THE HIGH COURT
[2006 No. 1562 S]
BETWEEN
MITSUBISHI ELECTRIC EUROPE B.V.
PLAINTIFF
AND
DESIGN AIR LIMITED
DEFENDANT
AND LINKED CASES
[2006 867 S] A.C.C. BANK PLC V. CRYSTAL TILES WHOLESALE LIMITED;
[2001 No. 13393 P] ANTHONY ANDREWS V. EIRCOM PLC;
[2006 No. 22 FJ] AXA SUNLIFE SERVICES PLC V. TIMOTHY GEORGE WHITHAM;
[2004 No. 9751 P] ESTHER BRESLIN V. PANORAMA HOLIDAY GROUP LIMITED;
[2004 No. 9033 P] THOMAS GALWAY V. FORAS AISEANNA SAOTHAIR;
[2006 No. 307 CA] JAMES P. FOLEY V. SEAMUS HAMILTON;
[2004 No. 18251 P] ANNALISHA KING V. JOHN BROPHY;
[2003 No. 1715 P] DARREN MONAHAN V. WILLIAM McCAFFERTY AND NOEL MURRAY;
[2001 No. 12322 P] CORNELIUS NOONAN V. BALLYCONWAY TRANSPORT LIMITED AND PETER WARD
LIMITED;
[2006 No. 3855 S] THE GOVERNOR AND COMPANY OF THE BANK OF IRELAND V. PATRICK GAYNOR;
[2006 No. 1251 S] UNECOL COMPANY LIMITED V. JAMES HEALY TRADING AS JAMES HEALY AND SONS;
AND
[2001 No. 10586 P] DENISE WRIGHT V. MICHAEL FOLEY AND MICHAEL LENIHAN
Decision of the Master of the High Court 22nd day of May 2007
In all of the above matters I have previously made orders on the applications
coming before me, and have awarded costs. Today’s decision concerns the
measurement of those costs in each case. Under O. 63 r. 6, the Master has jurisdiction
to award costs in his discretion and “may direct payment of a sum in gross in lieu of
payment of costs to be taxed”. It is under this rule that I am proceeding.
It is not uncommon to find a court “measuring costs” in lieu of ordering
taxation thereof, and usually it is done immediately following the hearing of the
motion or trial. In each of the above cases I afforded an opportunity to the successful
party, and the party against whom costs had been awarded, to return to me on 15th
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March, to be heard. In the case of the first case above mentioned the matter was
brought forward to the 8th March. Accordingly, the awards in each of these cases
have been the subject of full due process to the extent, in each case, that the parties
thought it appropriate to open their files and argue matters before me. In other words,
the hearing on the 15th March mirrored as closely as possible the procedure which
one would expect to find being followed in the Taxing Master’s chambers.
In addition, the exercise was preceded ten weeks earlier by an invitation to
practitioners to offer suggestions to the court as to the levels of fees and costs
appropriate for today’s marketplace for legal services. A suggested draft form of
response was made available and is appended hereto. Many practitioners, of both
branches of the profession, responded to the invitation and, although the material
submitted is of only anecdotal interest, it was nevertheless useful. If it appeared to
suggest something approaching a consensus it could not be discounted as irrelevant.
For the record, no such consensus emerged but the figures quoted apparently
randomly did not deviate so far from a mid range figure as to suggest that the
anecdotal evidence was anything other than bona fide, and I wish to thank
practitioners for their assistance in this exercise. For the record, it should be noted
that three of the larger firms in Dublin attended on the 15th March, and requested the
Master not to measure costs in their particular cases. For whatever reason, these
solicitors’ firms, presumably on their client’s instructions, opted to go the taxation
route (which does not involve hearings in public).
Costs: to reserve or not to reserve
At the outset I should draw attention to the fact that there is no developed
jurisprudence as to whether or not to reserve the costs of interlocutory applications.
The almost invariable practice is for the court hearing the interlocutory application to
reserve costs to the trial judge. That is the uncontroversial option. Another option is
the reservation only of the costs of the successful party in the application, an
indication that the unsuccessful party’s position was misconceived or unstatable or in
some other way that it would be unjust to allow that party to profit from a reserved
order for costs in the motion even if, after the full hearing of the case, the party
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emerged successful in regard to the substantive issues in the case. A reservation of
one party’s costs in regard to a motion is an indication that the court hearing the
motion is of the view that the party ought not to be liable to the unsuccessful party in
respect of that particular set of costs even if it ultimately loses the case.
Or there may be no order for either side’s costs.
It has been recommended that the costs of interlocutory hearings should not be
reserved but instead should be awarded and measured by the court at the close of the
hearing. This decision is not concerned with developing or offering any coherent
principles as to when to make an order for costs with immediate effect as opposed to
reserving same to the trial judge. Most of the matters dealt with in the Master’s Court
involve applications at preliminary stages of litigation when both parties are
represented, but some are applications of a final nature where a defendant has opted
not to contest the matter. An award of costs, and the measurement of costs on the
spot, will enable the successful party to execute on foot of that order against the
unsuccessful party and this may have significant and immediate cash flow
implications. For that reason, in interlocutory matters it may be thought appropriate
to place a stay on the execution of such costs until the determination of the
proceedings.
It would be unfortunate if the costs associated by a failure to properly attend
to court procedures or rules, or orders of the court, by his solicitor were to bar the
client’s access to the courts at a preliminary stage. If the court chooses not to place a
stay on the execution of such an order it is open to the party awarded costs to tax and
collect same and this has immediate implications for the party the subject of the order,
perhaps even for his solicitor. It is clearly a concern that an order with immediate
effect might prove to be a “last straw” for a party in financial difficulties, and that
such an order might bar his constitutional right of access to justice.
Legal Costs Reform: a synopsis
Most personal litigants do not pay legal costs: it is the other party, most often
an institution, an insurance company or the State, which usually ends up with the bill.
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A plaintiff rarely concerns himself about costs, or if he does, often apparently thinks
that the higher the fee, the more likely he is to win. The Competition Authority,
however, sees very high earnings, restrictive practices and costs’ measurement
without reference to work actually done, and concludes that the legal system is an
over-expensive overhead for the economy generally.
Changes are proposed to ensure that lawyers will only be paid for work
actually done, and for transparency in billing. The courts do not have a competition
agenda. Nor is it the courts’ function to regulate legal fees generally or to cap them.
But even with the new fees guidelines and assessment bodies in place, the court will
still have the final say in limiting the size of a costs award to costs which have been
properly and necessarily incurred in the pursuit of justice.
The new system of payment only for actual work done might or might not
reduce overall costs. The likelihood is that some lawyers will gain and some will
lose. Solicitors and Barristers have completely different business models. Civil
litigation is only a small part of most solicitors’ work, but for barristers, litigation
(including criminal work) is where they make their living as advocates. Barristers
have much lower overheads but workloads that fluctuate alarmingly: their lifetime
earnings’ profile is a cashflow nightmare, and they have to persevere through lean
early years in the hope that earnings later will be worth waiting for.
High costs are a concern with regard to the citizen’s access to the courts. But
there must also be a choice of lawyers. The court will need to monitor the affects of
the changes to ensure that there are enough solicitors and barristers to serve the
public’s needs. Fees will have to be profitable enough to sustain solicitor’s offices in
every town and although litigation fees are only a proportion of solicitors’ total
earnings, these fees often subsidise less profitable services and bad debt.
