COST BITES 8: CENTRAL LONDON HOURLY RATES: THE RATE DEPENDS ON THE LITIGATION NOT THE LITIGATOR

In Brake & Anor v Guy & Ors [2022] EWHC 1911 (Ch) HHJ Paul Matthews (sitting as a High Court Judge).  Considered the appropriate hourly rate to be applied on an application. Although costs were being assessed on an indemnity basis the judge reduced the hourly rate claimed.  The fact that the claimants were represented by a London firm did not automatically entitle them to recover the higher London guideline rate.

“the mere fact that a central London law firm does predominantly very heavy commercial and corporate work does not mean that when it does a piece of work which is not such work the same “London 1” guideline rates still apply. In my judgment, work done by such a firm which is not “very heavy commercial and corporate work” will fall under “London 2” rather than “London 1”, as “other work.”

THE CASE

The judge was assessing costs after an application in relation to a third-party debt order.   The claimants’ costs were ordered to be paid on the indemnity basis. The issues the judge had to consider was whether there should be a summary assessment.  There were also issues in relation to the hourly rate of the claimants’

THE JUDGMENT ON THESE ISSUES

The judge held that costs should be summarily assessed. He further held that the appropriate hourly rate was not based on the “London 1” basis, but “London 2”, as the application itself was not heavy work.

1. 1. I turn therefore to the question of assessment. This was an application which lasted less than one day. Therefore, the general rule is that the court should assess the costs summarily: CPR rule 44.6, PD 44 para 9.2. The Guy Parties however invite the court to order a detailed assessment of their costs, and to order an interim payment on account in the sum of £29,173.78, that is, 65% of the total claimed of £44,882.74. (I note however that the statement of costs applied to the court says it was “prepared for the purposes of Summary Assessment”.) On the other side, the third party says that this was a “fairly standard application” and that the costs are “clearly broken down” in their costs statement. No good reason not to assess summarily was suggested to me by the Guy Parties, and I can see none. Summary assessment saves both time and money, even if it is more “broad brush” than detailed assessment (Football Association Premier League v The Lord Chancellor [2021] EWHC 1001 (QB), [20]). I will therefore assess them summarily.

1. 1. The Guy Parties seek the sum of £24,336. 44 solicitors’ fees (including £16,801.94 in respect of work done on documents) and the sum of £6,187.50 counsel’s fees in relation to the original application of 17 March 2022. This makes a sub-total of £30,523.94. They further seek the sum of £6,636.23 solicitors’ costs (including £5,027.10 in respect of work done on documents) and the sum of £1,275 counsel’s fees, making a subtotal of £7,911.23. Finally, they seek the sum of £3,760.08 solicitors’ costs (including £2447.58 in respect of work done on documents) and the sum of £2687.50 counsel’s fees, making a subtotal of £6,447.58. The three subtotals add up to £44,882.74.

1. 1. In the present case, the third party says that the applications were not sufficiently complex to justify specialist London based commercial solicitors. This was simply a TPDO application, in relation to a debt of £70,000. The third party says it was not impracticable, let alone impossible, to instruct suitable specialist regional solicitors. Moreover, the costs which they seek greatly exceed the guideline hourly rates for “London 1” solicitors. In addition, the third party says that it did not cause the Guy Parties to incur costs which they would have incurred in any event. That means (it says) that (i) it is not liable for the costs of the application of 17 March 2022, because the Guy Parties opted to make that application and would have attended a hearing in any event; (ii) it is not liable for the costs of the application of 20 May 2022 because the Guy Parties would have been obliged to make the application in any event as it was opposed by Mr Brake; and (iii) it is not liable for the post hearing costs because the Guy Parties would have incurred them in any event.

London solicitors

1. 1. I begin with the use of specialist London based commercial solicitors. In an earlier instalment of a different branch of the already mammoth litigation between these parties (Axnoller Events Ltd v Brake [2021] EWHC 2362 (Ch)), I was referred to the decision of the Court of Appeal in Wraith v Sheffield Forgemasters Ltd [1998] 1 WLR 132. That case shows that, by itself, the fact that London solicitors are more expensive than provincial solicitors does not make their retainer unreasonable when it comes to assessing the costs as between the parties. In that case Mr Truscott had instructed a small firm of London solicitors (ATC) to act for him in a county court case after he became dissatisfied with his previous solicitors (MFC). The judge in the county court said it was unreasonable for him to do so because their charging rates were higher than those of local solicitors. The Court of Appeal allowed an appeal by Mr Truscott.

1. 1. Kennedy LJ (with whom Waite and Auld LJJ agreed) said, at 141:

“The following are matters which, as it seems to me, the judge should have regarded as relevant when considering the reasonableness of Mr. Truscott’s decision to instruct A.T.C. (1) The importance of the matter to him. It was obviously of great importance. It threatened his home. (2) The legal and factual complexities, in so far as he might reasonably be expected to understand them. Due to the incompetence of M.F.C. the matter had taken on an appearance of some complexity. (3) The location of his home, his place of work and the location of the court in which the relevant proceedings had been commenced. (4) Mr. Truscott’s possibly well-founded dissatisfaction with the solicitors he had originally instructed, which may well have resulted in a natural desire to instruct solicitors further afield, who would not be inhibited in representing his interests. (5) The fact that he had sought advice as to whom to consult, and had been recommended to consult A.T.C. (6) The location of A.T.C., including their accessibility to him, and their readiness to attend at the relevant court. (7) What, if anything, he might reasonably be expected to know of the fees likely to be charged by A.T.C. as compared with the fees of other solicitors whom he might reasonably be expected to have considered.”

