COST BITES 79: JUDGE AWARDS GUIDELINE RATES EVEN IN HEAVY COMMERCIAL CASE

In Manek & Ors v 360 One WAM Ltd & Ors (Re Consequentials) [2023] EWHC 985 (Comm) Simon Rainey KC (sitting as a Judge of the High Court) declined to award rates that were higher than the Guideline Rates in a heavy commercial case. The judgment contains some interesting observations (and rejection) of points raised by the paying party.

“The Court of Appeal has stressed in a number of recent decisions that, in the case of solicitors’ fees, if a rate in excess of the guideline rate is to be charged to the paying party, a clear and compelling justification must be provided”

THE CASE

The judge had earlier dismissed the defendant’s application to set aside an order granting permission to serve out of the jurisdiction.  The question of costs then arose.  The claimants’ costs were £195,107 (excluding VAT) plus £14,137.50 relating to post judgment issues.   The defendants’ costs were claimed at £651,027.98 (again exclusive of costs). The defendants were ordered to pay the claimants’ cost and made various submissions in relation to the amount claimed.

THE JUDGMENT ON COSTS

The judge rejected all of the defendants’ objections to the claimants’ costs with the exception of the hourly rate.  The rates allowed were confined to the guideline rates.

1. 1. The Claimants seek (a) costs of the application and of the hearing in the sum of £195,107.00 (excluding VAT), together with (b) additional costs of £14,137.50 (excluding VAT) in respect of dealing with post-judgment and consequential submissions.

1. 1. No submissions have been made as to (b), and these costs are in my view proportionate and reasonable and I summarily assess them in the sum claimed plus VAT.

1. 1. As to (a), the Defendants contend that the level of costs sought is excessive and should be reduced to about 60% of the figure claimed, i.e. to some £125,000 (inclusive of VAT).

1. 1. Standing back, the Defendants’ application, while disposed of in a one day hearing due to the economic and efficient way in which it was argued by both Counsel, nevertheless raised a large of number of issues and gave rise to a very extensive body of supporting documentation, both in the form of witness statements and exhibits. I note that the Defendants’ costs were £651,027.98 (exclusive of VAT), with solicitor hours charged at £349,995.00 of which £178,041.00 was work on documents. Just balancing the respective costs levels and while of course taking account of the fact that, as the applicant, the Defendants would have carried a larger proportion of the work in formulating the application, its grounds and supporting materials, than the Claimants as respondent, there is no obvious or glaring disparity in costs levels which would suggest that the Claimants’ costs are per se unreasonable or disproportionate.

1. 1. Against that background, the Defendants make two points.

1. 1. First, it is submitted that the hours spent by the Claimants’ solicitors Cleary Gottlieb are excessive for a one-day jurisdiction challenge. I dismiss this submission.

1. 1. The main individual criticisms relied upon are, first, that a total of 50 hours were spent on the preparation of the second witness statement of Mr Gadhia. Given that this was the principal response statement of the Claimants and dealt in detail with the various factual matters relied on by the Defendants and itself was 30 pages in length and marshalled over 500 pages of exhibits, this criticism lacks reality. I note that of the 50 hours, 35.75 hours were incurred by a Grade C fee earner and only 9.25 hours by the Grade A fee earner. This seems to me to be a perfectly reasonable and proportionate number of hours. Secondly, a total of 17 hours is complained of as having been spent (15.25, Grade C; 2.5 Grade A) on the first witness statement of Mr Manek. Again, when I consider what that statement covered and, additionally, when I compare equivalent times for witness statements prepared by the Defendants, this seems both reasonable and efficient.

1. 1. Lesser criticisms are that 7.25 hours was spent by Cleary Gottlieb on the Skeleton Argument. While this would be the principal burden of Counsel, it is unrealistic to consider on an application of this kind that solicitors would not also be heavily involved in the review of the Skeleton and its drafts; cf. the Defendants with their comparable time of 4.8 hours. Lastly, reliance is placed on 8.5 hours having been spent in generic “hearing preparation”. Given the volume of material and the large number of issues that figure is unsurprising.

1. 1. Secondly, objection is taken to the hourly rates claimed for and as charged by Cleary Gottlieb on the basis that these are far in excess of the Guideline Rates for Grades A, C and D fee earners (with the first two being 88% and 117% higher respectively). This submission has force.

1. 1. The Court of Appeal has stressed in a number of recent decisions that, in the case of solicitors’ fees, if a rate in excess of the guideline rate is to be charged to the paying party, a clear and compelling justification must be provided: see e.g. Samsung Electronics Co Ltd v LG Display Co Ltd [2022] EWCA Civ 466 and Athena Capital Fund SICAV-FIS SCA v Secretariat of State for the Holy See (Costs) [2022] EWCA Civ 1061. The sorts of justifications which might apply are set out in PD44SC, para. 29.

1. 1. The justification put forward by the Claimants is that the case is complex and that the litigation is substantial and of high value, involving an alleged international fraud (Consequentials Skeleton No. 1, para. 5(3)(b)) and that the overall level of costs (dealt with by me above) shows that the Claimants conducted the litigation economically and efficiently in terms of partner time when compared with the Defendants (ibid., para.. 5(3)(c) and Consequentials Skeleton No. 2, para. 2).

1. 1. The latter point goes to numbers of hours claimed and does not address nor could it justify claiming rates substantially in excess of the Guideline Rates.

1. 1. The other points relied upon in justification of the rates are, with respect, generic and could be made equally in many other jurisdiction challenges involving fraud, and involving much higher claim values.

1. 1. I bear in mind that the updated Guideline Rates are meant to reflect heavy and complex Commercial Court and Chancery Division litigation. As it was put by Birss LJ in Athena Capital (supra) at [10]:

“In my experience there has been a view that the previous set of Guideline Hourly Rates (before 2021) were not directed to the heaviest work such as takes place in the Business and Property Courts. In part no doubt this was because they were so out of date. Whatever the position was or was thought to be, it changed in the current set of Guideline Hourly Rates, which were approved by the Master of the Rolls in August 2021. As my Lord pointed out in Samsung v LG, the current set includes a band called “London 1″ which is a set of rates directed expressly to very heavy commercial and corporate work by centrally London based firms. I would add that the London 1 rates band in the current Guideline Hourly Rates is based on evidence from the Business and Property Courts themselves (see the Civil Justice Council’s Final Report of April 2021). Therefore the London 1 band is directly applicable to this case and so a justification for the much higher rates was needed”

1. 1. I note too that by comparison and handling the same litigation, the Defendants’ hourly rates are only slightly higher than the Guideline Rates.

1. 1. I do not consider that any real justification or special reason has been made out by the Claimants for allowing the recovery of costs from the Defendants at a level so far above the Guideline Rates.

1. 1. Costs will therefore be summarily assessed on the basis of the hours claimed but only at the Guideline Rates.

1. 1. I do not consider that any further discount is appropriate.

1. I therefore summarily assess the Claimants’ costs on the basis claimed, save for the application of the Guideline Rates for Grades A, C and D, together with VAT. The parties are invited to agree the appropriate figure produced by my assessment.