COST BITES 113: LOOKING AT DETAILED ASSESSMENTS (2): HOURLY RATES: THE APPROPRIATE AMOUNT AND THE IMPACT OF COMPLEXITY

As part of the series looking closely at the judgment of Costs Judge Leonard in Allseas Group SA, R (On the Application Of) v Sultana [2023] EWHC 2731 (SCCO).  The judgment also contains a consideration of the factors affecting  the assessment of hourly rates : (i) before the general updating; (ii) where an action is particularly complex.

 

“In the face of such limited evidence, it seems to me that I must of necessity refer to the GHRs, making an adjustment appropriate for the passage of time and for those factors. Because the choice of central London solicitors was reasonable, my starting point must be the GHRs for central London.”

THE CASE

The judge was assessing costs following a private prosecution by the receiving party.  A costs order was made under section 17 of the Prosecution of Offences Act 1985.    The test is similar, but not wholly identical, to the principles that apply in civil assessments.   The judge had to determine the question of the hourly rate.

1. 1. The first issue I must determine is the hourly rates to be allowed for the work undertaken by the Appellant’s solicitors, Mishcon. The claim is based upon the hourly rate actually charged for the work done by Mishcon’s fee earners, which are lower than the “headline” rates chargeable in accordance with the terms of Mishcon’s retainer. It is not necessary to reproduce the full list of hourly rates, but for those who led the work on the case they are as follows.

1. 1. Alison Levitt KC, a Grade A fee earner, oversaw the prosecution of the Defendant. Ms Levitt is a former Crown prosecutor and former principal legal adviser to the Director of Public Prosecutions. She was a partner in Mishcon throughout the proceedings, and has particular expertise in relation to the “Victims’ Right to Review” Scheme (having been central to its creation) and in relation to judicial reviews of decisions not to prosecute. Ms Levitt was also the author of the CPS Legal Guidance on private prosecutions. For a long period, every private prosecution which was referred to the CPS was personally reviewed by Ms Levitt. Ms Levitt, who made significant contributions to written legal arguments and submissions, recorded a total of 427.5 hours on the case. Her hourly charge out rate averages out at £559.52.

1. 1. Gareth Minty, another Grade A fee earner, is another former Crown prosecutor, having been a Senior Lawyer within the Central Fraud Division and latterly the Organised Crime Division. He is (and was throughout the proceedings) authorised to conduct litigation by the Bar Standards Board. Mr Minty undertook the key day-to-day management of the case, recording 1,993 hours at an average rate of £404.09 per hour. During both trials Mr Minty took responsibility for a number of contentious issues relating to disclosure, witnesses and legal arguments.

1. 1. Mr Minty delegated work as appropriate to a support team, predominantly to Mr Sam Ruback, a Grade C fee earner who coordinated the management and structure of the trials. Mr Ruback recorded some 2,193.9 hours in the case at an average hourly rate of £242.07.

1. 1. Some of the fee earners in the civil proceedings assisted the criminal team, for example in locating evidence and information. Given that they recorded time in the criminal proceedings, it seems to me at the right approach is to assess their hourly rates as if they were members of the criminal team.

1. 1. The Determining Officer allowed hourly rates for grade A, B, C and D fee earners at what she described as “the maximum Supreme Court Costs Office Guideline Hourly Rates”, by which she meant the GHRs as last updated in 2010.

1. 1. Accepting that it was reasonable for the Appellant to instruct Mishcon, a central London firm, the Determining Officer allowed 2010 London 2 (central London, as opposed to City of London) rates, which provide for a Grade A rate of 317 per hour; Grade B £242 per hour; Grade C of £196 per hour; and Grade D at £126 per hour. She did however depart from the strict application of the GHRs in making no allowance for increasing seniority, as where for example a Grade C fee earner gained more than 4 years’ relevant post-qualification experience and so became a Grade B fee earner.

Authorities Referred to by the Parties in Relation to Hourly Rates

1. 1. The authorities to which I have been referred in the context of the hourly rates issue (and other judgments that are not binding on me, but which are persuasive) include, apart from R (Law Society) v Lord Chancellor, Zinga, Fuseon Ltd v Senior Courts Costs Office and Harlow DC v Powerrapid Ltd, the following. R v Dudley Magistrates Court Ex p. Power City Stores Ltd (1990) 154 J.P. 654; Wraith v Sheffield Forgemasters Ltd and Truscott v Truscott [1996] 1 WLR 617; McEwan v National Taxing Team [2014] EWHC 2308 (Admin); Kazakhstan Kagazy Plc v Zhunus [2015] EWHC 404 (Comm); Evans v Serious Fraud Office [2015] EWHC 1525 (QB); Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2504 (TCC); Fuseon Ltd, R (On the Application Of) v Shinners [2020] EWHC B18 (Costs); PLK (COP: Costs), Re [2020] Costs L.R. 1349; ABS Company Ltd v Pantaenius UK Ltd & Ors [2020] EWHC 3720 (Comm); Cohen v Fine & Ors [2020] EWHC 3278 (Ch); R (on the application of TM Eye Ltd) v Southampton Crown Court [2021] EWHC 2624 (Admin); Samsung Electronics Co Ltd v LG Display Co Ltd (Costs) [2022] EWCA Civ 466.