The solicitor’s lump sum instructions fee in litigation is probably fairly close,
in most cases, to the costs he could invoice, in a case which went all the way, if he
itemised the bill and charged the same standard hourly rate he charges for services
other than litigation. But cases which settle in the early stages should be a lot less
5
costly then at present. And Senior Counsel will have to price their services more
competitively when solicitors, who currently hope Senior Counsel will mark a hefty
brief fee (because it strengthens the case for an equally weighty solicitor’s fee),
instead start to shop around for value for the client’s money.
Junior Counsel operate in an extremely competitive professional market.
They often have to discount or write off fees and are over reliant on the brief fee at the
end of the case. Survival on merit alone is unusual: in time, the talent pool for
judicial appointments might be a small group not reflective of society in general,
unless juniors are now to be properly paid for their drafting and other preliminary
work. In the absence of brief fees, this is the only way enough of them will survive
commercially to drive down in time the scarcity value currently attaching to Seniors.
Legal costs reforms can be fast tracked using the UK experience. Scheduled
to this decision is a copy of the bench book on costs available to judges in England,
who routinely measure costs at the close of each case. The practise might be adopted
here instead of automatically referring the bill to the Taxing Master. In particular,
note should be taken of the concept of “base line” costs for standard cases, with
optional “enhancement” factors for complexity, urgency, responsibility etc. as
add-ons. The Irish case law, reviewing Taxing Master awards, is very much in line
with thinking in the UK, except for the greater scrutiny given there of over-manning
by lawyers and inappropriate use of senior or experienced lawyers when less qualified
personnel would suffice.
At present, the only “scientific” yardstick by which a Taxing Master, or the
Court, may evaluate a professional instructions fee is data on earlier, similar cases, in
which the instructions fee was evaluated by the same reasonable solicitor standard.
There is, consequently, consistency in awards. But it is a system which lacks
objectivity and transparency.
The Legal Costs Working Group, established by the Minister in September
2004 proposed a very straightforward change: instead of using hopelessly nonspecific yardsticks and formulae like “having due regard for”; “fair and reasonable”;
“necessary and proper in the interests of justice” and the like, costs should henceforth
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be based on a set of published standardised figures (payment for actual work rather
than a percentage of quantum), together with, if appropriate, an add-on (which had to
be specially applied for to a “Costs Assessor” – a Taxing Master by any other name)
to reflect complexity above and beyond the routine.
Key passages from the report of the Working Group include:
(5.24) “The Group believes that the all encompassing instructions fee should be
replaced … recoverable costs should only be for work actually and appropriately
done with reference to the time that might reasonably be expended on the identified
task by a competent lawyer.”
(5.22) A Legal Costs Regulatory body should be “tasked to issue guidelines on
amounts deemed reasonable with reference to the time that would generally be
expended on the task. Put simply, the recoverable costs set by the body would
encompass a financial amount measured against a timeframe”.
(5.23) (On written applications to a new Legal Costs Assessment Office) “costs could
be allowed in excess of those set out by the costs body … in the particular
circumstances of the case … and to take into account differing levels of complexity.
Consideration should be given, where the type of action renders this appropriate, to
the value of the claim or counterclaim involved.”
(5.34) “While the Group is of the view that costs should usually follow the event, it
found that there was a broad consensus that departures from this principle should be
allowed.”
The Minister then established a Legal Costs Implementation Advisory Group.
This reported to the Minister in November, 2006. It recorded as a fact that the Legal
Costs Working Group had finalised their report in November, 2005 and that the
Tánaiste “subsequently brought the report to government to secure its endorsement of
the report’s recommendations”. The group also reported, as a fact, that “from the
outset, the Tánaiste attached a very high priority to the implementation of the report’s
recommendations” but that “he was aware that a great deal of preliminary work
would be required and … to this end established an implementation advisory group to
advise on the ‘timely’ implementation of the recommendations with particular
reference to the establishment of the new structure on an interim basis”.
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If the Minister felt satisfied that this Group had noted his desire to implement
the Working Group’s recommendations “as a priority”, he should perhaps have gone
on to read the small print: the Legal Costs Implementation Advisory Group did little
more than recommend that the working group’s recommendations be implemented.
They then qualified this, recommending that ‘any guidelines should take cognizance
of the value of the claim and … should also take into account relevant factors such as
time expended and complexity.” This marks a clear shift of emphasis.
At para. 3.2 the group also recorded that: “The IAG concurs with the view
expressed in the report of the Legal Costs Working Group in relation to the
importance of the ‘no foal, no fee’ arrangement in terms of providing access to justice
for many. Accordingly, the IAG considers it important that the risk involved in taking
on such cases should be taken into account in the formulation of the guidelines.”
At paragraph 2.9 they suggested that the “interim regulatory costs body
should be put in place and commence its work as soon as possible. While it is not
possible to estimate how long it might take to devise recoverable costs guidelines, the
IAG thinks it unlikely that the initial guidelines could be devised in less than one
year.” The interim body would have to be “mindful of the practical points raised by
the professional legal bodies, collecting, analysing and publishing data in relation to
legal costs, availing where necessary of statutory powers for that purpose, and
advising the Department of Justice, Equality and Law Reform of how best the
assessment procedure might be structured.”
And at para. 3.9 they went on to elaborate as follows: “The process will
require the conduct of research into current levels of solicitors’ costs, counsel and
expert witness fees, and expenses generally as allowed on taxation, as well as office
and business costs in urban and rural areas. The fixing of guidelines based on
detailed research, and their regular review, and the allowing of exceptions to the
guidelines, should address concerns expressed by both the Law Society and the Bar
Council that guidelines would undermine the ‘equality of arms’ principle by limiting
unreasonably the extent of the costs recoverable by the successful party under the
‘costs follow the event’ principles.”
8
The profession was reported as “welcoming” the Implementation Group’s
report (‘lawyers’ groups welcome proposals on fees’; The Irish Times, Friday, March
2nd, 2007.) It is for others to comment on whether there is any real prospect of
reforms in the short term. It has perhaps been forgotten that the proposed guidelines
were never intended or expected to be mathematically precise or the product of
exhaustive scientific research. In this regard, it should be noted that it has not taken
very long for a pilot exercise to be mounted in this Court, conducted and concluded,
and for the publication in this decision of sample costs which are intended to have all
the characteristics of recoverable costs guidelines published by, and drawing on the
High Court’s own jurisprudence (and that of its Taxing Masters).
There is perhaps a feeling abroad that the judiciary have in the past been too
ready to leave too much in the hands of the solicitors; that there is a culture of leaving
well enough alone and, in particular that judges should not involve themselves with
scrutiny of solicitors’ bills; that courts should not have to even consider making
wasted costs orders or any other order except “costs follow the event”. This is
perhaps the explanation for why the cost reforms now proposed appear to ignore
altogether the role of the Bench as final arbiters of costs in litigation. Neither Group
established by the Minster had direct judicial representation on it. But judges are
concerned about costs and are monitoring the debate. Back in June 2004, the
Committee on Court Practice and Procedure, chaired by Mrs. Justice Denham and
including four other judges in its membership, observed at par. 6.10 of its 29th Report
that “the Committee is satisfied that there is merit in giving power to judges to
determine the amount of costs in appropriate (usually the less complicated) cases”.
In litigation, judges are not free to assume that solicitors, even though they are
officers of the Court, accept (and act on) the need to be fair to their clients in the
matter of fees, or to the clients on the losing side. And there is no room for any sort
of collegiate solidarity between the bench and the profession: solicitors must follow
the directions of the court - any suggestion to the contrary is misplaced.
