Manchester Messenger September 2024
Here, in Kain Knight Costs Lawyers’ regular monthly legal costs update, we focus on those cases which we believe are likely to have a practical relevance for its members. We welcome feedback and if there is an area, topic or case you would like us to address, please let us know
We start with a County Court judgment (Central London) which is worthy of a read for its interesting facts even though the decision is persuasive, rather than binding. In SZ Solicitors (a firm) v Bharj, the solicitors had sued their former clients for their outstanding fees of £223,253, on a bill of £335,133 based upon a written retainer. Having heard evidence, HHJ Monty KC held that there was no written retainer. It followed that the solicitors had only been entitled to charge an hourly rate plus disbursements for the work done. However, that work had been undertaken in the County Court, and as s.74(3) Solicitors Act had not been excluded, the former clients’ liability in costs could not exceed the amount recovered from the opponent in that action, which had been agreed at £180,000. Giving credit for sums paid, that left £62,628 outstanding which was subject to detailed assessment. That was a task for the trial judge as HHJ Monty would not “shuffle that responsibility” to the Costs Judge: he carried out the assessment holding that the costs should be reduced by exactly 20% which meant that the clients had succeeded under the one fifth rule under s.70(9). However, this had been a common law assessment, the Act did not apply, so the solicitors had “won”. As the successful party under CPR 44, they were entitled to the costs of the action, but as the firm had failed to file its costs budget in time, their costs were limited to the £10,000 issue fee and the £1,175 trial fee. Ouch! A lot of expensive lessons there: make sure that the retainer is in writing and exclude s.74(3) if the work is in the County Court.
Still with the Act, Ivanishvili v Signature Litigation LLP [2024] EWCA Civ 901, is, of course, binding, but the judgment leaves loose ends. Below, the claimant had sought detailed assessment under s.70 Solicitors Act 1974 of 79 paid invoices delivered by the defendant solicitors between 31 March 2016 and 26 October 2022, totalling £13,781,354.66. His case was that they were interim “on account” bills, but the solicitors argued that they were interim “statute” bills (being final for the periods to which each related): if so, it was too late to assess them. The retainer was a Conditional Fee Agreement (CFA) (later varied) whereby the claimant paid 65% of the firm’s standard fees as the case progressed, plus a further 35% if the litigation succeeded. Upholding the Master below, the Court of Appeal held that whilst it seemed counter-intuitive that invoices which had been rendered and paid years ago could be subject to challenge, the law clearly pointed in that direction. Interim statute bills needed to be complete, final and self-contained. However, the sums incurred in the interim invoices were not necessarily the full sum payable for the work done during each respective period. The discount was temporary, and the client would not know the full amount until the conditions for payment of the additional 35% had (or had not) been satisfied. It followed that all the bills (going back 8 years) were “on account” and could be assessed, which, according to Coulson LJ, would not be difficult for solicitors because they have “full computer records”. Really? Does that mean that although for professional negligence purposes, solicitors need only retain records for 6 years, that that obligation should now be extended just in case more than six years later, an ex-client challenges their charges? That, too, leaves the question of whether a retainer where work is undertaken under a CFA with a success fee, can ever provide for the delivery of “statute” bills? All that Coulson LJ would say was that CFAs and s.70 made uneasy “bed fellows”. Perhaps the profession should be checking carefully in all cases they are undertaking under CFAs with success fees, whether there is provision to deliver interim statute bills, and if so, whether it will stand up to the sort of scrutiny which failed the solicitors in Signature.
Next Part 36. In Wells v Hornshaw [2024] EWHC 2019 (Ch) Adam Johnson J had to decide whether the Respondents’ Part 36 Offer dated 4 August 2023, was still open for acceptance when the Petitioner sought to accept it on 22 April 2024. To answer that question depended upon the proper analysis of CPR rule 36.12 headed “Acceptance of a Part 36 Offer in a split-trial case”. Here, the court had initially directed a split trial and the offer had been made about 6 weeks before the start of the trial in September and October. However, when the Petitioner had indicated that he wanted to accept it, the judge held that the offer was no longer open for acceptance, because by then all the issues had been determined and the case had been decided, even though a valuation process was still ongoing in relation to the Petitioner’s shares.
Brief mention next of intervenor’s costs where the court considered whether a prospective intervenor should pay the costs of the parties in respect of his failed application to intervene in the action. In Betta Oceanway Company v SC Tomini Trading SR [2024] EWHC 2068 (Comm) Stephen Hofmeyr KC held that where a prospective intervenor had unsuccessfully applied for an order pursuant to CPR r 3.1(2)(m) that he be added as a third-party intervenor permitted to make submissions to the Court, or alternatively, for an order pursuant to CPR r 19.2(2) that he be added as a Defendant, that he should pay the costs. It was an expensive failure: the claimant’s costs were summarily assessed at £40,000 and the defendant’s at £60,000, both payable within 14 days, albeit that counsel’s fees were reduced from £36,031 to £25,000.
Next “consequentials”. In Khokan v Nirjhor 2024] EWHC 1873 (KB), the court had struck out a claim in libel because the claimant had failed to pay an outstanding costs order of £20,646.58 by 4 pm on 14 June 2024 under an “unless” order. In a hearing for “consequentials”, Hill J held that all five arguments advanced by the claimant to support an argument that costs should not follow the event, would fail. However, so far as the defendant’s costs budget was concerned, an upwards variation of an additional £82,954.78 in estimated costs, thereby more than doubling the estimated costs figure if permitted, was excessive. Whilst costs relating to the application for an unless order and an application for security for costs were “significant developments” within CPR 3.15A(1), costs such as those for amending the pleadings, were not. In the result, the claimant was ordered to pay the costs of the claim on the standard basis (with some variation of the defendant’s costs budget being permitted), together with the costs of the consequentials hearing, summarily assessed at £5,500.
Finally, costs of permission to amend pleadings. In J Robbins Capital Partners Limited v Zamsort Limited, Ortac Resources (UK) Limited, Arc Minerals Limited [2024] EWHC 1990 (Comm) Paul Stanley KC gave the claimant permission to amend its particulars of claim without conditions. A stay until various costs orders had been met would have stifled the action as the claimant did not have funds to pay them.
As always, these are a selection of the principal recent cases which are likely to be of use to practitioners and if any further information is required, please contact either Nick McDonnell or Colin Campbell at Nick.McDonnell@kain-knight.co.uk or Colin.Campbell@kain-knight.co.uk
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