Stirring the pot

2 tbsp olive oil, 1 onion (chopped), 2 garlic cloves (crushed), 700g potatoes (peeled and diced), 4 carrots (thickly sliced), 2 parsnips (thickly sliced), 2tbsp curry powder, 1.5 litres vegetable stock, 100g red lentils, fresh coriander, sour cream and naan bread to serve.

-Spicy Root and Lentil Casserole

A recent inflation busting decision on hourly rates is currently doing the rounds. This is the case of Harvey Cohen v Fine and Others [2020] EWHC 3278 (Ch) a decision of HH Judge Hodge QC given on appeal, sitting as a section 9 judge, in the High Court in Manchester. The appeal was from a decision of District Judge Matharu made in a telephone hearing in June of this year, where she summarily assessed the Claimant’s costs in the sum of £27,000 and where the Claimant appealed that decision on costs.

The substantive litigation was described by the court thus:

2. The appellant (and claimant) is Mr Harvey Cohen, a former partner at Glaisyers Solicitors LLP, who sues in his capacity as the professional executor of the Will of the late Mr Eric Hermes (who died on 26 April 2014) which was admitted to probate on 2 December 2015. The claimant was a friend of the deceased and his family and this unfortunate case is said to have caused sadness and embarrassment to him. The three defendants are the deceased’s adult children. The dispute arises out of disagreements between the three defendants over the sale of the sole significant asset of the estate, which is a residential property at 18 Stanley Road, Salford M7 4RW. The substantive proceedings under CPR 64 were necessary because of the complete failure of the defendants, over a prolonged period of time, to reach any form of agreement between themselves regarding the sale of the property. Previous attempts to market the property for sale out of court had failed because the second defendant was resistant to any sale (as she lived in the property and wanted to continue to do so); and the third defendant held what are said to be wholly unrealistic expectations about the value of the property and his entitlement to share in the sale proceeds. For her part, the first defendant, who resides in Massachusetts, USA, wanted the property to be sold. The matter had been before the Manchester Beth Din, the Jewish Ecclesiastical Court, without resolution. The claimant therefore felt compelled to issue this Part 8 claim, on 30 May 2019, in which, in addition to an order for the sale of the property, he seeks to recover his costs on the indemnity basis under CPR 46.3 (which provides, as a general rule, that the costs of a trustee or personal representative are to be paid out of the relevant trust fund or estate, and are to be assessed on the indemnity basis).

The hearing before the district judge was described in these terms:

3. By the time the matter finally came before District Judge Matharu (by telephone) on 11 June 2020 (during the difficulties caused by the Coronavirus pandemic), the case had already been before s.9 Specialist Civil Judges on no less than four separate occasions. Before the District Judge, the claimant was represented by Mr Michael Fletcher FCILEx, an advocate and costs lawyer and a partner at Glaisyers. At no time have any of the three defendants been legally represented. With the agreement of the District Judge and all the other parties, the first defendant was represented her husband, Mr Sholom Fine; and the second and third defendants represented themselves. The District Judge made an order for the sale of the property, with consequential directions; and nothing presently turns on that part of her order. However, at paragraph 7 of her order, the District Judge provided that: “The costs of the claimant of this action are to be paid from the estate of the deceased. Those costs are summarily assessed in the inclusive sum of £27,000.00.” It is the summary assessment of the claimant’s costs in the inclusive sum of £27,000 which he seeks to challenge. His statement of costs for the hearing (in Form N260), which covered all of the costs of this litigation, had been in the sum of £40,835.50, together with VAT, which brought the total to £48,846. The District Judge refused permission to appeal her summary assessment of the costs but, on 16 October 2020, the Vice-Chancellor of the County Palatine of Lancaster (Snowden J) granted permission to appeal; and he directed that the appeal should be heard by a s.9 Specialist Civil Circuit Judge. His reasons for granting permission to appeal were that, notwithstanding that the appeal was only about costs, the claimant had a realistic prospect of succeeding in persuading the appeal court that the approach of the District Judge had been flawed for the reasons set out in the grounds of appeal and the accompanying skeleton argument.

The district judge’s assessment of costs was described in these terms:

9. On the quantum of costs, when questioned by the District Judge, all three defendants said that the claimant’s costs were too much; but they made no specific objections to any particular item of costs in the claimant’s N260 costs statement. For the claimant, it was submitted that costs were to be assessed on the indemnity basis and that they were reasonable in light of the manner in which the claim had been opposed and protracted by the conduct of the defendants. As they had made no specific objections to the itemised N260 costs statement, the claimant had nothing to answer in that respect. The District Judge herself took issue with the quantum of the claimant’s statement of costs. In her ruling the District Judge: (1) acknowledged that the costs were to be assessed on the indemnity basis, and that proportionality had no part to play; (2) considered the claimant’s costs to be unreasonable; (c) referred to items 70, 71, 78, 83, 81, 116, 117, 127 and 128 in the documents schedule to the costs statement as examples of what she considered to be excessive; (4) commented that this was not a detailed assessment; (5) said that she was appalled by the level of costs; and (6) ruled that the sum she would allow was £27,000.00 fully inclusive [against the £48,846.60 claimed in the N260]. There was no calculation or explanation as to how that figure of £27,000.00 had been arrived at. The claimant requested permission to appeal the summary assessment of his costs but, perhaps unsurprisingly, the District Judge refused permission to appeal. She considered that her decision was within the range of her discretion. The hearing then ended.

