Solicitor denied provisional permission to deduct costs shortfall from client
Posted on 17th December 2021 at 14:40
By Sean Linley, Costs Draftsman
The SCCO have given some interesting observations following a solicitor own client assessment of a proposed deduction from a Protected Party for a costs short-fall and additional liabilities.
In BCX v DTA [2021] EWHC B27 (Costs) (16 December 2021), the Claimant solicitor were required to have a detailed assessment of the Solicitor / Client costs. The Claimant agreed costs with the Defendant in the sum of £330,000.00 and sought to enforce their entitlement to claim a short-fall in profit costs, payment of a success fee and payment of an ATE Premium.
Hourly Rates
With respect to hourly rates, Costs Judge Brown found that:
“I do not think that hourly rate of £365 for a Grade A fee earner based in National 1 (Bristol or Southampton) taking responsibility for a claim of this nature in the period 2017-2020 is unreasonable. Such an hourly rate seems to be appropriate however if the role of this lead solicitor is essentially supervisory and one that involves taking substantial responsibility for some of the more important decisions made in the litigation. Whether the costs claimed in respect of the work done by the relevant fee earner is reasonable may depend upon the work done and whether it suitable for a fee earner at such an hourly rate.”
Concern was expressed with respect to the Grade B, Grade C and Grade D fee earners:
“I am concerned that the hourly rates claimed for the Grade B fee earners (£300 to £325 per hour), the Grade C earners (£245- £260) and the Grade D fee earners (£145) are unusual, and that they appear unreasonably high. Even if it were appropriate to take the new Guideline Hourly trades (for 2021) as a starting point in considering the rates claimed, the Grades B and C rates are about 50% above them. The B rate claimed here is more typical of an Grade A rate instructed on a substantial personal injury claim out of London and yet such the fee earners in this case were being supervised; similar such points can be made in respect of the Grade C rate. If I were to take the old A/B approach as a cross check they would reflect an uplift of substantially over 100%, which under the traditional approach would reflect a very high degree of responsibility. Discounting the matter further to allow for the fact that rates would have increased since the work was actually done confirms my view that these rates are unreasonable. I think that more usual and reasonable rates for the Grade B, C and D fee earner would be nearer to £260 per hour, £210 and £135 for this kind of work- carried out under supervision.”
“It appears to me that counsel's advice in my papers does not go as far as to say that the rate of £400 per hour, the rate claimed for the Grade A in the latter stages of the claim, is a usual rate for a Grade A fee earner in a claim. I do however accept that in general terms a solicitor who takes a high degree of responsibility in respect of important decisions, and in circumstances where the day to day to handling of the claim is delegated to junior fee earners at significantly lower rates may reasonably justify such a rate. But that is not, it seems to me, this case.”
Concerns were also raised as to the advice given to the Litigation Friend:
“The litigation friend appears to have been on notice that not all her costs may be recovered from the defendant (see para. 8 of the CFA) even if the claim were successful. However I have not found in the Core Bundle (where I would expect to see it) any clear explanation that these hourly rates may not be recoverable inter partes (cf r46.9 (3) (c) (i) and (ii) and yet the difficulty in establishing that the rates that have been agreed with the client are reasonable is relied upon as one of the reasons why the inter partes costs compromised should be approved[6]. I am also unclear whether any approval which would be required for the presumption under r46.9(3)(a) or (b) to apply is given with informed consent (HH v Herbert [2019] EWCA Civ 527 at [37]): that it is to say that she would be in a position to know whether the rates were reasonable.”
It is worth Practitioner’s ensuring that they are clear not only about the fact that full costs are unlikely to be recovered but also that there is an explanation as to the hourly rates specifically.
Concluding on rates, Costs Judge Brown observed that:
“I should emphasise that notwithstanding my concerns that the hourly rates claimed are substantially too high and lower hourly rates should be allowed my provisional allowances do not necessarily turn on any reduction of the hourly rates. The higher the hourly rate the more efficient a legal representative can be expected to deal with the case. To my mind the hourly rates claimed for the fee earners at all levels convey a high level of expertise, experience and specialism dealing with claims such as these. Thus, the Grade C (PQE 0-4 years) fee rate, which might be regarded as close to a rate ordinarily commensurate with or close to a Grade A rate outside London, and the degree of efficiency expected is high. Further, in this case work that has been actually done by a higher grade fee earner, for instance in respect of task such preparing indexes for bundles or other work in respect of bundles, could or should be delegated to Grade D fee earners with consequent reductions for the overall allowances.”
“I note that notwithstanding the relatively short life of this claim as a litigated claim there was some not insignificant reliance on counsel at various stages. I do not say this as a criticism- it is plainly not unreasonable for counsel to be instructed - merely that that necessarily has some effect on the responsibility assumed by solicitors.”
