SUMMARY ASSESSMENT OF COSTS: THERE WAS PROCEDURAL UNFAIRNESS IN THE ASSESSMENT PROCESS, HOWEVER THE RESULT WOULD HAVE BEEN THE SAME

June 23, 2022 · by · in Appeals, Costs, Summary assessment,

In  Golubovich v Golubovich [2022] EWHC 1605 (Ch) Mr Justice Edwin Johnson refused a defendant permission to appeal from the decision made in a summary assessment of costs.  There had been procedural unfairness in the way that the assessment was conducted. However the result would have been the same.

 

“I do not think that the summary assessment exercise would have been any different if the Deputy Master had waited for the response submissions before making the summary assessment.”

THE CASE

The Part 20 defendant in a case appealed a decision to grant permission to serve her out of the jurisdiction. She also  sought permission to appeal the Deputy Master’s assessment of costs.

THE GROUNDS OF THE APPEAL

The parties had agreed a process for the exchange of submissions on costs.  However the claimant (in the Part 20 proceedings) served a revised bill, with an additional element, at the same time that submissions were exchanged. The defendant did not, therefore, have the opportunity to make submissions in relation to the revised bill.  The Deputy Master assessed costs.  The defendant complained but the Master stated that costs had been assessed.

THE DECISION ON APPEAL

Permission to appeal was not granted.  There had been procedural unfairness.  However the defendant could not establish that this unfairness had led to any different outcome.  The bill had been reduced.  The defendant’s contentions amounted to an argument that the claimant should not recover anything at all in relation to the additional element.