It is for the courts to pursue the agenda of justice even in the matter of
litigation costs: the task cannot be subcontracted. The new approach to documented
bills and time recording will make it easier for the judges to engage with the process
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of costs measurement on an objective basis where, hitherto, the use of the O. 99, r.37
“reasonable solicitor” yardstick, and the all inclusive instructions and brief fees has
made it difficult for the court to get to grips with the costs of litigation on any other
than an almost arbitrary basis as between two competing figures offered by the parties
during the course of the taxation.
If there is to be culture change, it will begin with judges measuring costs in the
less complicated cases or in regard to preliminary applications. It is for this reason
that it is wholly appropriate that the Master’s Court should engage in this pilot
exercise in regard to a random sample of applications of the sort which are made on a
daily basis in the Master’s Court, and this decision, which concerns the above named
cases specifically, indirectly concerns other such cases on the basis that the costs
measured in these cases may be regarded as indicators of likely levels of costs for
similar applications in the future, when the new system becomes operative, subject
always to stress testing of the methodology employed and described hereunder, and
any consequent adjustments to the sample costs levels.
There is no question but that the profession urgently needs information on cost
levels to inform and assist them in preparing the estimates of costs at the outset of
litigation which will be required of them in their dealings with their future clients.
The figures in this published decision may be a starting point.
Given the pre-eminence of the court in the hierarchy so described, the
significance of cost measurement figures being published by the Master of the High
Court should not be underestimated. These are not figures being published today by
an amateur Taxing Master. They are, in fact, draft cost recovery guidelines being
published by the High Court (through its officer, the Master, pursuant to Rules of
Court) to which the Legal Cost Regulatory body, when it is established, should pay
particular attention. There is no point in having a statutory body determining
guidelines and figures which are out of line with those which the court has previously
measured. Likewise, any basis on which the court is satisfied to allow enhanced fees
over and above the standard or base cost must be factored into the deliberations of the
assessment body which is to replace the Taxing Master, just as today, the judgments
10
of the court in cases where decisions of the Taxing Master have been reviewed must
be, and are, employed by the Taxing Master as the basis for awards by him.
I trust the logic of this position is crystal clear: it is the courts which have the
final say regarding recoverable costs in litigation. There will of course be deference
between the courts and any statutory body of a specialist nature (just as there is at
present with the Taxing Master) but deference is a two-way process. The Taxing
Master may know more about the minutiae of a solicitor’s practice or the daily
frustrations of litigation, but the court knows more about justice.
Costs follow the event
There is nothing in the constitutional right of access to justice which is any
way close to a principle that a winning party should be entitled to recover all its costs.
The legal costs working group were persuaded that the principle of “costs following
the event” was the Irish “system” (5.15) and/or the “cornerstone of our system” (5.17)
(and that it was the operation of this principle that funded the “no foal, no fee”
system: a cause and effect linkage nowhere convincingly argued). The principle is in
fact no more than a general rule in the sense in which rules are often suggested by the
higher courts for the guidance of lower courts. To be precise: it is a rebuttable
presumption that the starting point for the exercise of the discretion is that costs
should follow the event.
Far from being the constitutionally protected inviolable rule which some like
to believe, there are already several situations in which the court will make deductions
from or disallow costs, even from a winner. For example, failure to “beat” a
lodgement means that, even though you win, you pay the loser’s costs.
Under the 1981 Courts Act proceedings which have been brought in the High
Court and result in an award within the jurisdiction of a lower court may be, in the
discretion of the trial judge, the subject of a section 17 costs order. As amended by
the 1991 Courts Act, the section provides that “the plaintiff shall not be entitled to
recover more costs then he would have been entitled to recover if the proceedings had
been commenced and determined in (a) lower court and … the judge may make an
11
order for the payment to the defendant of … the additional costs as between party and
party incurred in the proceedings by reason of the fact that the proceedings were not
commenced or determined in the said lowest court.” And now, under the Civil
Liability and Courts Act 2004 there are new provisions regarding formal offers which
the trial court is obliged to have regard to when considering its order as to costs. The
rules of court also provide for the imposition of costs sanctions in respect of delays
and the failure to comply with case management and other court orders. So far as I
am aware none of these provisions has been challenged on grounds on constitutional
infirmity.
In its 29th report (June 2004) the Committee on Court Practice and Procedure
recommended at 5.12 that the rules of court should provide for sanctions by way of
the award or refusal by the courts of costs, where parties to personal injuries actions
make claims or adduce evidence which proves to be false or exaggerated and the
committee suggested at 5.13 a similar sanction where a party fails to make full frank
and reasonable disclosure of all relevant information and evidence. The Committee’s
recommendation number 9 is that “parties using procedures to enhance costs rather
than advance case should suffer a penalty in costs or otherwise.” Costs of
unnecessary expert witnesses should be disallowed (6.11) and adjournments (other
than in exceptional circumstances) of the trial to be granted only on penalty by way of
costs (5.11). Even the Legal Costs Working Group recommended (2.29) that “the
costs of pre-trial motions should, save where it would, in the circumstances of the
case, be unjust to do so, be awarded to the successful party to the motion, measured
at the hearing and be set off against any award of damages or costs which may
ultimately be made in favour of the successful litigant.”
All of the foregoing are cited to underscore the point that the rule that “costs
follow the event” enjoys no constitutional protection.
In the UK, exceptions to the costs follow the event rule are now the norm. In
the context of case management the notion of budgeting cases or capping costs at an
early stage has gained currency and the hands-on role of the trial judge in assessing
the recoverable costs at the end of the day is now the rule rather than the exception.
In Base Metal Trading Limited v. Shamurin (No. 3) [2003] A.E.R. (D) 79 the
defendant succeeded at the trial but had raised unsuccessful defences or issues which
extended the length of the trial by 14 days. The claimant had not established a cause
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of action and the proceedings had been brought in a deliberate attempt to divert and
deplete the defendant’s resources. Both parties had behaved “unattractively” and in
those circumstances making no order as to costs achieved the closest approximation to
the modern issues-based approach.
The UK’s CPR R. 44.3, effective since 1999, provides that the court must
have regard also to the conduct of the parties before as well as during the proceedings
including whether it is reasonable for a party to raise, pursue or contest a particular
allegation or issue; the manner in which a party has pursued or defended his case; and
whether a claimant who has succeeded in whole or in part exaggerated his claim. In
that jurisdiction the changes are such that one of the leading text books on costs can
recommend, without fear of criticism, that whenever practicable, the judge will
endeavour to form a view as to the percentage (emphasis added) of costs to which the
receiving party should be entitled, or alternatively whether justice is sufficiently done
by awarding costs from or until a particular date only.” (again my emphasis). Cook
2005 Ed. 802.
Under R. 44.4(2) the court will only allow costs which are not only reasonable
but are also “proportionate to the matters in issue”. Lord Woolf himself in the Court
of Appeal in Jefferson v. National Freight Carriers Plc [2001] 2 Costs LR 313
approved of and adopted the following dictum from Judge Alton of the Bermingham
County Court: “In modern litigation, with the emphasis on proportionality, it is
necessary for the parties to make an assessment at the outset of the likely value of the
claim and its importance and complexity and then to plan in advance necessary work,
the appropriate level of persons to carry out the work, the overall time which it would
be necessary and appropriate to spend on the various stages in bringing the action to
trial and the likely overall cost. While it was not unusual for costs to exceed the
amount in issue, it was, in the context of modern litigation, such as the present case,
one reason for seeking to curb the amount of work done or the cost by reference of the
need for proportionality”. In effect, it appears that proportionality is the preferred
yardstick by which necessity will be judged. A proportionate level of costs will prima
facie be accepted as necessary, but anything over and above will have to be more
closely scrutinised. When the decision is reached as to the proportionality of the costs
as a whole, the judge is able to proceed to consider the costs, item by item, applying
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the appropriate test of reasonableness or necessity to each item. In considering that
question, the cost judge will have regard to whether the appropriate level of fee earner
or counsel had been employed, whether offers to settle had been made, whether
unnecessary experts had been instructed and the other matters listed at CPR R.44.5 (3)
(a) to (g) namely conduct of the parties, quantum, importance, complexity or novelty,
skill involved, time spent and unusual location.