Travel Time
A reminder was given as to the high threshold to recover travel time. Though it was reasonable for the initial meeting where the Claimant was in hospital, it was noted that the Claimant solicitor’s had an office in Southampton (the Claimant’s location) and work could have been undertaken out of that office.
Costs Judge Brown expressed that there was no clear consent from the Litigation Friend that such time was unlikely to be recoverable inter partes.
Case Management and Rehabilitation
There are some interesting observations around fees incurred by a Case Manager and relating to them.
Costs Judge Brown considered that the much of the time spent with the Case Manager was unreasonable. He stated that “the solicitors’ expertise list in the recoverability of the costs of care in the claim but not otherwise as to the appropriateness of any particular care or rehabilitation; these were matters falling within the expertise of the care manager engaged in this case.”
As to Case Manager fees, he held that:
“It is not clear to me that the cost of the case manager generally (who was, of course, not an appointed expert in the claim) could, in principle, be claimed as costs rather than as damages in the litigation. The manager is not providing a litigation service and generally acts outside of the litigation process. The manager would have provided substantial input into the INA, but if this were done under the Rehabilitation Code I would assume that the work done by the Case Manager would be paid for by the compensator (see the Code). I am not in any event satisfied of the reasonableness of this expense (or indeed of the level of the expense).”
It is an important reminder for Practitioners of the difficulties faced in recovering (in principle) the full extent of time relating to Case Management. Solicitors can become, understandably, quite involved in rehabilitation and the machinations of it, precisely because it has a direct relationship to losses and quantum. Here we have a warning, however, that the Court can look to disentangle such time and Solicitors should be aware of this when spending time which arises from Case Management.
The issue around Case Manager fees is a warning that the Court may see the correct vehicle for recovering these as damages and not costs.
Fee Remissions
Fee remissions continue to be front and centre. In BCX the Claimant was entitled to a fee remission. Costs Judge Brown has made some interesting remarks. He made it clear that “had the Claimant been entitled to a remission it would be difficult to see the reasonableness of such a response.”
If a fee remission isn’t investigated and it isn’t recovered inter partes, don’t assume the client should meet the short-fall.
Success Fee
Costs Judge Brown found that the claimed 20% success fee was too high, given it was “difficult to see that the Claimant could have failed to recover significant damages given the serious nature of his injuries and the circumstances of the accident as they would reasonably be known to the solicitors […]”.
He was also critical of the risk assessment, which was in his view ‘generic’. He accepted that there was a Part 36 risk and that the Solicitor would lose the right to recover part of their fees of the result of the Claimant’s failure to beat a Part 36 offer rejected on their advice.
Costs Judge Brown did accept that there was a two-staged success fee. In this case it was 20% or 100% three months before trial. He stated that:
“It seems to me to be clearly reasonable for the solicitors to enter into a two staged success fee. But if solicitors are going to do so on terms which provide that if the matter proceeds to trial their success fee will be 100% (even in a case where liability is not likely to be in issue) then that must be balanced by a lower success fee at an earlier stage. If 20% were reasonable for what was essentially a part 36 risk on single stage success fee, then the uplift for the first stage must be below this: if it were otherwise the solicitors would be substantially over-compensated for the risk that they are taken.”
It was accepted by the Costs Judge Brown that hindsight could not be applied and that it “would not have been possible to predict with any degree of confidence the precise risks that might emerge in respect of quantum and causation”.
Further it was stated that:
“there is however no real basis however for thinking that litigation friend would have been able to consider the reasonableness of the success fee, and thus that any approval, by her entry into the CFA, was informed. Moreover if the CFA were to be regarded as a CBA it would in any event be for me to consider the reasonableness of the success fee in any event.”
Costs Judge Brown allowed a success fee of 15% specifically referring to the fact there was no ‘bespoke risk assessment’ and the success fee of 20% was not justified on the basis of funding matters.
Other
Some other interesting findings by Costs Judge Brown include:
- Bundling should (largely) be undertaken by a Grade D.
- Extensive time spent considering the different records was unreasonable as the experts and Counsel would both consider them, themselves.
- Multiple fee earners can lead to duplication and contribute to an excessive level of costs.
Analysis
There are many interesting comments made within the judgment and they should give Practitioners a number of issues to think about.
Interestingly the total allowance of base costs came to £274,859.00 which was a sum which was less than what was agreed and recovered from the Defendant. Costs Judge Brown stated that he thought the inter partes compromise was generous but that the consequence of his findings was that he was not “satisfied that any payment should be made by the Protected Party in respect of IM’s claim for a ‘shortfall’”.
Given guidance provided by the SCCO on seeking deductions from Protected Parties and Minors then these sort of issues are likely to arise more routinely.
The comments, however, give us a gauge on how the Court may approach a multitude of issues when undertaking a between the parties assessment, as many of the principles will extend into them.
Should you have any queries or concerns related to this article then give our friendly team a call for a no obligation chat via 01472 534 567 or via e-mail info@carterburnett.co.uk.
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