1. 1. If only for the sake of relative brevity, I will refer only to those judgments that I believe to be key to the hourly rates issue in this case, but I have borne in mind all of the judgments to which I have been referred.

1. 1. Several of the authorities mentioned above refer to section 16 of the 1985 Act rather than section 17, but (as confirmed by the Court of Appeal in Zinga) the relevant principles, for the purposes of this judgment, are the same.

1. 1. R v Dudley Magistrates’ Court concerned an order made in the Magistrates’ court for defence costs to be paid out of central funds under section 16. On assessing the amount to be paid under the order, the justices’ clerk disallowed a claim for leading counsel’s fees, being of the opinion that the matters alleged against the defendants could adequately have been dealt with by a senior solicitor or junior counsel.

1. 1. Woolf LJ and Pill LJ, in the Divisional Court, quashed that order, finding that the clerk had applied the wrong test. The appropriate question was whether the defendant had acted reasonably in instructing leading counsel (as, the court found, he had) and not whether more junior counsel or a solicitor could have adequately dealt with the case.

1. 1. Woolf LJ, in his judgment, said:

“It appears to me that subs (6) and subs (7) presuppose that, in properly assessing the amount of costs which are to be allowed in respect of a defendant’s cost order, the appropriate taxing authority will carry out a two-stage exercise, first of all, consider what amount will be reasonably sufficient to compensate the defendant for any expenses properly incurred by him in the proceedings. That is stage one. In order to fulfil the requirements of stage one he has to ask himself, first of all, whether the expenses are ones which are properly incurred by the defendant.

Looking at the situation in this case the cost of instruction leading counsel, in my view, could not be described as other than expenses properly incurred, subject to the amount of those costs being reasonable. Having regard to the nature of the case, which I have already described, it is quite impossible for it to be said that the defendants were acting improperly in instructing leading counsel.

Having come to the conclusion that the expenses are properly incurred the court’s next task is to consider the amount which is reasonably sufficient to compensate the defendants for those costs. That is a question of quantum. If there are no untoward circumstances that is the end of the task of the taxing authority under the provisions of s 16. However, there can be a situation where subs (7) comes into play. That is a situation where the court is of the opinion that there are circumstances which make it inappropriate that the person, in whose favour the order is made, should recover the full amount mentioned in subs (6). Subsection (7) is dealing with a situation where there is something which causes the court to consider that what would normally be the result of taxation would not apply to this particular case.”

1. 1. McEwan v National Taxing Team concerned another application for judicial review of the assessment of costs awarded under section 16. The court dismissed the application. At paragraph 19 of his judgment Cranston J distilled from the statutory provisions, R (Law Society) v Lord Chancellor, R v Dudley Magistrates Court Ex p. Power City Stores Ltd other authorities, the following principles:

“(1) The statutory test is one of compensation but subject to the amount being considered reasonably sufficient to cover expenses properly incurred…

(2) Compensation in an amount considered reasonably sufficient to cover expenses for work properly incurred must have regard to prevailing market rates and is not limited by the size of the public purse…

(3) The test is an objective one, necessity plays no part and there is no indemnity for costs actually incurred…

(4) In determining compensation in an amount considered reasonably sufficient to cover expenses for work properly incurred, the taxing authority must have regard to all the relevant circumstances, including the nature, importance, complexity or difficulty of the work and time involved…

(5) In the special circumstances of a particular case it may be considered inappropriate for there to be recovery according to the above principles and the taxing authority can then fix a lesser amount considered just and reasonable…”

1. 1. In Zinga the Court of Appeal considered the costs of a private prosecution arising out of intellectual property infringement. The court’s judgment referred to the observations of Elias LJ in R (Law Society) v Lord Chancellor and to R v Dudley Magistrates Court and continued (at paragraphs 21 and 22):

“…The market in legal services continues to undergo significant change, particularly as a result of the Legal Services Act 2007 which has affected the scope of regulation and the type of entity which can provide legal services.

…The type of fee agreement and the rates charged will be influenced by the particular market in which legal services are required; fees vary significantly as between different segments of the market. Competition is greater. For example, firms which specialise in private prosecutions of cases arising out of intellectual property infringements advertise their services and the fact that legal and investigative costs can be recovered from central government.

…It is now commonplace for commercial clients to seek quotations or tenders and to negotiate the basis on which fees are charged.

…Thus in relation to the test in Dudley Magistrates:

i) In determining the first question, namely whether a person, whether it be a corporate body or private individual, has acted reasonably and properly in instructing the solicitors and advocates instructed, the court will consider what steps were taken to ensure that the terms on which the solicitors and advocates were engaged were reasonable. It was submitted on behalf of the Interveners that they do not pursue private prosecutions lightly, but only where state prosecuting authorities are unwilling to prosecute or where the nature of the case makes it inappropriate; as this is the position of highly responsible industry bodies, a court may also have regard to the steps taken to involve State prosecuting authorities.

ii) In any significant prosecution the private prosecutor would be expected properly and reasonably to examine the competition in the relevant market, test it and seek tenders or quotations before selecting the solicitor and advocate instructed.

iii) We must emphasise that it will rarely, if ever, be reasonable in any such case, given the changes in the legal market to which we have referred, to instruct the solicitors and advocates without taking such steps. Although for the reasons we give at paras 23 and 24 below that issue does not arise in this matter, it will be highly material on all future applications.

iv) In determining whether the costs which are charged are proper and reasonable in a criminal case, the court will also have regard to the relevant market and the much greater flexibility in the way in which work is done.

v) The court will also have regard to the Guidance given by the Ministry of Justice.”