Costs measurement by the Court
The task now facing the courts is to find a replacement for the “reasonable
solicitor” test employed hitherto as the yardstick for the level of costs which the
Taxing Master has been, in effect, obliged to certify. Although both parties are
represented in a taxation, and both parties can offer evidence and dispute the other’s
suggested market rates, the reality is that, viewed in a certain light with which
competition lawyers are familiar, the system is, as a whole, self serving for solicitors
generally, and the supposed due process is merely a nominal nod in the direction of
objectivity. The reality is that there is no competitive marketplace for legal services
in civil litigation and, there being no marketplace, there are no fixed or objective
market prices. As of now O. 99 purports to vest in the Taxing Master the task of
assessing the cost which “shall appear to him to have been necessary or proper for
the attainment of justice” but in practice, and in law, it has been impossible for the
Taxing Master to dislodge the presumption that costs incurred by a solicitor acting
reasonably ought to be allowed, and that the opinion of the solicitor as to the
reasonableness thereof cannot be disputed. The Taxing Master, although the rules
appear to suggest otherwise, cannot make a finding which is at variance with the
evidence before him, because to do so would risk the charge of perversity. In effect,
the Taxing Master has been bound to accept the evidence of solicitors as to the
prevailing market rate.
Some conceptual confusion needs to be cleared up. First, the court’s only
direct involvement in legal costs is in regard to the costs of litigation. [The Court has
an indirect involvement in relation to Solicitor/Client bills generally whether from
litigation or otherwise: it can be asked to “review” a Taxing Master’s award made not
pursuant to Court order but at the request of either the solicitor or the client. In effect
14
the profession is able to avail of a court official as an arbitrator in regard to
Solicitor/Client bills. No other profession enjoys the benefits of a State funded fee
arbitration system, so far as I am aware.]
Secondly, the option of ordering “taxation” of costs is available to the courts
as an alternative to the “measuring” of costs without assistance from any court
official.
Thirdly, the Taxing Masters are no more and no less than officers of the court,
with statutorily defined powers, available to the court should the court consider it
appropriate that it should, in effect, sub-contract the work of measurement and, as
such, the said officers carry out the work under sub-contract in accordance with the
rules of the courts which are, in effect, the collectively agreed “standard form of subcontract” which the courts direct the Taxing Masters to comply with. In turn, and
specifically, the rules of court are not the last word and, although the Taxing Master is
bound by them (and by statute), no court is bound by them, and the court retains
discretion to deal with each case as it sees fit. Indeed, as one might expect from such
a system, the decisions or “awards” of the Taxing Master are themselves frequently
appealed to or “reviewed” by the court which may and frequently does substitute its
own measurement for that previously pencilled in by the Taxing Master.
The objective is to ensure that the receiving party should not impose on his
opponent a costs burden which is disproportionate, unwarranted or which was not
caused to the receiving party by the litigious conduct of the paying party. In short, the
court’s concern is to limit the liability of the paying party who has lost the case to
such sum as is “just” in regard to the conduct of the litigation. The challenge now is
to find a costs measurement mechanism which the public can look to as transparently
fair and objective. We do not need years of research and consultation. Most of the
spade work has been done already by the judiciary in England. (See form N260
appended).
It may be of interest to note that in the U.K. fast track procedures are for
claims between £5,000 and £15,000 which are not likely to last for more than one day,
with no more than two expert witnesses. The costs of these cases will be “summarily
15
assessed” by the trial judge after the hearing. Lord Woolf’s “Access to Justice”
Report suggested a costs scale or matrix with the primary objective of certainty,
simplicity and proportionality to the amount in dispute. Appended to this decision is
part of the Judicial Bench Book on costs. It merits study.
I am indebted to Peter Hurst, the Senior UK costs judge (and textbook author),
for sending on to me his 2001 memorandum to Lord Woolf on the subject of
benchmarking for judges’ summary assessment of costs. This document is also
appended to this decision. It was received by me somewhat late in the day, but the
methodology proposed is similar in most respects to that on which this decision is
based. One must wonder why materials of this serious quality were not apparently
considered by either of the Minister’s working groups, or if they were, why they were
brushed aside.
Even in multi-track cases in the U.K. a set of “predictable” costs has been
published for proceedings “which have a limited and fairly constant procedure and in
which the steps taken in the majority of cases are standard”. They have been
described as a half-way house between summary assessment and fixed costs. Michael
J Cook, the author of Cook on Costs, recalls that “the lynchpin of Lord Woolf’s
proposals was a fast track with fixed costs” but the author suggests that, instead,
“fixed or predictable pre-trial costs for all fast track actions should be introduced
(but) all multi-track trial costs should go for detailed assessment with benchmark
costs for interim hearings”.
Constitutional aspects
It would appear that, possibly out of frustration with the amorphous and
subjective assessment system currently in place, the courts have occasionally
considered disallowing costs where the sums involved would seem to jeopardise the
constitutional right of access to the courts.
16
In Sean Heneghan v. Allied Irish Banks (Unreported, 19th October 1984).
Finlay P. said: “The jurisdiction of the court to award costs and the consequence of
an order providing for cost seems to me to be part of the ancillary machinery
associated with access of citizens to the court and as such should in my view be
construed in the light of constitutional origin of that right of access and the obligation
of the courts to make such constitutional right real and effective.”
And as recently as last February Mr. Justice Charleton in Mahony v. KCR
Heating Supplies said that: “It is vital to control the costs of litigation. When
litigation becomes too expensive it can operate as a fetter on the constitutional right
of access to the courts. It is difficult to see how an instruction fee of £35,000 on an
award in a bullying case of £50,000 can be regarded as proper”. Charleton J. had to,
and did, find a way to cut the costs bill without having to resort to any sort of
constitutionally inspired exercise. Citing a comparator with an instruction fee of
£12,000, but noting that the Mahony case was somewhat more difficult than an
ordinary case as it “called for repeated consultations, the taking of exacting
instructions and a certain degree of emotional support towards the client”, he
substituted an award of £24,000, as “a fee for the most work this kind of case might
need.”
In his interim report “Access to Justice” (June 1995) (at 199), Lord Woolf, the
Master of the Rolls, said that: “The problem of costs is the most serious problem
besetting our litigation system. It is directly related to access to justice: if litigation is
too expensive claimants will not proceed or will use alternative means of resolving
disputes. High costs also make it impossible to extend legal aid coverage; on the
contrary, they increase the risk of shrinking eligibility. High costs, while they are a
problem in themselves, are also a symptom of structural and procedural deficiencies.
… Unnecessary costs to the economy as a whole are not acceptable, however they are
distributed.”
