those which go to the Supreme Court which are extremely complex but are essentially dealt with by counsel. The solicitors’ allowance of costs by the Supreme Court costs officers is consequently modest.

48. In his submissions, Mr Sachdeva queried whether the guideline hourly rates were really relevant, whichever ones were taken as a starting point. He said that the case was ground-breaking in that, unlike other well-known cases, the English doctors considered treatment to be futile, or at least not in the patient’s best interests, and so objected to transfer to another country on that basis. Mr Sachdeva submitted that the level of skill, effort and specialised knowledge of the claimant’s solicitors was necessary to be able to pursue such a case. It was literally a life-or-death decision that was involved in the proceedings.

49. I have already determined that the 2021 rates would be the starting point in this case. That seemed to me to be the main argument regarding the hourly rates in themselves. The defendant has offered figures that are above the 2010 guideline rates but below the 2021 version.  If a similar increase above the 2021 guideline rates was calculated it would reach figures approaching the rates actually claimed, even though they were offered on the basis of the solicitors taking little responsibility or demonstrating any real skill.

50. Given the vital nature of these proceedings, it seems to me that the hourly rates claimed are in fact entirely reasonable and that there is little need to go through the seven pillars of Wisdom (ignoring the budgeting aspect) in CPR 44.4(3) in any detail. In particular, it is hard to imagine any case involving more importance to the client or, given the need for urgent action, one which would score more heavily on the circumstances in which the work was done.

51. There are undoubtedly cases where the subject matter does not require the need for specialist solicitors or only needs a junior solicitor to carry it out in an appropriate fashion. In such cases, the hourly rate that can be recovered will be reduced to a non-specialist firm or more junior solicitor rate.

52. In this case, the defendant did not go so far as to say that the case did not require a specialist solicitor.  Indeed, Mr Mallalieu said, when canvassing the extent of the counsel’s fees, that the defendant was not saying that the higher grade solicitors at Irwin Mitchell were unskilled et cetera.

53. Instead, it is the defendant’s case that the claimant’s solicitors did not display their skill in this particular case.  The defendant says that by the choice of its counsel and the nature of the arguments being run, the solicitors have rendered their own expertise unnecessary and as a result they should be reduced on a between the parties’ assessment. It might be said that the choice of expert counsel was perhaps a reflection of expert solicitors. But leaving that to one side, it is in my view, a remarkable suggestion that a case whose own weight clearly justified using expertise to pursue it, can be downgraded in the choice of an appropriate solicitor by that solicitor’s choice of external assistance.

54. It was this discussion which led me to make sure that I had the benefit of papers between the solicitors and counsel in order to form a view about the expertise on show.  Having done so, I am clearly of the view that expertise was evident in the solicitors’ dealings with counsel. The papers reminded me of files seen where commercial law firms and leading and junior counsel are acting quickly in relation to injunctive proceedings with rapid return dates et cetera. There is very much a team effort between solicitors and counsel in terms of communication with other parties, the drafting of documentation, the strategy and so on. That is the clear impression I was given in this case by reading the correspondence and documents with which I was provided.

55. I therefore conclude that the solicitors not only had the requisite skill, effort and specialised knowledge and responsibility appropriate for this grave case but also demonstrated it in their dealings with counsel and other solicitors. There is no warrant in my view for there to be a reduction in the hourly rates claimed simply on the basis that counsel was also involved in dealing with matters. The issue on assessment will be whether there was too much involvement of counsel, as the defendant contends. To the extent that the defendant is correct then either the solicitors’ charges or counsel’s fees will be reduced. But that does not mean that the hourly rates claimed by the solicitors should be reduced in any event.

56. Accordingly, I allow the hourly rates as claimed.