1. 1. Applying this approach to the facts of the case, the court noted that the reasonableness of retaining the solicitors and counsel instructed in the proceedings leading up to the appeal was not before the court. As for the appeal itself, as it was the usual practice to instruct on an appeal the legal representatives who had acted at trial, it was reasonable to instruct them for the appeal.

1. 1. That addressed the first stage of the two-stage test. As for the second stage, the court observed (at paragraph 25 of its judgment):

“However, the reasonableness of the costs incurred must be judged by reference (1) to the proceedings in question – that is to say the conduct of an appeal before the Criminal Division of the Court of Appeal, (2) the nature of the issues before the court – issues of law relating to confiscation proceedings and (3) comparable market rates charged for similar work..”

1. 1. Applying that approach to the facts of the case, the court, bearing in mind that the GHRs required adjustment for the passage of time since they had been last updated in 2010, assessed hourly rates at the rates applicable to a partner in a “West End” (central London) firm, adjusted to £320 per hour (as opposed to £317 in the 2010 GHRs) for a trainee of £125 per hour (as opposed to £126 in the GHRs).

1. 1. In Zinga judgment was handed down on 11 September 2014. The court’s conclusions were founded, to an extent, upon an emerging market as at that time for private prosecution services, in particular in relation to intellectual property infringement. Such market as there may have been for private prosecution services in relation to financial fraud does not appear to have extended nationwide, at least by the end of 2015.

1. 1. That is evident from the judgment of Lane J in Fuseon Ltd v Senior Courts Costs Office. Fuseon concerned a small company based in Lancashire. The company had two directors, one of whom was a Mr Shinners. Over a period of years, Mr Shinners had engaged in fraudulent activity which led to the company accruing liabilities in excess of £100,000. Following the discovery of the fraud his co-director, Mr Laycock, informed the police, who declined to investigate.

1. 1. Mr Laycock, between November and December 2015, attempted to find a local law firm which would provide private prosecution services. His own solicitors undertook criminal defence work, but advised him that they were not in a position to undertake a private prosecution (as Lane LJ observed at paragraph 85 of his judgment, “The duties on prosecutors are, in significant respects, different from and more onerous than those placed on defence teams”). Being unable to find a firm outside London that was both willing and qualified to undertake a private prosecution, in January 2016 he instructed a central London firm, Edmonds, Marshall McMahon Ltd (“EMM”), and ultimately secured a conviction.

1. 1. Lane J accepted that Mr Laycock had been unable to find suitable solicitors outside London. He also found that a Costs Judge had erred in having used, as a comparator for a private prosecutor’s costs, the costs which the CPS would have incurred, had it undertaken the prosecution. Since the correct test to have applied was whether it had been reasonable to instruct London solicitors, there had been an error of law and substantial prejudice to the prosecuting company.

1. 1. Lane J quashed the decision of the Costs Judge and remitted the case to the SCCO for assessment. The assessment was then undertaken by the Senior Costs Judge. His findings are recorded in his judgment in R (Fuseon Ltd) v Shinners [2020] EWHC B18 (Costs) and his conclusions on hourly rates (which had been charged at between £350 for a Grade A solicitor and between £225 and £70 for Grade D fee earners) are at paragraphs 24 to 33 of that judgment:

“… If, as Lane J. found, Mr Laycock could not find a firm more local than EMM, it must have been reasonable for him to instruct EMM. The issue then is whether the rates charged by EMM were reasonable for a central London firm…

The guideline hourly rates for central London (where EMM were then based) for 2010 were: A £317, B £242, C £196, D 126.

The use of the guideline rates in the determination of criminal costs appears to derive from guidance given by the Ministry of Justice to determining officers…

The guideline rates are of course just that. They are fairly blunt instruments designed to assist judges in the summary assessment of costs. The passage of time since 2010 means that they tend now to be used as a starting position rather than as carved in stone.

Part 45 of the Criminal Procedure Rules 2015 applies where the court makes an order for costs under Part II of the 1985 Act…

It seems to me that this was not a particularly complex case. It was however conducted by specialist solicitors and, for the reasons found by Lane J., the work was properly done in London. Given the amount of time spent by the solicitors, over 1,000 hours, I do not think that it can be said that the matter was handled with despatch.

The only factors which it seems to me elevate this matter above the guideline rates are the specialism of the solicitors instructed and the passage of time…”

1. 1. Having made those findings, the Senior Costs Judge allowed the recovery of hourly rates at £350 for Grade A, £210 for Grade C and £140 for Grade D. This represented a significant uplift on the 2010 GHRs. (Other rates awarded were limited by the operation of the indemnity principle, and do not serve to illustrate his general approach.)

The Jurisdiction of This Court

1. 1. Before turning to the parties’ specific submissions in relation to hourly rates, I should address four points in relation to the jurisdiction of this court and the appropriate approach to the appeal.