The appeal raised a number of issues, the two principal ones being whether the District Judge had taken too summary an approach, to a summary assessment and the level of costs that had been allowed in consequence. But the judge hearing the appeal took a rather surprising course:

15. Due to the Coronavirus pandemic, the hearing of the appeal took place before me remotely by Microsoft Teams. The hearing lasted from about 10.30 am until just after 2.00 pm. At a fairly early stage of the appeal hearing I indicated that I was satisfied, for reasons I would set out in this reserved judgment, that the District Judge had erred in her approach to the conduct of the summary assessment. Having considered whether I should remit the costs for a detailed assessment by the Regional Costs Judge, I decided, again for the reasons to be set out in this reserved judgment, that I should myself undertake a detailed line-by-line assessment of the elements of the claimant’s N260 Summary Assessment Statement of Costs (which extends to 13 pages and comprises no less than 130 separate items in the schedule of work done on documents). This exercise took about two hours; and it was only after it had been completed, and I had assessed the total costs (inclusive of VAT) at £35,703, that it became clear that the claimant had exceeded the figure for costs which had been summarily assessed by the District Judge (even though, as Mr Fine, in particular emphasised, this was significantly less than the total figure of £48,846 which had been sought by the claimant). After hearing submissions on the costs of the appeal, these were awarded to the claimant as it was he who had been the substantially successful party. I then proceeded to conduct a further detailed line-by-line summary assessment of the appeal costs by reference to the more modest six-page N260 Summary Assessment Statement of Costs (comprising a relatively more modest 30 separate items in the schedule of work done on documents). This took about a further 30 minutes; and it produced a total sum (including VAT) of £8,298.12 (against a claim for £9,971.52).

He had taken the view that the district judge had erred in principle in her summary assessment of costs for these reasons:

21. The appeal court will only allow an appeal where the decision of the lower court was either wrong or unjust because of a serious procedural or other irregularity in the proceedings in the lower court: CPR 52.21 (3). Both features are present in the instant case. The District Judge correctly analysed the applicable provisions of the Civil Procedure Rules. However, in the light of the authorities I have referred to above, and for the reasons advanced by Mr Fletcher, the approach of the District Judge to the summary assessment she undertook was wrong. While summary assessment can be “broad brush”, a judge still has to consider the individual elements of the bill item by item: see Flowers, McLinden v Redbond, and Morgan v Spirit Group. What is meant by “broad brush”, in the present context, is that, unlike the detailed assessment procedure under CPR 47, there is no need for any formal notice of commencement of the assessment, or any detailed bill of costs, or any points of dispute, or any points of reply. But the court must nevertheless address individually each separate objection that may be taken to particular items in the N260 statement of costs.

22. Having now revisited the District Judge’s summary assessment, with the result recorded at paragraph 15 above, it can also be seen that the District Judge’s approach had produced an unjust result. The claimant’s costs were summarily assessed at £27,000 whereas, having considered the individual elements of the bill item by item, I have assessed the total costs at £35,703. In effect, the District Judge had assessed the claimant’s costs at only some 75.6% of the figure that I have arrived at by using the approach mandated by binding authority.

He had also adopted a liberal approach to the hourly rates which should be allowed, deciding that the guidelines were effectively “old hat” and should be uplifted for inflation:

28. In my experience of sitting in the Business & Property Courts, both in the North-west and in the Rolls Building, the present Guideline Hourly Rates are considerably below the rates actually being charged by the solicitors who practise in those courts. Likewise, the Table of Counsel’s Fees bears no relationship to the fees which the courts see being charged for counsel appearing in the Business & Property Courts. In my judgment, pending the outcome of the present review, the Guideline Hourly Rates should be the subject of, at least, an increase that takes due account of inflation. Using the Bank of England Inflation Calculator, it seems to me that an increase in the (Band One) figures for Manchester and Liverpool broadly in the order of 35% would be justified as a starting point (appropriately rounded-up for ease of calculation). That would produce figures as follows (with the present rates shown in brackets):
A 295 (217) B 260 (192) C 220 (161) D 160 (118)

29. These are the rates which I decided to adopt in the present case (subject to the indemnity principle, which meant that the lower rates actually charged to the claimant applied in the case of the majority of the fee earners who have been involved in the present case). There are only two fee earners whose chargeable rates exceeded these revised guideline hourly rates: Ms Rocca (Grade B), who is the principal fee-earner and is charged out at £300 per hour, and Mr Hughes (Grade D), who is a para-legal and is charged out at £175 per hour. Mr Fletcher sought to persuade me to apply these actual rates rather than the rates of £260 and £160 respectively. I rejected his invitation. Whilst I acknowledge that in many cases pending in the Business and Property Courts, the specific factors identified in CPR 44.4 would justify the application of rates higher than the guideline hourly rates, even after adjusting for inflation, that is not so in the instant case, which does not feature any of the particularly complex, specialist or high value aspects of the work typically encountered in the Business and Property Courts.

