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Unusual Fees and Solicitors Costs

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Costs & Fees

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“All In” fees with no breakdown deemed irrecoverable.
Murray v Richard Slade & Co Ltd [2021] EWHC 3383 (QB)

Sir Andrew Nichol handed down judgment in the High Court on a discreet issue concerning the recoverability of Counsel’s fees where there had been no express or implicit authorisation to instruct Counsel and incurred their fees from the client.

Background

The matter related to an appeal concerning the detailed assessment under Section 70 of the Solicitors Act 1974, the Respondent lay client had sought assessment of three bills, the Judgment in particular dealt with the billing in relation to Counsel’s fee.

The lay client had been involved in parental litigation for a significant period of time which was valued at around £700,000; a substantial multi-track case which was listed for trial in Central London County Court.

Up until the PTR, it was envisaged that a more junior barrister would have conduct of the trial, the matter has been costs budgeted on the basis that his fee for the trial would amount to £16,000, £10,000 for the brief and preparation and four refreshers of £1,500 each.  

Consequential to the PTR the lay client became unhappy with Counsel’s representation; an adverse costs order had been made at the PTR.

At paragraph 22, the judge at first instance had held that the lay client had informed the solicitor that:

“You had better get this sorted out.  You had better get this sorted.”

The solicitor consequently negotiated a fee with a new, more senior counsel, of £25,000.  The Judge at first instance found that, at 26:

“The evidence points to Mr. Slade instructing Mr. Moraes on May 10 of his own volition without authority from the client which he did not seek until 7 days later, shortly before trial.”

Parental litigation settled before trial on May 18th for £30,000.  There was no trial of the matter.  The lay client refused to pay the additional cost of instructing the more senior counsel which led to the fees to be assessed.  

During the course of the assessment, the Judge was referred to CPR 46.9 which states:

1. This Rule applies to every assessment of a Solicitor’s bill to a client except a bill which is paid out of the community legal services fund under the Legal Aid Act 1988 or the Access to Justice act 1999 or by the Lord Chancellor under Part 1 of the Legal Aid, Sentencing & Punishment of Offenders Act 2012.

2. Section 74(3) of the Solicitors Act 1974 applies unless the Solicitor and client have entered into a written agreement which expressly agrees to payment to the Solicitor of an amount of costs greater than that which the client could have recovered from another party into the proceedings.

3. Subject to paragraph (2), costs are to be assessed on the indemnity principle and are to be presumed –

(a) To have been reasonably incurred if they were incurred with the express or implied approval of the client;

(b) To be reasonable in amount if their amount was expressly or impliedly approved by the client;

(c) To have been unreasonably incurred if –

(i) They were of unusual nature or amount; and

(ii) The Solicitor did not tell the client that as a result costs might not be recovered from the other party.

The Practice Direction to Part 46 of the CPR at paragraph 6.2 states:

The presumptions in Rule 46.9(3) are rebuttable.

The Judge at first instance held that it was unusual that the fee that had been negotiated with new counsel was a fee which included refreshers.  As it were, it was an ‘all in’ fee.  Further, the fees for trial had been costs budgeted at £16,000 and as such, the Solicitor would have been aware that if the Respondent were to succeed on the parental litigation the additional costs of instructing the new counsel would be irrecoverable.  

At paragraph 36: the Judge concluded the assessment by saying:

“Consequently, Mr. Slade has not complied with CPR 46.9(3) and in that respect additional Counsel’s fee is irrecoverable from the Respondent.  Consequently, any additional costs incurred in relation to the instruction of Counsel over and above to the fixed fee agreement between [the Respondent] and [the Appellant] on 21 December 2017 are disallowed.”

Grounds of Appeal

The Solicitor Appellant appealed the decision on 6 substantive grounds, it is recorded within the Judgment at paragraph 37:

“The Judge was wrong to find that the fees of Counsel were ‘unusual’ in nature or amount.  In particular (but without limitation):

(d) The inter partes budget was not determinative of costs which are usual or unusual as between solicitor and client.  

(e) The inter partes cost budget does not in any event set an allowance for Counsel’s fees: the Court’s approval of the budget relates to the overall total for that phase.  The amount estimated of Counsel’s fees did not constraint the amount which might have been recoverable…

(f) The Judge failed to have regard to his own factual findings which were to the effect that there had been a change to more senior counsel very shortly before the trial…and in those circumstances the more senior counsel had reading and prepare for a trial at short notice it was inevitable rather than unusual that the fee for counsel would exceed the sum within the inter partes budget.