1. 1. The Appellant complains that on the appeal, the Lord Chancellor has raised issues and advanced arguments that (apart from a tendency to evolve in the course of the appeal) are not consistent with the findings of the Determining Officer. By way of example, the Appellant prepared for this appeal on the basis of the Determining Officer’s finding that it was reasonable for the Appellant to have instructed Mr Jonathan Laidlaw KC. In submissions, the Lord Chancellor however took issue with the tendering process through which Mr Laidlaw was retained as a leading counsel for the Appellant.

1. 1. The Appellant argues that the limits placed by regulation 10 of the 1986 Regulations upon grounds of objection which were not raised in the course of the redetermination process, prevents the Lord Chancellor from raising such an argument.

1. 1. I am unable to agree. I do not accept that the Lord Chancellor’s case on appeal must be in any way limited by the Determining Officer’s reasoning or conclusions. Whilst (subject to the court’s permission) regulation 10 of the 1986 Regulations limits the evidence and the arguments that the Appellant can advance on appeal to those put before the Determining Officer, it places no equivalent restrictions on what the Lord Chancellor may say in response.

1. 1. Regulation 10 also confers upon the Costs Judge hearing the appeal, jurisdiction to approach the determination completely afresh, whether that increases or reduces what has been allowed by the Determining Officer. (For the same reason, I do not find it necessary to address in any detail the Determining Officer’s reasoning: I am applying my own).

1. 1. It seems to me that any apparent unfairness arising from the way in which regulation 10 works, can be addressed by appropriate case management and the exercise of the court’s discretion. I believe that that has been done, insofar as the Appellant required it.

1. 1. The second jurisdictional point is that Mr Cohen argues that it is open both to a Determining Officer and to this court to limit the costs recoverable by the Appellant under section 17(2A) of the 1985 Act (not, necessarily, that I should do so, but only that I could do so if I thought that appropriate).

1. 1. I disagree. Mr Cohen’s argument rests upon references in R v Dudley Magistrates’ Court and McEwan v National Taxing Team to the jurisdiction exercised by the “taxing authority”, but taken in context that term seems to me to refer to those situations in which the court making the costs order will also quantify the costs: in other words, where the court making the section 17 order is itself the “taxing authority”.

1. 1. The section 17(2A) jurisdiction can, expressly, only be exercised by a court. The quantification of the costs awarded by the court may be undertaken by a Determining Officer on behalf of the court under section 17(2C)(b), but that determination, in accordance with the provisions of that subsection, is governed by the 1986 Regulations, as is the Determining Officer’s jurisdiction. The 1986 Regulations do not confer upon the Determining Officer any jurisdiction to make any kind of order, much less an order limiting costs under section 17(2A).

1. 1. The Costs Judge’s jurisdiction on appeal from the Determining Officer is, similarly, a statutory jurisdiction governed entirely by the provisions of the 1986 Regulations, which, by virtue of regulation 10(12), limit the Costs Judge’s jurisdiction to that of the Determining Officer.

1. 1. Even if this court had any section 17(2A) jurisdiction, it would be inappropriate for me to exercise it. That is not just because the court, in the person of HHJ Loraine-Smith, has already decided that this is not a case for a section 17(2A) order. It is also for the reasons set out at paragraph 56 of the judgment of the court in R (on the application of TM Eye Ltd) v Southampton Crown Court:

“It is for the court which has actually heard the case presented by the private prosecutor to determine how to exercise those statutory powers. A DO is well-qualified to assess the reasonably sufficient sum, and will no doubt be punctilious in doing so. But the DO will proceed on the basis of the antecedent decision by the court as to whether that sum is to be paid in full or subject to some limitation. As Ms Cumberland put it in her skeleton argument, the factors to be considered by a DO in accordance with the 1986 Regulations “do not align precisely” with those which a court may consider under s.17.”

1. 1. The third point is not one of jurisdiction but of approach. Mr Cohen argues (as I understand it) that it is within my discretion, on determining hourly rates, to make a Singh reduction (R v Supreme Court Taxing Office ex parte John Singh and Co [1997] 1 Costs LR 49) if that seems to me to be appropriate.

1. 1. Again, I cannot agree. The appropriate application of a Singh discount involves the classification of work into categories; stepping back and looking at the totality of the time claimed in relation to each type of activity; considering if, taken as a whole, the time claimed for that activity was reasonable; and if not, making an appropriate overall reduction. That was the approach endorsed by Henry LJ in Singh.

1. 1. At paragraph 91 of his judgment in Fuseon Ltd v Senior Courts Costs Office Lane J emphasised the importance of the categorisation exercise, and at paragraph 39 of his judgment in R (Fuseon Ltd) v Shinners the Senior Costs Judge, having referred to paragraph 91 of Lane J’s judgment, said:

“What the determining officer did in Singh… was to reduce the overall time allowed for certain classes of work, so that a reasonable total was allowed for those particular tasks. The Singh principle cannot be used to reduce the reasonable hourly rate that has been allowed.”

1. 1. That is a view with which I respectfully agree.

1. 1. The fourth point is that I understood Mr Cohen to say that the exercise of the Determining Officer’s or Cost Judge’s judgment under regulation 7(2) of the 1986 Regulations entails the exercise of hindsight. That seems to me to go directly contrary to the conclusions of Lane J at paragraph 104 of his judgment in Fuseon v Senior Courts Costs Office, when he stated that the application of hindsight is not permitted on the assessment of costs awarded under section 17 of the 1985 Act. One must assess the reasonableness of decisions made or work done in the context of matters as they stood at the time that the decision was made or the work was done.