In the UK, which does not enjoy the benefits of a written Constitution, the
concerns of Lord Woolf resulted in the identification of a new factor or “relevant
consideration” in the assessment of costs, namely proportionality. There is no doubt
that what might be described as disproportionate legal costs have prompted judicial
17
concerns in this jurisdiction concerning the implications for access to justice.
Obviously, the new system of assessment which is time based and not quantum based
should produce a demonstrably fairer level of fees and to that extent constitutional
concerns may be allayed.
No attention however, has been paid to other side effects of the new system
which may in time impact on access to justice to the extent of being unconstitutional.
Intuition alone suggests that, after the abolition of the instructions fee, time based
assessment of costs for litigation which proceeds either to full hearing or to settlement
at the door of the court, is likely to conclude with bottom line figures which are not
altogether significantly different from the current level of instructions fee. But that is
not the end of the story. The restriction of recoverability to only such fees as may be
payable in respect of work actually done will mean that for many litigation solicitors,
a large proportion of fee income which is, in reality, unearned (because on the time
basis, the time recorded is only a fraction of the time required for a fully fought case)
will no longer be available to them. This may impact on the overall profitability of
the solicitor’s business and his viability. Likewise, in regard to counsel’s brief fees,
the replacement by some more transparent and objective fee structure as proposed will
inevitably impact on the nature of the barrister’s business.
Some attempt must be made even at this early stage to analyse where the two
professions are going and whether the new legal costs principles will alter the
commerciality of those solicitors whose practice is largely in personal injury litigation
and those (probably the preponderance of) barristers whose earning levels have
traditionally been dependent on brief or settlement fees at the tail end of a case, rather
than on the drafting, advices and interlocutory appearances as the case progressed to
that point which have, up till now, been largely under priced and subsidised by the
anticipated end-of-case brief fee.
Traditionally, apart from the fully fought application for interlocutory
injunctions, most of the early stages in litigation, including drafting, have been added
into bills, if at all, as afterthoughts. A solicitor looks at a case and thinks quantum and
professional fee. Counsel looks at the case and hopes he will be briefed for the
hearing which produces the brief fee and, to improve his chances, may either ignore
18
altogether billing for the preliminary work and applications or will charge them out at
a discounted rate knowing that the instructing solicitor cannot pay them unless he has
funds from his client. Investment in work-in-progress, if it can be so described, by
counsel, especially junior counsel, is usually far more substantial than the investment
of his instructing solicitor. At present this may be just a bad professional habit but,
unless both branches get to grips with their bad habits, the abolition of the instructions
and brief fees will, overnight, destroy the commercial viability of many a career.
Barristers and solicitors have entirely different business models. Solicitors
have office and staff overheads. That said, that most of their earnings are from office
based services while litigation is (in comparison, say, to conveyancing) good money,
often in reality unearned. The solicitor can subsidise poorly paying or break-even
services (including no foal, no fee litigation) with a high margin on income from
injury litigation (with a relatively small outlay). The barrister on the other hand is
also in the business of subsidising in the early years; his brief fees after hearing or
settlement of the case have to be profitable enough (even though he has much lower
overheads) to allow him to sit, unemployed, at the barrister’s cab rank waiting for the
next brief.
The abolition of gross (or quantum related) brief and instruction fees
will sharply reduce lawyers’ earnings from litigation and jeopardise the viability of
the Solicitor and the short and long term survival of the Barrister in his chosen career
unless, in future, each lawyer is paid for his actual work from day one at fair and
profitable rates which allow both branches to survive commercially and in such
numbers as ensure choice for the legal services’ consumer and access to justice at a
reasonable cost.
In this system, it will not be possible to enlarge fees to permit cost
subsidisation between files. Litigation on a no foal, no fee basis will still be an option
for every Solicitor but no fixed automatic subsidy would be appropriate even if such
subsidies were other than a surcharge on another client, (or more realistically, a levy
on other defendants’ Insurance Companies)
19
Returning briefly to the current oversupply of lawyers in both branches, it
must be said that the Competition Authority made no effort to probe or examine the
underlying reason why the very large number of very poorly paid barristers did not
succeed in competing with barristers up the scale. Indeed, the authority’s only
complaint was that there was no market reason why brief fees for Junior Counsel
should be two thirds of the brief fee for Senior Counsel. This practice serves to
sustain Junior Counsel in securing for them in their early years brief fees which could
not be earned on a simple demand and supply pricing mechanism. Further, the
historical provenance of the practice has not been alluded to by the competition
authority and should not be overlooked. Junior Counsel do not have the standing or
the power to individually demand and receive proper remuneration. All too often,
solicitors suffer from selective amnesia when it comes to paying Junior Counsel.
(The ones that are paid promptly are the ones who appear to be going somewhere,
career-wise, or who are connected with more senior figures in the business.) The two
thirds brief fee rule is in fact the mechanism thought appropriate by the Senior Bar to
encourage and shelter Junior Barristers of quality from the chill winds of commercial
reality; likewise, though it is almost always the case that Senior Counsel can manage
quite adequately as sole advocate in a High Court action, the “advice” from Senior
that both Senior Counsel and Junior Counsel be briefed for the hearing of the action.
There is no point in restructuring both branches in order to increase the supply
of lawyers into the system if the cost structuring is so incoherent that most will drop
out before they are in a position to offer a fully professional service. This, too, is an
issue of constitutional importance involving limitations on access to justice: if the
brief fees for juniors “dry up”, fewer will survive the early years and those who do
will continue to command disproportionately large fees as seniors.
Instructions and brief fees: “full and detailed particulars”.
No exercise of this sort is worthwhile unless it has more than a passing
resemblance to accuracy. Nevertheless no set of principles emerging in conclusion is
of any practical use unless it is fairly straightforward and user friendly. There is a
trade off. If solicitors and barristers are now to be required to “quote” in advance for
their services they need to have to hand a “ready reckoner” which doesn’t need to be
20
filled (or interpreted) by a legal costs accountant. It should be a single page standard
form. Solicitors should be able to adapt for their own use either the standard rate and
time figures published in this decision or the bottom line totals for the sample
applications in this exercise. For this to work it needs to be simple, but also rooted in
some market place reality however roughly approximated.
In every fee marked by counsel and in every instructions fee invoiced by a
Solicitor there is an amalgam of time, of overhead and profits, of complexity and
skill. Each has been (probably subconsciously) assigned an appropriate price, and the
task now is to disentangle the rolled up figure and find the hidden formula. We must
seek, by simple iteration, to arrive at a breakdown of the lump sum figures which will
identify any recurring underlying pattern which can then, once identified, be of
general application in the future. You might think of it as an exercise to find the
“DNA” of the instructions and brief fees. Identify the molecules and their
proportions. Add and multiply as appropriate. Both lump sum fees have a clear
“genetic” make up.
Measurement of the bills involves deconstructing them into individual items of
work and then deciding the appropriate legal grade of lawyer to deal with same and a
sufficient time for execution. Multiply all of these by the appropriate rate of
remuneration (to include overheads and profit mark up) , and the resulting figure is
the basic or standard cost. Once the exercise has been completed once in relation to a
particular type of application, then the basic cost figure will be recoverable prima
facie in respect of all such applications.
In all the debate surrounding the legal costs issues, the focus has, to date, been
on big ticket items – costs which are incurred at or immediately before the full
hearing of the case. The proposed reforms seek to break these down and provide a
basis for transparent analysis. It has apparently not occurred to the costs working
groups that there is a range of litigation related expenses, “small ticket” items, which
can be discreetly identified, timed and priced. The methodology employed will then
be available for general application.