Going forward the learned judge noted:

31. What lessons are to be learned from the present appeal? How might costs assessments be conducted in future cases, consistently with the need to further the overriding objective? How can courts avoid the summary assessment procedure becoming “bedevilled by formulaic and time consuming intricacy which would often be wholly disproportionate to the exercise being carried out and the nature of the litigation in hand” (to adopt the words of Black LJ)? First, the court should establish from the paying party how many, and which, individual elements of the statement of costs are subject to challenge. If there is simply no time available to undertake an item by item consideration of those elements, the court should make this clear; and it should ask whether all relevant parties expressly consent to the court adopting a broad brush, and global, approach to these disputed items, without minutely examining them in any detail. If such consent is forthcoming from all relevant parties, it should be expressly recorded in the court’s order. If no such consent is forthcoming from all relevant parties, then the court has the options of: (1) ordering that the assessment (and, if not previously determined, the incidence and/or the basis) of the costs of the relevant hearing will be determined on paper following upon an exchange of short, sequential written submissions from the relevant parties (as O’Farrell J did in Ohpen Operations); (2) re-listing the matter for a summary assessment of the costs; or (3) directing that the receiving party’s costs should be the subject of a detailed assessment. If a detailed assessment is ordered, the court should exercise its power under CPR 44.2 (8) to order the paying party to pay a reasonable sum on account of costs unless there is good reason not to do so. This salutary power should always be borne firmly in mind as an alternative to a rushed, and procedurally improper, summary assessment.

This decision might be thought to be surprising for a number of reasons. The first point is that there can’t be too many members of the county court judiciary, who would regard with enthusiasm the necessity to spend 2 hours+ summarily assessing a schedule of costs of under £50,000. In my own outings to the Commercial Court, I have seen schedules of circa £150,000 dealt with, briskly in 20 minutes. A summary assessment is just that: a view taken on the schedule. There is no need to articulate a decision in respect of each line.

Moreover, it could be argued that the authorities relied upon by the learned judge do not mandate that a summary assessment is a line by line assessment, conducted without points of dispute or replies, or the solicitors papers. It is possible that the learned judge in his desire to bring the litigation to an end, without the need for a detailed assessment erred in principle, in his approach.

Secondly, the learned judge has set a hare running with his inflation busting £295 for a grade A fee earner, and concomitant rates for more junior fee earners, for a case which did not warrant any enhancements under rule 44.4 CPR, for complexity or any other particular feature and where the costs were incurred over several years.

It will be observed that he has used the Bank of England calculator (which I note features in articles elsewhere on this blog) but that index is not free from controversy. It will be remembered that in In the matter of PLK and 3 other cases (SCCO Master Whalan 30th September 2020) that Master Whalan rejected the use of RPI for these reasons:

33. The Brown Shipley & Co. report entitled ‘SCCO Guideline Rates and the Impact of Inflation’ and dated October 2019 demonstrates an RPI inflation rate increase of 31% between 2010 and the end of 2018. The hourly rates claimed in the bills drafted by Clarion and considered in this assessment all apply RPI inflation to the 2010 GHR.  Indeed, this is the only basis upon which the hourly rates are argued in the PLK, Thakur, Chapman and Tate bills.  Mr Wilcock submits, as a secondary alternative to his primary argument, that the court ‘is invited to apply RPI inflation to the GHR and allow the rates as claimed’ (SA, paragraph 49).  But the problem with this approach (at least in empirical terms) is that most official indexes of the impact of inflation prefer the CPI to the RPI rate.  The official rate of UK inflation has used the CPI since 2004.  Dr Friston, as Mr Wilcock acknowledges, uses CPI inflation in his table(s) at 68.3 to 68.10 in the third edition of Friston on Costs.  CPI inflation from 2010 to 2019 is approximately 21%.

It might also be observed, that it is one matter and properly within a judge’s remit, to allow rates that he considers as a matter of discretion should be applied in a case before him, it is quite another matter to purport to lay down guidelines for other judges, in other cases, which are not grounded in either the Civil Procedure Rules or a Practice Direction made in accordance with the Constitutional Reform Act 2005. 

However, this decision, ably argued by the appellant’s costs lawyer, is an early Christmas present for the profession. The arguments that it generates will no doubt be ventilated at length in Bridge Street and Vernon Street, at least until the long awaited review of guideline hourly rates, chaired by Stewart J delivers its report.

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