The Appellant’s Submissions on Hourly Rates

1. 1. The Appellant’s case in relation to hourly rates is straightforward. The GHRs have never been “maximum” rates. No allowance has been made by the Determining Officer for the passage of time between 2010 and 2018, nor for the matters such as complexity, difficulty and skill referred to at regulation 7 of the 1986, Rule 45.2(7) of the Criminal Procedure Rules and TONG. Nor, argues Mr Bacon, is it appropriate to allow the same rate for, say, all Grade A fee earners because that does not recognise the particular contribution made by particular fee earners to the case. Bespoke rates are more appropriate in a case of this nature.

1. 1. The Determining Officer’s rigid adherence to the 2010 GHRs does not, accordingly, achieve reasonably sufficient compensation for the Appellant’s expenditure, as required by section 17 (1) of the 1985 Act.

The Lord Chancellor’s Submissions on Hourly Rates

1. 1. The Lord Chancellor’s submissions, as I have mentioned, have tended to evolve. In written submissions offered by the Lord Chancellor in accordance with a timetable set by the court, Mr Morris referred to advice given by Mishcon to the Appellant in October 2014 to the effect that private prosecutors are expected to review the legal market and seek tenders from different firms before selecting solicitors and advocates, failing which, as Mishcon put it by reference to Zinga, “it will usually mean that costs have not been ‘reasonably’ incurred.” There was, nonetheless, no tendering process for solicitors. Accordingly, the court could not be sure that the hourly rates charged by Mishcon were proper and reasonable, which must be determined by reference to the prevailing market. Absent the certainty that would have been brought about by an appropriate tendering process, the court would be obliged, in accordance with regulation 7(3) of the 1986 Regulations, to resolve the element of doubt against the Appellant by applying the 2010 GHRs, adjusted for inflation.

1. 1. A “position statement” filed by the Lord Chancellor shortly before the hearing of the hourly rates issue, along with Mr Cohen’s oral submissions, developed a rather different argument.

1. 1. Before me, Mr Cohen made it clear that he did not take issue with the objective reasonableness of the choice of Mishcon to conduct a private prosecution against the Defendant. This did not, he submitted, dispose of the need to consider market rates. That is because the measure of what is reasonably sufficient to compensate the prosecutor in accordance with section 17(1) of the 1985 Act must, in accordance with Zinga, be determined by the market.

1. 1. The question of whether the compensation sought by a private prosecutor is a function of the market will be answered (Zinga again) by the private prosecutor having examined the competition in the relevant market, tested and sought tenders or quotations before selecting legal representatives.

1. 1. If a private prosecutor does not test the market then the claim for compensation faces an evidential obstacle, given that the rates charged by its legal representatives are not prima facie evidence of the market. In that situation a Determining Officer has to identify what the market would charge, resolving any doubt, in accordance with regulation 7(3), against the private prosecutor. The Determining Officer will be guided by the guideline hourly rates. Where an applicant’s solicitors (however objectively reasonable the choice of those solicitors might have been) were not chosen by market tender, the Determining Officer has no other evidence other than the guideline hourly rates.

1. 1. Given that the GHRs are set by reference to location as well as seniority, the Determining Officer has to ask which location is appropriate for the case in question. He or she will look at all the relevant circumstances of the case including the nature, importance, complexity and difficulty of the work and the time involved and identify an appropriate location.

1. 1. If no tendering has taken place, the Determining Officer will have doubt that the charges rendered by the private prosecutor’s legal representatives are representative of the market. The DO will then have to identify the least expensive location in which the work could have been undertaken because he or she will have doubt that the more expensive geographical bands represent the “prevailing market”, and in accordance with the observations of Leggat J (as he was then) at paragraph 13 of his judgment in Kazakhstan Kagazy Plc and others v Zhunus and others:

“The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances”.

1. 1. The distance between the private prosecutor and the “lowest” geographical band within the GHRs is irrelevant to the identification of the appropriate location, though it could arguably justify a small increase in the amount of the band for necessary travel time.

1. 1. On this appeal, the Court will have to decide which band represents the “lowest” location within the GHRs of solicitors (the bands being the “prevailing market”) which could cater to this specific prosecution (for example, a firm in Colchester might not have been able to do it but it is open to the Court to conclude that one in Manchester could).

1. 1. In oral submissions Mr Cohen argued that Section 17(1) mandates a two-stage test on assessment. First, one must identify whether the costs have been properly incurred. Then one must identify a sum sufficient reasonably to compensate the private prosecutor. This is not just (as in civil proceedings) a test of whether costs were reasonably incurred and reasonable in amount.

1. 1. Even where the choice of solicitor is, objectively speaking, reasonable (and the Lord Chancellor accepts that, in this case, the choice of Mishcon was reasonable) that only meets the first test. The court, when considering reasonably sufficient compensation, must consider the market and should not be limited to the market local to the solicitors reasonably chosen, insofar as available, rely upon its own knowledge of the market.