21
As part of this pilot exercise, practitioners were invited to participate and
make submissions in relation to cost levels and other issues of relevance. Ultimately
in a random selection of sixteen cases the parties were invited to appear in Court, not
to deal with the substantive matters because same had already been adjudicated and
costs awarded, but to deal with the measurement of such costs. I have measured costs
in thirteen of the cases and same are incorporated in this decision.
The first and perhaps obvious point (indeed so obvious that it appears to be
often overlooked) is that the court is measuring not the actual costs incurred by the
party who has been successful in the application but, instead, the reasonable costs
which such an application would necessary involve. To do this one must first be
familiar with the subject matter of the litigation and the nature of the application and
its patent complexity. Then, using the successful party’s actual bill of costs as no
more than an aide memoire, the court has to check off the various items in the bill and
allow an appropriate measure in respect of each. A “disallowance” will occur in
circumstances where an item included in the actual list in the bill presented for
taxation appears to be unwarranted either in quantity or in amount. Given this
methodology, it is quite possible for the court (or its Taxing Master) to arrive at a
standard list of items, and standard rates which would normally be recoverable
without even opening the successful party’s bill of costs which has been presented for
measurement.
Items and Time
The case law on items, and the recoverability of the costs thereof, is fully
explored in the judgments of the Taxing Master and, and on review, of the High
Court. In Attorney General (McGarry) v. Sligo County Council [1991] I.R. 99 the
Supreme Court confirmed that the underlying principle of party and party costs was
that costs could be recovered only in respect of “items properly incurred by the
winning party and no more than what he had actually expended or was liable for.”
All of the decisions of the Taxing Master and High Court emphasise that the
allowance of costs should be only in respect of costs necessary for the attainment of
justice or defending the rights of any party (Order 99, r. 37(18)) but cases where the
court has made clear findings as between necessaries and “luxuries” are not plentiful.
22
(The dicta in most cases concern not whether the item itself is wholly unnecessary but
rather whether the sum claimed in respect of such item is excessive.)
On page 659 of Flynn and Halpin’s Taxation of Costs (1999) the authors offer
this guidance: “the proper estimation or appraisal of whether a cost is reasonably
incurred or otherwise is dictated by the act, charge or behaviour of the defendant and
the resultant hurdle that the plaintiff must clear in order that he has an opportunity to
enforce or defend his legal and constitutional rights. The method of assessment is of
critical importance in that the approach is not a concrete science and the justification
of a cost is exclusively dependant upon the function it has fulfilled in litigation or
matter under taxation”. A non-recoverable item is dubbed a “luxury”: a term which
derives from Smyth v. Buller [1875] L.R. 19 EQ 475 (“any charge merely for
conducting litigation more conveniently may be called luxuries and must be paid by
the party incurring them.” )
Order 99, r. 37(18) of the RSC 1986 provides that “no costs shall be allowed
which appear to the Taxing Master to have been incurred (my emphasis) or increased
through over-caution, negligence or mistake, or by payment of special fees to others
or special charges or expenses to witnesses or other persons or by other unusual
expenses”. In Francis v. Francis Dickerson [1955] 3 A.E.R. 836 is to be found the
following quote “when considering whether or not an item is in a bill is “proper” the
correct viewpoint to be adopted by the taxing officer is that of a sensible solicitor
sitting in his chair and considering what in the light of his then knowledge is
reasonable in the interests of his lay client.”
Flynn and Halpin at page 380 of their book draw the reader’s attention to
Garthweight & Another V. Sherwood [1976] 1. Weekly Law Reports 705 where “the
travelling costs incurred by a solicitor attending court himself instead of employing a
London agent where held to be “proper for the attainment of justice” within the
meaning of the provisions of the pertaining rule”. The authors offer this conclusion:
“the assessment should not be too rigid to permit an assessment by means of a
blinkered microscope but rather by a sensible and flexible spectacle”. As against
that, under O. 99, r. 37(13) the courts may direct “the costs of any endorsement or a
23
summons, pleading, affidavit or any other document, which is improper, or contains
vexation or unnecessary matter, or is of unnecessary length to be disallowed.”
Of particular interest in regard to the Master’s Court is Taxing Master Flynn’s
reference (522) to the circumstance in which “if a judge is not available to hear the
case, the solicitor must linger around the hallowed halls and corridors, disguising a
distress that exists because of the solicitor’s absence from the office and knowledge
that he is not attending to work that would otherwise be attended to but which must be
postponed because at any stage a judge may become available”. This factor, and
others, Flynn writes, “affect the overall amount of the instruction fee and clearly the
assessment of the instructions fee is indeed a very multifarious and complex
operation”.
In UK decisions, time spent considering the law is usually non-chargeable. In
a review of criminal costs there, it was noted that leading and junior counsel are
assumed to be fully up to date with the law in the field in which they hold themselves
out as practising in and they will not be paid for researching the law unless the case is
unusual or infrequent. The higher the rate billed, the more law and procedure the fee
earner is expected to know.
In Minister for Finance v. Goodman (2) [1999] 3 I.R. 323 Laffoy J.,
disallowed sums in respect of catering services for the legal team as “neither
necessary or proper within the meaning of O. 99 r. 10(2)”. Costs of advice given
relating to customs law and export sales reliefs by consultant accountants were also
disallowed, the Court ruling that the costs of a solicitor outsourcing legal expertise is
not allowed on a party and party bill. Also the costs of PR services “did not come
within the concept of legal costs”.
In Ormond (an infant) v. Ireland and Others [1988] I.L.R.M. at 490, Barron
J., in considering solicitor’s remuneration, thought it was proper to take into account
the extent, if any, which the work done on one case is reduced by reason of the extent
of the work done on other similar cases. The case concerned seventy nine motions for
judgment in default of defence in which each of the plaintiffs were represented by the
same solicitor and in which the marked instructions fee in respect of the motions of
24
£12.50 in each case was reduced to £10.50. The decision of the Taxing Master was
upheld, the court ruling that “repetitive acts do not warrant the same remuneration as
the first of such acts. Once the work was done for one of these applications, it was
substantially done for them all”.
The court went on to consider the fact that counsel’s brief fee of £33.60 for
each motion was taxed at £33.60 in one case only and £3.15 in each of the other cases.
Ruling that the “Taxing Master was correct in not accepting that a careful and
prudent solicitor would have offered a brief to counsel in each case at £33.60”
because “there would have been an inherent danger in offering briefs to counsel on
the basis claimed”. The careful and prudent solicitor would not have “assumed that
the court would have made orders under which counsel was entitled to a scale fee of
£33.60 on each motion”.
In Flynn and Halpin’s work (438) the authors comment that “the (above) dicta
in a simple and concrete sense state exactly what remuneration is precisely expected
to cover, for justice could never stand idly by and allow profiteering …. The Court
had hit the nail on the head in that it understood that the true test was whether or not
the outlay was reasonably incurred. In so doing, it removed the veil of confusion
which had besieged the precise grasp or fathomable understanding of the
performance of costs in litigation which led to the misconceived ideas of the past.”
Next: the small matter of adjournments. Adjournments cost money. Often the
cost is simply written off by the lawyers: this is particularly so when it is the Court’s
listing system which has let them down. Sometimes it is the fault of one party and in
extreme cases an application may be made for an order for costs “thrown away”.