THE APPEAL JUDGMENT ON THE COSTS APPEAL

The Costs Assessment Point – discussion
    1. The Deputy Master circulated the Marsh Judgment in draft on 22nd July 2021. On 29th July 2021 Olga’s solicitors emailed the Deputy Master with their suggested corrections to the draft of the Marsh Judgment. The email then continued in the following terms:
“In addition to the above, the parties have been in correspondence in relation to consequential matters (correspondence attached). The latest proposal from Withers (with which we agree) is for the parties to provide written submissions on consequential matters in accordance with the timings below and that the consequential matters be decided on paper as this would be the most efficient and cost-effective way forward:
1. The parties to file and serve their primary submissions by 4pm on Tuesday, 3 August 2021; and
2. Response submissions be filed and served by 4pm on Thursday, 5 August 2021.”
    1. The Deputy Master emailed the parties on 30th July 2021, attaching the Marsh Judgment, which was to be treated as formally handed down that day. The email then continued as follows:
“I agree the proposal put forward by the parties concerning consequential issues. Please will the parties file an agreed consent order for me to approve.
All consequential issues, including permission to appeal, are treated as being adjourned for later disposal.”
    1. It is therefore clear that the Deputy Master approved the proposal for written primary and response submissions on consequential matters, with primary submissions by 4.00pm on 3rd August 2021 and response submissions by 4.00pm on 5th August 2021.
    1. The parties had exchanged draft costs schedules prior to the filing of their primary submissions. I believe that this exchange of draft costs schedules took place on 14th June 2021; that is to say the day before the hearing of the Jurisdiction Application. Alexey’s draft costs schedule stated costs in the total sum of £169,617.13. I should mention that the description of these costs schedules as draft costs schedules comes from Mr Emmett’s skeleton argument. Both costs schedules were signed and dated 14th June 2021.
    1. Olga duly filed her primary submissions, by email to the Deputy Master, on 3rd August 2021. The email also attached the parties’ costs schedules of 14th June 2021. So far as costs were concerned, Olga accepted the principle that Alexey was entitled to his costs, to be summarily assessed, but took various points on the costs claimed by Alexey. The first point was that Alexey had originally argued, in relation to the Jurisdiction Application, that Olga was out of time to challenge service of the Additional Claim. It was said that Alexey had then abandoned this argument. Olga argued that this justified a reduction in Alexey’s recoverable costs. The remaining points comprised various arguments that the costs shown in Alexey’s costs schedule of 14th June 2021 were unreasonable in their amount.
    1. Olga’s submissions on costs proceeded on the basis that the costs claimed by Alexey were those shown in Alexey’s costs schedule dated 14th June 2021.
    1. Alexey also filed his primary submissions on 3rd August 2021. Alexey’s primary submissions were however accompanied by a final cost schedule which increased the costs claimed to £190,260.50, which was an increase of £20,643.37 from the earlier draft schedule. My understanding is that the figure of £20,643.37 comprised additional costs said to have been incurred by Alexey after the hearing of the Jurisdiction Application on 15th June 2021.
    1. The next event was the handing down by the Deputy Master of the Consequential Judgment on the morning of 5th August 2021. The Consequential Judgment was handed down prior to the parties filing their response submissions, and prior to the deadline for filing the response submissions (4.00pm on 5th August 2021).
    1. The Deputy Master dealt with costs at paragraphs 8-15 of the Consequential Judgment. At paragraphs 8 and 9 of the Consequential Judgment the Deputy Master dealt with the argument that Alexey’s costs should be reduced to reflect the abandonment of the argument that Olga’s challenge to jurisdiction was out of time. The Deputy Master rejected this argument. The Deputy Master then turned to the reasonableness of the costs claimed in Alexey’s revised costs schedule. It is easiest simply to set out the relevant paragraphs of the Consequential Judgment:
“10. Alexey has filed a costs statement that totals £190,260.50. Olga’s costs statement totals £170,038.08. I have in mind the factors set out in CPR rule 44.4 and Mr D’Cruz’s submissions about them.
11. The summary assessment of costs in an impressionistic exercise rather than an exercise of calculation.
12. Alexey’s costs statement includes a schedule of work done on documents that has 164 entries and I accept Mr Emmett’s submission that there are doubts about whether numerous items are recoverable in whole or in part on the standard basis because they suggest there has been double counting. Such doubts must be resolved in favour of Olga.
13. I also consider that (a) there are doubts about the extent to which counsels’ fees will be fully recoverable and (b) the costs statement claims for an excessive number of fee earners attending the hearing.
14. I note that by letter dated 27 July 2021 Alexey offered to accept £150,000 in respect of his costs. Some additional costs have been incurred since that date.
15. Both parties have adopted a broadly similar ‘no holds barred’ approach to the claim which forms part of a bitter family dispute. I consider that £150,000 is a reasonable and proportionate sum for Olga to pay. Payment must be made within 28 days from the date of this judgment.”
    1. The Deputy Master thus assessed Alexey’s costs of the Jurisdiction Application in the sum of £150,000. This was a reduction of roughly 21% from the total sum of £190,260.50 which Alexey had claimed in his revised costs schedule.