1. 1. If, for example, solicitors in Manchester rather than London could have undertaken the work, then Manchester market rates should inform the court’s decision, whether or not the choice of solicitors in London was reasonable. Equally, if the London market seemed to be appropriate, one might take account of the rates charged by EMM as a prominent firm of London solicitors undertaking private prosecution work, as recorded in the judgment of the Senior Costs Judge in Fuseon Ltd v Shinners, and bearing in mind that those rates were likely to be standard, rather than tailored to the particular case.

1. 1. Section 17(2A) creates a third-stage test, in that it may be appropriate to limit costs by reference to that section, and Singh a fourth, in that it may be appropriate to make a Singh reduction.

1. 1. In considering all of these matters the court must, in accordance with regulation 7(3) of the 1986 Regulations, resolve any doubt against the private prosecutor.

Conclusions: Whether the Appellant’s Choice of Solicitor was Reasonable

1. 1. It is not necessary for me to address this point at any length, because the Lord Chancellor has conceded that the Appellant’s choice of Mishcon as it solicitors for the purposes of the prosecution of the Defendant was, objectively, a reasonable choice. I should however make some observations.

1. 1. It seems evident that HHJ Loraine-Smith’s decision not to make any order limiting the cost recoverable by the Appellant under section 17(2A) of the 1985 Act was informed by his conclusion that it was reasonable for the Appellant to instruct Mishcon. It does not necessarily follow that I am bound to take that view, but for the avoidance of doubt I should say that, having had the benefit of reviewing the written submissions made to him for the purposes of this decision, I would respectfully agree (as, evidently, did the Determining Officer). I do not doubt that the choice of Mishcon was a reasonable one.

1. 1. I could (and if the necessity were to arise, would) explain my reasons for that conclusion in more detail, but as the point is conceded I will move on to the matters that remain in issue.

Conclusions on the Appropriate Approach to Assessing Solicitors’ Hourly Rates

1. 1. I have already given my reasons for concluding that it is not open to me either to make a 17(2A) order or, in any other context than the consideration of the total time claimed for undertaking given categories of work, to apply a Singh reduction.

1. 1. This leaves me to address Mr Cohen’s other arguments, which I would summarise as follows. First, applying section 17(1) of the 1985 Act, the questions of whether expenses were reasonably and properly incurred and the identification of an amount sufficient reasonably to compensate the prosecutor for those expenses, are two quite separate questions. Even where (as here) it was reasonable to instruct central London Solicitors, that only addresses the first question. The second question requires consideration of the market. The fact that the market has not been tested by tendering creates an element of doubt that must be resolved against the Appellant, so that I must apply the GHRs by reference to the least expensive locality in which the work could have been done.

1. 1. I am unable to accept that analysis, for these reasons.

1. 1. The authorities to which I have referred do not seem to me to support the proposition that the question of whether costs were reasonably and properly incurred, and the identification of a sum reasonably sufficient to compensate the person who has reasonably and properly incurred them, are entirely separate questions. The answer to the first question must necessarily inform the answer to the second.

1. 1. That is why, at paragraph 19 of its judgment in Zinga, the Court of Appeal was able to summarise the principles to be derived from R v Dudley Magistrates Court in this way:

“… there were two questions.

vi) Whether it was proper and reasonable to instruct the solicitors and/or advocates actually instructed. It did not matter whether the work could have been done adequately by someone less experienced, provided it was proper and reasonable to instruct those instructed.

vii) If it was proper and reasonable, then the costs were recoverable, provided the costs were reasonable.”

1. 1. The court went on, at paragraphs 23 to 25 of its judgment in Zinga, to consider separately the question of whether it was reasonable to instruct the solicitors and counsel who appeared on the appeal (finding that, insofar as the issue was before that court, it was), and then whether the costs were reasonable. That stood to be judged by reference to a number of criteria, including “comparable market rates charged for similar work”.

1. 1. The identification of “comparable” rates must necessarily be informed by the location of the solicitors reasonably chosen. Manchester hourly rates are not comparable with central London rates, any more than Manchester property prices are comparable with central London property prices.

1. 1. That would seem to be why, despite noting that there was in fact an emerging market in private prosecutions for intellectual property infringements, once satisfied that the choice of central London solicitors was reasonable the Court of Appeal in Zinga awarded (as adjusted for the passage of time) the GHRs for central London, without finding any need to look further afield. The Senior Costs Judge employed a similar approach five years later, in R (Fuseon Ltd) v Shinners. Although it was the absence of suitable solicitors outside London that led him to conclude that the instruction of London solicitors was reasonable, it was the conclusion that the choice of London solicitors was reasonable that made it appropriate to base his assessment of costs on (suitably adjusted) central London GHRs.

1. 1. Wraith v Sheffield Forgemasters Ltd is the most important authority, in civil cases, on the importance of choosing solicitors in an appropriate location. Wraith established, for the purposes of the recovery of costs, that a litigant who makes a “luxury choice” by instructing solicitors in an expensive location, when in the circumstances of the particular case less expensive solicitors in another location would have been the reasonable choice, may expect to recover only a level of costs attendant upon the reasonable choice. In practice, that usually entails awarding hourly rates commensurate with solicitors in an appropriate location, for example substituting Manchester rates for London rates.

1. 1. The other side of that coin is that if, in the circumstances of the case, the more expensive solicitors were the reasonable choice, then the client (as in Truscott v Truscott) may expect to recover costs accordingly.

