JUDGE VARIES ORDER SO SUMMARY ASSESSMENT OF COSTS REPLACES DETAILED ASSESSMENT: COSTS SUMMARILY ASSESSED AT £7,250,000

In Pipia v Bgeo Group Ltd [2022] EWHC 846 (Comm) Mr Justice Henshaw took the unusual step of replacing an order for detailed assessment with an order for a summary assessment and then assessing the costs.

THE CASE

The defendant had succeeded in defending the claimant’s claim at trial (the action was struck out because of a failure to comply with an order for security for costs) and had an order for the assessment of costs.  The defendant applied for an order that costs be assessed summarily.   The claimant had not complied with an order for payment on account of £7,567.265.  The defendant sought a variation of the original order on the basis that the costs involved in the assessment process were large and enforcement was a difficult task in any event.   The defendant’s case was that its costs exceeded £17 million, they sought an order for £7.25 million by way of summary assessment.

THE COSTS OF DETAILED ASSESSMENT

It is interesting to note  that the costs of the assessment process were predicted to be over £1 million.

1. 1. The context of the present application includes what a detailed assessment would be likely to involve in the present case. Ms Trevan, in her witness statement, explains that her costs team estimates that, given the length and complexity of the proceedings, preparing a bill of costs would be likely to take at least six months and cost at least £400,000 (excluding VAT). Further, regardless of whether and to what extent Mr Pipia might participate in any detailed assessment proceedings and the duration of any hearing in detailed assessment proceedings, such proceedings would require substantial time and resources, both for BG and for the Senior Courts costs office. Freshfields’ costs team estimate that, in total, detailed assessment proceedings in this case – from the point of filing the bill of costs up to and including attendance at the hearing (which could potentially last for an estimated eight weeks) and the obtaining of the final costs certificate – would likely take a minimum of a further six months and cost in the region of an estimated further £800,000 (excluding VAT) to complete. That results in a total estimated cost of £1.2 million (excluding VAT). Ms Trevan says that Mr David Wallace, an independent costs lawyer at DW Legal Costs, with 38 years experience dealing with the assessment of costs in commercial matters, has confirmed that he agrees with these estimates.

1. 1. That evidence, first of all, confirms the considerable extent to which good money would have to be thrown after likely bad money in pursuing a detailed assessment. It also indicates that detailed assessment would involve considerable further delay for BG. As the Court of Appeal said in Blakemore v Cummings [2010] 1 WLR 983 (in the context of ordering a payment on account), “It is an important consideration that a party should not be kept out of the monies which should almost certainly be demonstrated to be due longer than is necessary.”

1. 1. Ms Trevan also explains that there is a potential enforcement advantage of a final order being made now. She states that BG is concerned that Mr Pipia’s conduct over the past six months strongly suggests that he does not intend to, and will not, comply with existing or future orders of the court, so that BG will need to take steps to enforce its costs claim against Mr Pipia, including internationally. Without waiving privilege, it is, she says, BG’s understanding that it is likely to require a final, rather than an interim, costs order from this court in order to have reasonable prospects of doing so in those foreign jurisdictions where Mr Pipia resides or may have assets. It seems to me entirely likely that that is the case.

1. So for the reasons I have given so far, I conclude that there has been a material change of circumstances that would justify a variation of the order. The question then becomes whether a summary assessment of the costs of the action is either feasible or appropriate.

THE SUMMARY ASSESSMENT

The judge concluded that it was appropriate to order summary assessment in this case.   The defendant went to considerable trouble to explain the process by which the bill on summary assessment was produced and the reasons for the figures involved.

1. 1. As to the amount of costs Cockerill J, as I have indicated, said that the costs claimed by BG were very high indeed and that the assessed costs may very well fall below the usual range. Views as to what is the usual range differ, but on a standard costs assessment, 60-70 per cent of claimed costs are commonly recovered.