O. 99 r. 6 is a provision in point, but one hardly ever activated. Clearly, if the
Superior Courts Rules Committee act on the Working Group’s recommendation that
this provision should be available not just at the trial but at all preliminary stages, the
“small” matter of adjournments may take on a whole new dimension. Clearly, also,
if the case cannot proceed on the date assigned because no judge is available, costs
calculated on a “work actually done” basis should feature as recoverable items in the
final party and party costs. And those costs should not be on the traditional measure of
“costs thrown away”, but should be a day’s costs discounted in some measure (20%)
25
to reflect the reality (if any) of last minute replacement work for the lawyers
concerned.
A second lawyer: a team?
It is under this heading (items) that the court must consider whether any outlay
by the solicitor in the form of counsel’s fee for preliminary work might be considered
to be unnecessary. Indeed, the whole question of when and how many counsel need
to be retained for the case is a matter for some debate.
“Has a senior partner done work which could have been done by a legal
executive? If so, only the expense rate of a legal executive can be allowed. Has a
legal executive done the work of a senior partner? Again, only the expense rate of a
legal executive can be allowed, but the hourly rate can then be the subject of an uplift
– perhaps to award the partner for his expertise and expedition and the legal
executive for punching above his weight.” (Perry v. Lord Chancellor [1994] Times
26th May, Q.B.D.)
The costs of counsel are only normally recoverable in respect of advocacy
work, which includes the drafting of “the pleadings, evidence and proceedings in any
cause or matter … and to settle such pleadings and special affidavits as the Taxing
Master shall in his discretion think proper to be settled by counsel”. Order 99, r.
37(10). No clear or usable guidelines have emerged as to whether to allow or
disallow outlay in respect of counsel’s drafting of other documents or non contentious
appearances in court. The best that can be said is that the courts have moved with the
times and will allow a solicitor considerable latitude in his choice of whether or not to
engage counsel, even for documents such as letters which are not formal litigation
documents.
Although Flynn & Halpin record the fact that in Tobin and Anor. v. Kerry
Foods Limited and Anor (Unreported, Kelly J., 3rd December, 1998) three
consultations were allowed in preparing affidavits, they contend (p. 553) that: “If
counsel is very familiar with the law, has read the brief carefully and is attended by a
very experienced solicitor, a consultation may not be necessary, or if a very short
26
consultation is requested, more than one consultation will not be allowed in these
circumstances on a party and party basis… in a normal or standard case it may be
reasonable to have more than one consultation but on a party and party taxation all
consultations may not be allowable.”
There are few decisions in which counsel’s drafting fee, as an item, has been
disallowed in its entirety. In O’Loughlen & others v. Flanagan a decision of the 1890
Supreme Court referred to in Flynn & Halpin at page 543 the court held that the costs
of the second counsel settling a defence had been rightly disallowed by the Taxing
Master “owing to smallness of the case” and the authors conclude (544) that “the
nature of the case, the issues to be tried, the difficulties involved and the
circumstances of the case, are factors that will all contribute to the assessment of the
fee allowable in drafting a pleading and if such a document requires settlement by
senior counsel”.
In Smith v. Ireland and Ors. (Unreported, Lynch J. February, 1991)
exceptionally allowed the costs of counsel’s preliminary legal opinion on the basis
that “This was not a case where the solicitor could be expected to advise the plaintiff
as to whether or not he had any just cause of action and if so, for what and what
would be the likely issues and risks arising. I think this was eminently a case where
the solicitor should obtain the opinion of counsel before embarking upon proceedings
and that such opinion was, therefore, necessary and proper for the attainment of
justice and for enforcing the rights of he plaintiff.”
In Lynch v. McCann (No. 1) [1890] 91 26 L.R. I.R. 385 Chief Baron Palles
refused to allow the costs of counsel’s advices notwithstanding that they were related
to deciding if an order for discovery had been complied with sufficiently, on the basis
(he said) that the advices had been procured prior to the institution of a motion and
were therefore not taxable as party and party costs for the motion. Flynn & Halpin
comment that: “The Chief Baron was correct to disallow the costs but not for the
reasons given. It should have been disallowed because it was not a just and
reasonable expense given the fact that the assessment of whether an order of court
had been complied with should be obvious to the solicitor and the seeking of advice is
on this point indicates an element of over-caution. On taxation between party and
27
party, the Taxing Master should allow only such charges as are proper for
professional work strictly necessary for the prosecution of the litigation.”
Considerable latitude is also afforded in the matter of whether to brief not one
but two or perhaps more counsel for the hearing (although for the Master’s Court O.
63, r. 11 provides that “The cost of such counsel shall not be allowed unless certified
for by the Master”). Although it is of course open to any party to retain one or more
counsel in respect of any of the work which needs to be done in the litigation process,
the costs of doubling or trebling the number of lawyers included in the team may not
be recoverable from his opponent at the end of the day. Viewed in this light, it is a
matter which may require to be explained and approved of by the client (but see the
provisions of O. 99, r. 10(2) and (3) in that regard). If the Master of the High Court
can disallow the costs of counsel, who is to say that, on closer examination of the file,
the trial judge might not certify for senior counsel or, perhaps more bizarrely, might
not allow the costs of junior counsel for the hearing. For the Bar, these are sobering
considerations, but for the consumer of legal services, answers need to be found when
a solicitor, who is after all, a fully trained lawyer, chooses to engage junior counsel to,
in effect, hold his hand from the moment he has received instructions to litigate.
Order 52, r. 17 provides that in any of the sixteen listed applications, “one
counsel only shall be allowed unless the court shall otherwise order” and the listed
applications include applications for discovery; for extension of time for doing any
act; applications in reference to security for costs and applications for directions in
probate and admiralty actions.
Key to the assessment of “necessary and proper”, and therefore recoverable,
costs is matching the task or item billed to the appropriate lawyer, and the appropriate
grade of lawyer.
Regarding time, in Minister for Finance v. Goodman (2) [1999] 3 I.R. 323
Laffoy J., reduced the general instructions fee by 20% “to account for the probable
inclusion in the recorded hours for time which was neither necessary nor proper, and
to adjust the probable overcautious bias in allocating the work to the highest and
second highest categories of fee earners”.
28
The Goodman decision is an early indication of probable judicial activism
even with bills compiled on the “work actually done” basis now proposed. The
“actual work” concept first appeared in 1995 when the Courts and Court Officers Act
allowed the Taxing Master “to examine both the nature and extent of work done and
to allow a fee which he considered fair and reasonable”.
In Quinn v. South Eastern Health Board (Irish Times Law Report 23.1.2006) a
High Court review of a reduction of Senior Counsel’s brief fee from £48,000 to
£26,000, although Peart J. was reluctant to describe it as an “error” on the part of the
Taxing Master, he ruled in effect that the figure had been based on comparators
instead of actual work done, but later (presumably subconsciously) re-employed the
comparators as reference points from which he arrived at his figure of £37,500:
otherwise, it would have been arbitrary, there being no other data available.
In turn, although I am reluctant to characterise the judge’s ratio in Quinn’s
case as “erroneous”, it must be recorded that he was wrong to weigh the brief fee as a
sort of instructions fee for Counsel, and inclusive of all work on the case even before
the drafting of the Statement of Claim. The work was actually done, of course, but it
might not be recoverable on a party and party taxation, and shouldn’t be conveniently
added into the brief fee (it was this confusion which put the figure out of line with
brief fee comparators). In not dealing with it as a separate item (perhaps even a
“special fee”) the Judge appeared to endorse the pervasive practice of solicitors in
retaining Counsel to, more or less, do all the serious work in a case: extended to its
logical conclusion, solicitors might see their fees in litigation reduced to the level of a
handling fee (and as to when it is the client who does most of the work: see Crotty’s
case 1990 ILRM 617).