1. 1. That principle, in my view, applies equally to the recovery of costs under section 17(1) of the 1985 Act. So much seems evident from the 2014 Ministry of Justice guidance to which I have referred; from the fact that the Court of Appeal, in Wraith v Sheffield Forgemasters Ltd applied R v Dudley Magistrates Court; and from the fact that Lane J, in Fuseon Ltd v Senior Courts Costs Office, applied Wraith.

1. 1. Given that the Appellant’s choice of solicitors in Central London was a reasonable one, it follows that the decision not to undertake a tendering process was also a reasonable one (as Mr Bacon puts it, putting this case squarely within the exceptions to the general rule contemplated by the court in Zinga). Mishcon prudently advised the Appellant in October 2014 of the risks, in the light of Zinga, attendant on not undertaking such a process. Bearing in mind that Zinga had been decided the previous month, they would have been open to criticism if they did not, but given that Mishcon was the reasonable choice a tendering process would have been an empty gesture.

1. 1. In those circumstances, the absence of a tendering process cannot in itself create any element of doubt, as Mr Cohen suggests, as to the appropriate measure of compensation. Nor could it be right to identify the appropriate measure of compensation by reference to that part of the country in which the work might have been done at least expense. As Woolf LJ R v Dudley Magistrates Court explain, that is the wrong test. The question is whether the instruction of Mishcon was reasonable.

1. 1. In summary, one cannot separate the question of whether the Appellant’s choice of solicitors was a reasonable one from the exercise of identifying a sum reasonably sufficient to compensate the Appellant for the expense attendant on instructing those solicitors. The two are inextricably linked. To adopt the approach advocated by the Lord Chancellor would be to depart from this court’s task of identifying an amount reasonably sufficient to compensate the Appellant as required by section 17(1) of the 1985 Act.

1. 1. If I am wrong about any of that, there is to my mind another good reason to conclude that it cannot be right to adopt the Manchester rates mooted by the Lord Chancellor as a possible basis for calculating a reasonably sufficient sum to compensate the Appellant. Given the dearth of market evidence in this case I wondered why Manchester was mentioned at all, but I understand it to be accepted on behalf of the Lord Chancellor that although private prosecution services suitable for this case cannot be found nationwide, they may be found in Manchester.

1. 1. Whether or not such services can be found in Manchester now, it seems clear from the conclusions of Lane J in Fuseon Ltd v Senior Courts Costs Office that they were not to be found in 2014, when the Appellant instructed Mishcon. Lane J accepted Mr Laycock’s evidence that despite his best efforts, he could not, in late 2015, find outside London a solicitor willing to and capable of undertake the prosecution of a relatively straightforward UK fraud involving about £100,000. In the light of Lane J’s findings I can find no basis for supposing, much less assuming, that there would in 2014 have been any kind of market outside London for the prosecution of a complex international fraud involving €100 million.

Conclusions: Hourly Rates

1. 1. Mr Cohen suggests that the rates charged to Mr Laycock by EMM, as recorded in the judgment of the Senior Costs Judge in R (Fuseon Ltd) v Shinners, offers at least an indication of the market in central London in 2014, being the rates charged by perhaps a prominent firm willing and able, at that time, to undertake private prosecutions.

1. 1. I do not think that that can be right. One firm cannot, to my mind, represent a market. Given the limited range of options apparently available in 2014, Mishcon’s hourly rates could reflect as well, if not better, such “market” as can be said to have existed for private prosecution services for a fraud of this complexity and on this scale. Nor can it be right to award less than what would be a reasonable hourly rate for Mishcon’s work on the assumption that another firm might have charged less (a variation on the error identified by Woolf LJ in R v Dudley Magistrates Court).

1. 1. Nor do I know whether the rates charged by EMM in R (Fuseon Ltd) v Shinners, were their standard rates. The fact that several of the hourly rates awarded by the Senior Costs Judge were limited by the indemnity principle suggests that there may have been a concessionary element: Mr Laycock, as Lane J noted, had been left in a very difficult financial position following his co-director’s fraud.

1. 1. Mr Bacon has suggested that no firm of solicitors would have undertaken a case of this nature other than at similar rates to those claimed by Mishcon, but I have no evidence to support that proposition either.

1. 1. Bearing all that in mind, I do not think that it can be right to accord to what either Mishcon charged for this case or EMM is known to have charged for another (not really comparable) case, more weight than the factors identified in the 1986 Regulations, Rule 45.2(7) of the Criminal Procedure Rules and TONG.

1. 1. In the face of such limited evidence, it seems to me that I must of necessity refer to the GHRs, making an adjustment appropriate for the passage of time and for those factors. Because the choice of central London solicitors was reasonable, my starting point must be the GHRs for central London.

1. 1. Mr Bacon has referred me to a number of judicial decisions from late 2019 into late 2020 offering various bases for adjusting the 2010 GHRs by reference to inflation, but apart from a judicial consensus that the GHRs were out of date they do not seem to me to offer a uniform approach. I also bear in mind that Lord Dyson MR, when considering a review of the rates in 2014, took the view that an inflation-based adjustment of the 2010 GHRs would be arbitrary. Thanks to the updating of the GHRs in 2021, I have better information to hand than did those judges struggling with outdated GHRs in 2019 and 2020.