1. 1. In my view, the most notable features which arise from a review of the updated costs schedule are, first, that in some months quite large proportions of partner time were spent, for example frequently of the order of a third of the solicitor’s costs for the month in question; and, secondly, the level of the hourly rates claimed. For example, the rates claimed for work since about May 2020 range from £1,085 and £985 an hour for partners through £675 an hour for a senior associate, to £395 an hour for a more junior associate. By way of comparison, in the guideline rates issued in October 2021, the London 1 band applies, amongst other things, to very heavy commercial work by Central London firms. The rates in that band range from £512 an hour for solicitors of over 8 years experience, through £348 an hour for solicitors with more than four years experience, to £270 an hour for more junior qualified solicitors. Paragraph 29 of the guide to the summary assessment of costs says:

“In substantial and complex litigation an hourly rate in excess of the guideline figures may be appropriate for grade A, B and C fee earners where other factors, for example the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element, would justify a significantly higher rate. It is important to note that these are only examples … Further. London 1 is defined in Appendix 2 as ‘very heavy commercial and corporate work by centrally based London firms.’ Within that pool of work, there will be degrees of complexity and this paragraph will still be relevant.”

1. 1. The present case was at least to a degree exceptional, being originally a USD 1 billion claim ultimately reduced to a USD 246 million claim, with complex factual issues and issues of foreign law, listed for an eight-week trial. That was a trial for which, as I have said, BG had instructed three counsel and Mr Pipia four counsel. That is not to say that the case necessarily justified recovery between the parties of rates quite as high as those claimed, which in some cases are or approach double the guideline rates, but it would justify a significant uplift of some sort.

1. 1. The costs order sought of £7,567,266 represents only 44.4 per cent of the now estimated costs of £17,028,242. The latter figure does not include any interest on costs incurred back to 2018, nor post-judgment interest on the outstanding balance of the order which Cockerill J made. Post-judgment interest at 8 per cent per annum on the £4.4 million, over and above the money in court, for the period of about 10.5 months since the order was made, would amount to something of the order of £300,000. Pre judgment interest on costs at the Bank of England base rate of 0.5 per cent on costs of £7.5 million, for an average period of, say, 18 months, would be of the order of some £65,000, although it is not necessary to arrive at an exact figure. The essential point, simply, is that if sums of that order are added to the costs figure now claimed, the resulting figure increases further to something of the order of £17.4 million. The claimed sum of £7,567,266 is only about 43.5 per cent of that figure.

1. 1. Mr Pipia suggests that BG is in fact now taking its present approach for fear that a detailed assessment will uncover excessive fees; and that in turn, he suggests, may even show that security ought never to have been ordered in the first place in the sums in which it was ordered. However, in my view, there are obvious good reasons for BG to be taking the present approach, particularly given Mr Pipia’s complete failure to pay any of the costs ordered by Cockerill J some 11 months ago. I also consider that the reasonably detailed breakdown which BG has provided now gives a good sense of the rates and hours claimed, making it less likely that there is some area where excessive fees are somehow not visible. Clearly, the summary does not detail each hour spent in the way a detailed assessment or a detailed bill of costs would, but the monthly breakdown does give a short narrative explanation of the areas of work done each month by the solicitor and counsel team as a whole, as well as the individual hours spent by the solicitors and counsel’s fees. I accept that it provides a sufficient basis for the court to form a view as to what figure could confidently be predicted as the minimum cost recovery on detailed assessment.

1. 1. I mention in passing that I do not believe any assistance can be gained by way of comparison with the costs incurred on the claimant’s side. Mr Roman Pipia told me during submissions that Mr Pipia’s costs approached some £3 million. Counsel for BG told me on instructions that the costs on the claimant’s side were believed to be of the order of £6 million. However, the simple fact is that there is no evidence before the court either way as to the actual level of the claimant’s costs, so I do not consider that it is of any assistance here.

1. I have therefore had to form a view, based on the totality of the information that is before me, as to a fair level of costs to be payable under a final order, which does not run any material risk of amounting to an overpayment. In all the circumstances, I am confident that costs would be awarded on a detailed assessment in the sum of at least £7,250,000 and I consider it appropriate to assess the costs summarily in that amount.