COST BITES 18: APPROPRIATE CHARGING RATES WHEN A GRADE C IS CHARGED AT NOTHING: THE NEED FOR A “BLENDED” APPROACH

There are several interesting aspects to the judgment of Mr Justice Miles in  Eurohome UK Mortgages 2007-1 Plc v Deutsche Bank AG, London Branch & Anor [2022] EWHC 2408 (Ch). One issue was the appropriate hourly rate when a grade A fee earner was charged at a rate higher than the guideline rates but where no charge was made for the work done by a grade C.  The judge held that a “blending approach” was necessary and this led to a relatively small reduction of the costs on the schedule.

THE CASE

The judge heard, and granted, an application by the defendants to strike out the claim.  The grounds for the claim were that the proceedings had been issued without authority and that those who asserted that they were directors of the company had never been appointed.  The judge struck the action out and declared it totally without merit.  He also ordered costs on an indemnity basis.  The claimants did not attend the application. The judge held it was appropriate to assess costs in the claimants’ absence.

 

THE JUDGMENT ON THE ACTION BEING TOTALLY WITHOUT MERIT

Totally without merit

    1. I also certify that the claim brought was totally without merit. The attempts of the ADFDs to enter contracts and bring proceedings on behalf of the Eurohome Companies depended on a manifest legal absurdity. If people could make themselves directors by their say so, anyone in the world could become a director of any company. Not only is that a legal nonsense but the gambit used in this case has been considered and exposed as such in earlier published judgments of this court and the Commercial Court. This is not just a case where the claimants have failed. There was never a rational basis on which the claim could have succeeded.

THE JUDGMENT ON COSTS

The judge then considered the appropriate approach to costs.   The bill was presented on the basis that the hourly charging rate for a grade A was higher than the guideline rates.  The judge held that this higher rate was not justified.  However the funding agreement between the defendants and their solicitor meant that the work done by a grade C was not charged at all.  The grade C had carried out a lot of the work in relation to documents.  The judge held that it was appropriate to take this fact into account when assessing the deduction to be made to the bill overall, a “blended” approach had to be taken.

Costs
    1. The general rule should apply, namely that the third claimant should pay the costs of the defendants. The defendants seek their costs on the indemnity basis. They have referred to well-known principles and authorities which I need to go to. Essentially, the question is whether the conduct of a party is sufficiently out of the norm so as to justify an order for indemnity costs.
    1. I am satisfied that it is appropriate in the present case to order the costs on an indemnity basis. The entire claim was based, in my judgment, on the manifest legal absurdity. It is simply inconceivable that parties who are strangers to companies should be able to make themselves directors against the opposition of the properly constituted board simply by saying that they wish to do so. That particular argument has already been exposed in a series of other decisions which I have referred to in my substantive judgment. Moreover, it is not merely the underlying transactions which are in dispute. In this case, the people responsible for bringing this claim have also purported to do so in the names of two securitisation vehicles where the properly constituted board has opposed that. They have done so, therefore, without any authority whatsoever. It is important with these kinds of instruments that the market should have certainty and that legal strangers to securitisation vehicles should not be allowed to abuse the process of the court by purporting to take steps in their names.
    1. I have also concluded that it was an abuse of process for the claim form to be issued in the way it was. I also note that the address given in the claim form appears to be a false address. When an attempt was made to serve this application there, it turned out to be an empty shop premises. That is another form of abuse.
    1. I also take into account the complete lack of engagement by the named claimants. They have not engaged in this application in any way, they have not served evidence, and they have not appeared on this hearing to seek to defend the claim from being struck out.
    1. This is an appropriate case to summarily assess the costs (on the indemnity basis). I was provided with a revised statement of costs. I was told that the only revision from a version which was served on the respondents concerned provision relating to the recovery of VAT. It has recently become apparent that some but not all VAT will be capable of being recovered and, therefore, appropriate adjustments have been made. It seems to me in circumstances where that is the only change and where there is no change to the underlying numbers, it is appropriate for me to consider and rule on the statement of costs in the absence of the respondents. The overall amount being claimed, including VAT, is £72,287.
    1. I make the following observations on the schedule. The grade A fee earner’s rate is £710 as opposed to the guideline hourly rate of £512. I bear in mind that these are guidelines and are not fixed but they are an important starting point. I do not think that this is a case of such complexity as to justify a departure from the guideline rates.
    1. On the other hand, the statement of costs explains that the arrangement with the client is that while grade A rates would be charged that amount, which itself is discount from the rates charged elsewhere by solicitors, the grade C fee earner’s work is charged at zero. It is important, therefore, to recognize when going through the bill of costs that although the guideline rates are about 72 per cent of the rate being charged, taking out what would otherwise be £270 under the guideline rates for a grade C fee earner, there is an element of blending that needed to be taken into account.
  1. I also note that in some respects at least, most of the work seems to have been done by the grade A fee earner rather than the grade C fee earner. This includes attendance on others. In the schedule of work done on documents, the majority of the work was, in fact, undertaken by the grade C fee earner for which, as I have said, there was a zero charge. Looking at the solicitors’ fees overall and taking into account those various factors, it seems to me that it is appropriate to make a relatively small deduction, essentially to reflect the fact that the grade A fees are somewhat higher than the hourly rates. But when one takes into account the blending that I have referred to, it seems to me that the reduction should be a comparatively small one and of £4,000. It seems to me that counsel’s fees are slightly on the high side overall for a comparatively short hearing albeit counsel had to prepare against the possibility that the hearing would be contested. It seems to me that it would be right to deduct overall £3,000 from counsel’s fees. The total shall be £60,000 plus VAT.