1. 1. In the present case, the litigation was of great importance to the Guy Parties. They had invested some £7 million in a business and estate which had unfortunately ended in disputes with the Brakes, which in turn threatened that investment. This claim was one of several, of potentially high value, brought by the Brakes against them. So they had to deal with them. The Guy Parties were and are also sophisticated consumers of legal services, having been involved in launching a number of businesses, including one involving the first commercial exploitation of the medical properties of cannabis in the UK. They were and are used to instructing professional advisers in London, with the expertise necessary to deal with their concerns. However, although the documentation relating to Mr Brake’s pension is complex, the applications themselves were not. One (TPDO) was an everyday occurrence. The other (injunction) was a little more difficult, though not groundbreaking.

1. 1. Nevertheless I bear in mind that, in the present case, the so-called “documents claim”, the same solicitors have represented the Guy Parties all the way through, first to trial, and then in the Court of Appeal, in both cases successfully. They are obviously very familiar indeed with the background to the case, and indeed with the wider “baggage” associated with the litigation between the parties more generally. They also have the confidence of their clients. To get another, less expensive, provincial firm up to speed simply for the purpose of making an application for a TPDO (and then the injunction application) would cost a great deal of money and take considerable extra time. In bringing enforcement proceedings after a court order has been made, it is nearly always essential to act quickly. In the circumstances, I do not think it was unreasonable for the same solicitors to continue to act.

Hourly rates

1. 1. The second point concerns the hourly rates sought to be applied by the Guy Parties’ solicitors. The 2021 Guide to the Summary Assessment of Costs, in force since last October, provides for different figures for central London (where the Guy Parties’ solicitors are based) depending on whether it is (i) very heavy commercial and corporate work by centrally based London firms (“London 1”), or (ii) other work in the City or central London (“London 2”). The figures for London 1 are £512 (grade A), £348 (grade B), £270 (grade C) and £186 (grade D). The figures for London 2 are £373 (grade A), £289 (grade B), £244 (grade C) and £139 (grade D).

1. 1. The Guy Parties’ solicitors are based in the City, and so fall within one or other of these two scales. It seems to me which of these two applies depends on the nature of the work being done in the particular case, rather than on some special attribute of the law firm concerned. In other words, the mere fact that a central London law firm does predominantly very heavy commercial and corporate work does not mean that when it does a piece of work which is not such work the same “London 1” guideline rates still apply. In my judgment, work done by such a firm which is not “very heavy commercial and corporate work” will fall under “London 2” rather than “London 1”, as “other work”.

1. 1. I do however make clear that I see no reason why a piece of litigation may not qualify in an appropriate case as “very heavy commercial and corporate work”. I do not think that that expression is restricted purely to transactional matters. However, in my judgment the work done on these two applications is simply not heavy enough to fall into that category. Indeed, the first of the two applications was straightforward, the kind of thing which is given to a junior solicitor or even a trainee. The injunction application was more difficult, but still not “heavy”, let alone “very heavy”. In my judgment these two applications constitute “other work in the City or central London”, and therefore fall within “London 2”.

1. 1. Of course, as the Guide says, the guideline figures are intended only to provide a starting point for those faced with summary assessment. As the Guide then goes on to say,

“29. 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. … “

I bear all that in mind. Nevertheless, I cannot see that there are any factors involved in these applications which would justify hourly rates significantly in excess of the guideline figures. When I come to assess the costs, therefore, I will be looking at hourly rates in the region of the figures given in “London 2”.

Delegation

1. 1. The third party does not address questions relating to delegation of work to more junior colleagues in its submissions. This is nevertheless a question for the court. It is even referred to in the Guide, at Appendix 2, in the context of solicitors sitting behind counsel during hearings. But in my judgment the point arises in other contexts also, such as attendances on others and work on documents. I have therefore looked at the breakdown of the figures on the statement of costs. I do not see any obvious case of failure by the Guy Parties’ solicitors to delegate work appropriately.

Counsels’ fees

1. These are not addressed by the third party, and I assume that they are not challenged as to the amounts involved.

1. 1. In assessing the costs of the Guy Parties on the indemnity basis, I must disallow costs which have been unreasonably incurred or are unreasonable in amount, but I do not need to consider proportionality. If I have any doubt as to reasonableness, I must exercise it in favour of the receiving party. I am satisfied that the time spent and the delegation of work carried out were reasonable. However, I am also satisfied that the hourly rates being applied, taking into account the 2021 Guide, were not. They are far in excess of ‘London 2’, which I have held is the appropriate level for the work done. Lastly, I am satisfied that the fees for counsel were reasonable.

1. I have therefore gone back to the Schedule of Costs. As I have said, the total claimed is £44,882.74, of which £34,732.74 is solicitors’ costs, £9,875 is counsels’ fees, and £275 is an application fee. Reworking the solicitors’ costs on the basis of London 2 produces a total of a little under £20,000, to which counsels’ fees and the application fee must be added. I will therefore assess the costs of these applications as £30,000 in total, plus any applicable VAT (though I imagine that the Guy Parties are able to recover that).