    1. At 11.57 (am) on 5th August 2021, and following their receipt of the Consequential Judgment, Olga’s solicitors sent a lengthy email to the Deputy Master. The email made reference to the agreed timetable for filing the primary and response submissions, as approved by the Deputy Master. The email went on to refer to the revised costs schedule served by Alexey, and pointed out that Olga, who had not seen the revised costs schedule prior to the exchange of the primary submissions, would have made submissions on the revised costs schedule as part of her response submissions. The email then set out the arguments which Olga would have included in her response submissions, had she been given the chance, as follows:
“We note that the costs now claimed by Alexey exceed by £20,643.37 the amount indicated in the schedule dated 14 June 2021. Olga accepts the principle that the costs of reasonable work since the hearing may be recovered. But this amount is excessive. In particular:
1. £10,291.97 has been claimed by Alexey’s solicitors for attendance on client / opponent / others. This is an extraordinary amount to claim following argument and before judgment. This can hardly be regarded as the reasonable costs of the application.
2. A further £6,947 has been claimed in respect of work done on documents by the solicitors which again can’t be viewed to be reasonable in addition to the fees charged by the counsel team in relation to the submissions on consequential matters.
3. There is an entry for £965 on 21 June 2021 said to relate to work done by junior counsel on a “Supplemental Skeleton Argument” (the hearing was on 15 June 2021). We do not know what this relates to.
4. Alexey has also claimed £639 as the costs of obtaining a transcript of the hearing on 15 June 2021 (costs which the parties did not agree to share / Olga should not be responsible for reimbursing Alexey given the transcript has not been shared with her).
In addition to the above, in relation to paragraphs 11-12 of Alexey’s submissions dated 3 August 2021, the offer in question was not reasonable. It did not address the matters set out in Olga’s submission dated 3 August 2021 (which were already known to Alexey). Also, it was made before Alexey’s solicitors provided notification of the additional £20,000-odd that are now being claimed in respect of work since the hearing. It was (i) unreasonable to make an offer which was intended to have costs consequences without providing proper information about the amount that would ultimately be claimed, and (ii) not unreasonable for Olga to refuse the offer given that it represented nearly 90% of the costs that had actually been notified to her to that time.
In the circumstances, we would respectfully submit that the sections of today’s judgment in relation to issues as to costs are reconsidered in light of the information set out above.”
    1. The Deputy Master responded to this email at 17:13 on 5th August 2021. The Deputy Master said this:
“Thanks, but I don’t need reply submissions.
I have handed down the judgment. The decision is made and is final.”
    1. Mr Emmett made what were, essentially, two submissions in support of the Costs Assessment Point. The first submission was that the procedure adopted by the Deputy Master, which resulted in the Deputy Master handing down the Consequential Judgment before Olga had had the opportunity to file her response submissions, was unfair. The second submission was that the Deputy Master’s decision that £150,000 was a reasonable and proportionate sum for Olga to pay in costs was wrong. If the Deputy Master had considered the submissions which Olga wished to make on the increased costs claimed by Alexey, there should and would have been a further reduction in the sum assessed by way of costs, in the amount of £10,000 to £15,000.
    1. I accept the first of these submissions. I am bound to say that it does seem to me that an unfairness occurred in relation to the submissions on costs. The parties agreed on primary and response submissions by certain deadlines, and the Deputy Master approved these arrangements. In these circumstances it seems to me that the Deputy Master should have awaited the response submissions, before handing down the Consequential Judgment. In my view a procedural irregularity did occur in this respect, which was unfair to Olga.
    1. The problems with the Costs Assessment Point arise in relation to the second submission. If the Costs Appeal is to succeed, it has to be demonstrated that, as a result of not waiting for Olga’s response submissions in relation to the increase in Alexey’s costs, the Deputy Master got the summary assessment wrong, and should and would have made a further reduction of £10,000 to £15,000 if he had not gone wrong.
    1. I do not see how this can be demonstrated. As the Deputy Master noted in the Consequential Judgment, the summary assessment of costs is not a matter of precise calculation. It is a more broad brush process. The Deputy Master made his summary assessment by reference to the increased figure claimed by Alexey, not by reference to the original figure. When making his summary assessment the Deputy Master would have had in front of him both Alexey’s original costs schedule, which had been sent to him by Olga’s solicitors with Olga’s primary submissions, and Alexey’s revised costs schedule, which had been sent to him with Alexey’s primary submissions. The Deputy Master would therefore have been aware of the increase in Alexey’s costs and of the fact that the increase in costs was generated by costs said to have been incurred by Alexey following the hearing on 15th June 2021 (see paragraph 14 of the Consequential Judgment). The Deputy Master would also have been aware, from Olga’s primary submissions, that Olga’s submissions on the reasonableness of Alexey’s costs were made by reference to Alexey’s original costs schedule.