(g) A fee of £25,000 plus VAT for Chancery Counsel called in 1985 to reading and prepare for a 5 day trial at short notice was not an unusual fee.”

Even if the Judge were right to find that the fees for Counsel are unusual in nature and amount he was wrong to apply the presumption of unreasonableness provided for in rule 46.9(3)(c).  In particular:

a) The presumption can only apply in circumstances where there is a recovery of costs inter partes on which there is a shortfall due to the unusual nature or amount of the relevant fees.  Here there was no recovery of inter partes fees so the presumption was irrelevant.

b) Even if Counsel’s fees were unusual because they exceeded the amount in the estimated budget, it did not follow that those fees ought to not to have been recovered between the parties so as to engage the principle of unreasonableness.  The amount estimated in the costs budget does not limit the amount recoverable inter partes; that is only a function of the phase total.  The phase total for trial, £25,740 was sufficient to cover Counsel’s actual fees.

Even if the Judge was right that the presumption of unreasonableness was prima facie applicable to Counsel’s fees, he was wrong nonetheless to apply it.  As a matter of law the presumption is rebuttable and the Judge should have held that the presumption be rebutted on the facts of the case, inter alia, where there was change to more senior Counsel at the eleventh hour it was to be expected that greater fees would be incurred

Even if the Judge was right to reduce Counsel’s fees for trial in the parental litigation, he was wrong to limit the estimated brief fee of £10,000 + VAT which had formed the basis of part of the workings of the inter partes budget.  The relevant indexed point was the phase total, not any individual sub-component of the phased total.  

Findings

At 56 it was held:

“I do not accept that the Judge implicitly accepted that the Respondent had authorised Mr. Slade to instruct new and more senior counsel.  As the Judge said at [36] of his decision, the agreement for an all in fee was important to the Respondent because, in part, of his previous complaint concerning the Appellant’s fees…on the Judge’s resolution of what he saw as the preliminary issue in relation to the parental litigation, the Appellant had instructed Mr. Moraes on his own initiative without his client’s instructions.  In those circumstances, it seems to me I am willing to say that it was implicit in the Judge’s decision that the Respondent had instructed the Appellant to instruct different and/or more senior Counsel.

As such where the instruction of Mr. Moraes was totally without the Respondent’s authority, the consideration of the rebuttable presumption was a nullity.  

With regard to ground 1, at paragraph 60,

“This overlooks the fact that the Judge’s decision that the fees for Mr. Moraes’ services was ‘unusual’ did not rest solely on the fact that the fees agreed with Mr. Moraes’ clerk exceeded the budget for the trial phase.  The Judge also found that the fee was unusual because it was an all in fee for the trial as a whole.  It was not divided (as is customary) between a fee for the brief and other fees for refreshers in the event that the trial went into a second or subsequent day.  While that would mean that the trial was protected if the trial lasted longer than the projected number of days, it also meant that the whole fee would be payable if the case settled early.  In my Judgement, a finding that the fee was unusual was well within the permissible range of decisions to which this experienced Judge could come.”

With regard to ground 2A, that the presumption can only apply in circumstances where there is a recovery of costs inter partes on the date where there is a shortfall due to the unusual nature or amount of the relevant fees, this was not accepted on the basis that Rule 46.9(1) began with the preamble that the rule applied to every assessment of the Solicitor’s bill and as such the rule was general, rather than narrowly confined and subtle.

As to ground 3 of the appeal, it was held that the presumption was not rebuttable but there was no basis for finding that the presumption had been rebutted; alternatively, it was open to the Judge at first instance to find that it had not been rebutted and that they would be implicitly capable of doing so.

Finally, as to ground 4, at paragraph 65:

“…I have already commented that the Judge would have been well aware that budgeted costs covered the particular phase of the case and that here the costs for the phase of trial was £25,740 plus VAT.  Ground 4 argues that the costs Judge was wrong nonetheless to make use of Counsel 1’s brief fee to limit the allowable recovery to £10,000 plus VAT. But in my judgment this part of the calculation was also well within the discretional judgment which judge enjoyed.”

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