1. 1. The approach I have taken has been to average out, year by year, the increase in the GHRs between 2010 and their eventual updating in 2021, and to identify (without attempting to be overly precise) a median figure for the period between 2014, when the Appellant instructed Mishcon to undertake the prosecution, and 2018, when the Defendant was convicted. The resultant figures, rounded to the nearest £5, are for Grade A £350; Grade B £270; Grade C £220; and Grade D £135. That represents an increase on the 2010 rates, for the Grade A and Grade B fee earners, of about 10% and 11% respectively; for Grade C 12%: and Grade D, 7%.

1. 1. Taking those as the central London GHRs suitably adjusted for the passage of time, the next question is the extent to which they should be further adjusted to take into account the factors identified in the 1986 Regulations, Rule 45.2(7) of the Criminal Procedure Rules and TONG.

1. 1. Mr Bacon points out, with some justification, that the work done in this case bears comparison with the sort of heavy commercial litigation that might, under the GHRs as updated in 2021, have justified City of London rates (regardless of postcode). These are not, however, civil proceedings. As observed by Hickinbottom J (as he then was) at paragraph 25 of his judgment in Evans v Serious Fraud Office, those practising in criminal work can reasonably expect to receive less for their work than their civil counterparts. That observation was made in the context of counsel’s fees, but I believe must equally be applicable to the costs of solicitors.

1. 1. On the other side of the equation, I bear in mind that this was a much heavier, more complex and more difficult case than that considered by the Senior Costs Judge in R (Fuseon Ltd) v Shinners. I bear in mind not only the amounts of money involved and the factual complexity of the fraud, but the difficulties attendant on proving beyond reasonable doubt that the Defendant, who claimed to be an innocent attempting to arrange the Appellant’s involvement in what he thought a perfectly legitimate investment opportunity, in fact knew that the investment scheme he was advocating was a fraudulent one. That entailed a close analysis of his words and actions through a complex series of meetings, commission arrangements and business deals and extended to his involvement with previous such schemes and the introduction of extensive bad character evidence covering his conduct over more than two years. It seems to me that the Defendant’s criminal conduct would have been significantly more difficult to pin down than, say, Mr Nobre’s, convicted as Mr Nobre was of money laundering offences following his dissipation of funds purportedly meant for investment.

1. 1. I also bear in mind that the prosecution, which went to two full trials, was hard fought and complex, involving a vast amount of evidential material and much contentious procedural work. There were for example two applications by the Defendant to stay the case as an abuse of process, primarily on the ground that it was wrong for the prosecution to be undertaken by the Appellant; an application by the Defendant to dismiss one of the counts on the re-trial on indictment; an application by the Defendant to have the case taken over by the CPS; and substantial arguments relating for example to the structure of the indictment, the admissibility of the evidence of a prosecution witness incarcerated abroad, whether the jury should be made aware of the fact the prosecution, was a private prosecution. The Appellant’s duties of disclosure, bearing in mind in particular that the prosecution ran in tandem with civil proceedings, were onerous.

1. 1. These matters put this case in a quite different bracket to R (Fuseon Ltd) v Shinners. In considering how the recoverable hourly rates should reflect that, I have resolved any element of doubt, as I must under regulation 7(3) of the 1986 Regulations, against the Appellant.

1. 1. The conclusion I have come to is that I should allow for Grade A, throughout the case, an hourly rate of £400; for Grade B, £300; for Grade C, £250; and for Grade D (given a lower level of responsibility) £150. Where lower rates have been claimed, they will be allowed at the claimed rate.

1. 1. I do not think it appropriate to award higher rates for individual fee earners such as Ms Levitt, despite her impressive credentials. I believe that it must be right to award no more than the appropriate hourly rate for a Grade A fee earner with the capacity to manage the litigation, Mr Minty being an example. Nor would I regard it as a realistic or proportionate exercise to differentiate between different fee earners of the same seniority (as categorised in the GHRs) when identifying the recoverable hourly rates.

1. 1. I have recognised the exceptional responsibility taken on by all Mishcon’s Grade A, B and C fee earners in allowing an appropriate uplift from the GHRs, as adjusted for the passage of time. Some fee earners (as mentioned above) will, as they gained experience, have moved from one category to another, as from Grade C to Grade B.

1. 1. The Determining Officer did not adjust the rates awarded to take account of increasing experience. The logic of that decision was that the rate paid should be appropriate to the job being done, and if a job can be done by a Grade C fee earner, then that is the appropriate rate to pay, whether or not that fee earner subsequently becomes a Grade B.

1. 1. As Mr Bacon points out, that is not necessarily consistent with her rigid application of the GHRs. Arguably, it may also fail to recognise the value of the additional experience the relevant fee earners will have brought to the case as time went on.

1. My own approach is based on the GHRs, but I have not applied them rigidly. I have departed from them in adding a significant uplift to reflect the factors I have mentioned. According to the Determining Officer’s written reasons, the responsibility accorded to each of the relevant fee earners did not change as they gained experience. Nor is it possible for me to quantify how the increasing seniority of the fee earners concerned may have added to the value they brought to the case. For those reasons, resolving the element of doubt against the Appellant, I would agree with the Determining Officer’s approach and award rates appropriate to each fee earner’s seniority as at the date of their initial involvement in the case.