    1. The Deputy Master decided that £150,000 was a reasonable and proportionate sum for Olga to have to pay. The Deputy Master decided that this was the appropriate figure after consideration of Alexey’s revised costs schedule, in the total sum of £190,260.50. In making his decision on the summary assessment, the Deputy Master appears to have had in mind, at least as general points, some of the points which Olga’s solicitors made in their email of 5th August 2021; see paragraphs 12 and 13 of the Consequential Judgment.
    1. If one concentrates on the increase in the figure claimed by Alexey by way of costs, namely the sum of £20,643.37, this was subject to the overall reduction of 21% which was applied by the Deputy Master to the global figure of £190,260,50. Olga’s case is that this figure of £20,643.37 should then, in addition to this 21% discount, have been subject to a further reduction of £10,000-£15,000 which, taken at the upper end of these figures, would have left Alexey with virtually no recoverable costs in respect of the post hearing period. This seems an impossible result, in terms of the summary assessment of the figure of £20,643.37.
    1. The above point seems to me to illustrate the difficulties in arguing that the summary assessment exercise carried out by the Deputy Master would have been any different if the Deputy Master had waited to take account of the arguments which would have been in Olga’s response submissions and were articulated in the email from Olga’ solicitors sent on 5th August 2021. I do not think that the summary assessment exercise would have been any different if the Deputy Master had waited for the response submissions before making the summary assessment.
    1. It seems to me that there is further support for this conclusion in the terms of the email sent by the Deputy Master on 5th August 2021. By the time this email was sent, the Deputy Master would have had time to read and digest the further submissions which Olga wished to make, because they had been set out in the earlier email sent that day to the Deputy Master by Olga’s solicitors. There would then, I believe, still have been time to alter the summary assessment in the Consequential Judgment, because the Marsh Order had not then been finalised or sealed. The Deputy Master made it clear however that he did not need response submissions. It seems to me reasonable to assume that the Deputy Master did not need response submissions because he had read the email from Olga’s solicitors, and had concluded that the arguments in that email did not cause him to change the summary assessment which he had made in the Consequential Judgment.
    1. There are further difficulties with the Costs Assessment Point. If it is assumed that the summary assessment of the Deputy Master should be set aside, because of the procedural unfairness which occurred, there are, in theory, two options. First, the summary assessment could be remitted to the Deputy Master, for the Deputy Master to carry out the process of summary assessment over again. Second, I could make my own summary assessment. The first of these options would plainly be a disproportionate exercise, in terms of the costs and time involved even if one assumes, contrary to my view, that the Deputy Master fell into error in the summary assessment which he did make. The second of these options is equally unattractive. It seems to me that the Deputy Master was in a far better position than I am to assess the costs of the Jurisdiction Application. The Deputy Master conducted the hearing of the Jurisdiction Application, and heard all the arguments. I would be making a summary assessment of the costs at second hand, which seems to me to be highly undesirable, and more likely than not to compound any unfairness in the original summary assessment if, contrary to my view, it is assumed that the procedural unfairness which occurred did actually result in substantive unfairness in the summary assessment made by the Deputy Master.
    1. Drawing together all of the above discussion, I conclude that there are no grounds upon which Olga is able, or should be permitted to challenge the summary assessment of costs made by the Deputy Master.
Conclusion – the PTA Application
    1. If the PTA Application is considered in isolation, it seems to me, on the basis of my discussion of Abuse Point and the Misdirection Point, that there was more than sufficient in these two Points to characterise them as having a real prospect of success.
    1. I am rather more hesitant in relation to the Evaluation Point. For the reasons which I have explained, it seems to me that it was always going to be difficult for Olga to challenge the evaluation exercise carried out by the Deputy Master, if one assumes that the Deputy Master did not go wrong in the manner alleged in the Misdirection Point. That said, and if I had been considering the PTA Application in isolation, I think that I would have been prepared to grant permission to appeal on the Evaluation Point. I do not think that I would have thought it right to refuse to allow the Evaluation Point to proceed, in circumstances where I was prepared to allow the Abuse Point and the Misdirection Point to proceed.
    1. I am therefore prepared to grant permission to appeal in respect of the Jurisdiction Appeal, on all the grounds of appeal in support of the Jurisdiction Appeal.
  1. Turning to the Costs Appeal, the position seems to me to be different. While I have found that there was procedural unfairness, the reality seems to me to be that there was no substantive unfairness, and no viable ground of challenge to the summary assessment of costs made by the Deputy Master. Nor can I see any other compelling reason for granting permission to appeal. I conclude that permission to appeal in respect of the Costs Appeal should be refused.
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