(Also note in passing that holding, as he did, that the disallowance of £22,000
was “unjust” to the plaintiff, the Judge in effect confirmed that the plaintiff was
unlikely to obtain a disallowance of this sum on taxation of the Solicitor and Client
bill. O. 99 r.11(2)).
29
Of particular interest (under the heading of “items”) is the list of actual work
done by the Senior which the judge referred to in his judgment as the basis for the
figure he arrived at. They included “an extensive search of medical literature to
obtain a basis for fixing the defendants with liability (over thirty articles annexed):
numerous consultations with agents; highly time consuming mastery of discovery with
many documents of poor quality and not in order; considering various medical
reports obtained by Agents; and pre-trial work conservatively estimated at 150
hours.”
There is a perception that in litigation the decision whether to retain the
services of counsel (or to do it himself) is a no brainer for the solicitor: why do it
himself if he can use a barrister and bill his client for the extra cost, without any
reduction in his own fees? (He can lay off risk this way also!) This overuse of
counsel (i.e. for work which the solicitor should be competent to do including, in
particular, drafting) has become a professional norm. Does this mean it is “necessary
and proper”?
Is litigation not now a sort of joint venture? If so, the fees earned should be
paid to the lawyers who do the work and the solicitor’s grade and rate for merely
attending on Counsel should be kept to a minimum. But the court’s function is not to
make sure barristers get paid for their work. (If needs must, and they feel they have to
“keep in” with solicitors by acting for reduced fees, that is their choice, and only a
firm consensus to decline work on this basis will change the culture). The court has
to ensure merely that the paying party is not overcharged. To that end, it is the court
which will decide how many lawyers should have been used, and of what grade. If
that decision is at variance with the actuality, it is the receiving party who must make
up the shortfall to his solicitor (if it will tax on a solicitor and client basis).
If the costs of retaining counsel to draft correspondence, or attend court on
low-grade matters requiring no advocacy skills as such, are to be allowed, they
perhaps ought to be allowed only when the instructing solicitor is not experienced
enough to handle these matters. It also follows that the bulk of the costs for the legal
service so performed should be paid to counsel because the hourly rate of the
inexperienced solicitor cannot be other than at the lower end of the professional scale.
30
It is presumably to avoid the incurring of the professional costs of an
unnecessary extra lawyer that the provisions of O. 63 and O. 52 above cited have been
included in the Rules. After all, clients are entitled to know why they have to pay for
two lawyers when, prima facie, one should be sufficient (likewise why they should
have to pay for three lawyers when two are sufficient, and so on and so forth).
Of the two lawyers attending court, it is counsel who as advocate has the
greater responsibility and must be allowed to charge the higher fee. Pushed to its
logical limit, the question then arises as to whether or not the solicitor ought to be
allowed the costs of attending counsel in court. Is it “necessary and proper” or is it,
as some would suggest, merely an additional cost imposed by the barristers’ code of
practice? Under general pressure from the Competition Authority the Bar some years
ago moved away from the invariable practice of senior counsel advising the issuing of
three briefs (two senior, one junior) in all High Court cases, but the trimmed-down
legal team of one senior, one junior and instructing solicitor remains the norm today
for the hearing. Is this because it is “necessary and proper” or is it because senior
counsel advises it?
In this debate the lawyer’s viewpoint is criticised by the economic consultant
or management expert: it ought to be possible to litigate more cheaply if the
manpower is streamlined. The lawyer, however, knows that justice will not be served
by such parsimony. There may be some savings to be made, here and there, but each
party needs his legal team: no single lawyer can manage a full hearing without
support services in place. But perhaps equally important, it would not be safe or in
the interests of justice to require a solicitor to hand over his client to a barrister for the
hearing and walk away, or for a barrister to conduct or transact any business directly
with the client other than in the presence of the instructing solicitor. The legal team is
something of a joint venture as between the barrister and the solicitor. All team
members can recover their costs, within reason.
Price: the going rate
31
The Competition Authority’s somewhat two-dimensional analysis of the legal
services market place seems to be based almost exclusively on the notion that because
some lawyers make a great deal of money, and both branches of the profession
control the number of entrants to the bottom rung, these must be cause and effect.
Increase the number of lawyers, they seem to suggest, and supply and demand will
reduce the cost of litigation. Unfortunately, this is a misreading of the market place,
but, having contented themselves with observing this apparent linkage on a sort of
undergraduate theoretical analysis, the authority failed to dig further. There is another
explanation for why the earnings of some lawyers are so astronomically high. It is
because consumers do not shop around.
Unfortunately, we cannot look to the market place to supply data on price for
legal services. The reality is that, asked to quote price at the commencement of
litigation, solicitors do not know how much they should quote. One of the principal
objectives of legal costs reforms is that there should be, based on the recovery costs
guidelines, a fairly accurate measure of the likely cost of litigation if it proceeds
without any unusual legal twists or turns. Armed with such a quotation, a prospective
client can, if he is to choose, shop around as between different firms.
Many clients of course will not do so because they do not expect to have to
pay the fees at the end of the day, because, of course, they are going to win (probably)
and therefore do not need to concern themselves. Then there are clients who are
offered service on a “no foal, no fee” basis. These, too, are not concerned with the
costs of litigation and that therefore have no reason to shop around. Finally, we have
the largest group of clients namely the ones whose costs are not a matter of personal
concern but are institutional, corporate or insurers’ concerns.
Viewed as a market place, it is difficult to see how any market pressures could
be brought to bear on prices without official publication of standard costs.
Lawyers are of course entitled to decide for themselves what their hourly rate
should be. For a barrister, “taking silk” is signalling that he won’t work for junior
counsel’s rates any more. First principles of economics would suggest that the
market place would control the rate. But the principles of economics are foreign to the
32
legal services market place: it is (in terms of economic theory) dysfunctional. There
is even a perception that some senior counsel feel they can write their own fee
cheques. Perhaps that is because it is thought that the consumers of the services of
senior counsel have agents (their solicitors) who would normally be expected to shop
around, but who are conflicted because their own fee level will be up there in line
with the figure senior counsel marks. Consequently, the consumer’s agent is not
looking for value for money.
The Competition Authority didn’t spot this phenomenon either, or investigate
high fees at all, simply observing that a profession which reports such huge fees from
its leading members must have need for competition, and short-sightedly
recommending freeing up entry into the profession with the probable consequence
that fewer young barristers will survive long enough to swell the ranks of the inner
bar, and bring about the desired end result - compete effectively there and bring fees
down.
For the body with the task of identifying the standard costs, it is fortunate that
an entry grade hourly rate for both solicitors and barristers can, however, be computed
with reasonable accuracy.
Some things are given, like the fact that there are twenty four hours in a day.
Some are assumptions rarely disputed, like the fact that there are one thousand
billable hours in a year. Some are commercially accepted standards, like the fact that
an employed professional must earn three and a half times his salary if his
employment is to be commercially viable. And some are market place realities like
the fact that the starting salary for a solicitor is, today, in 2007, €40,000. That figure
is in line with other salary rates in other professions, and is, ultimately, determined by
demand and supply factors in the graduate market place. It is a given. In turn, it
produces an hourly rate for a starting grade solicitor of 40,000 x 3½ ÷ 1000 = €140.
That figure is therefore also, for 2007, a given.
The data for junior counsel is much less clear cut. They have fixed and
variable overheads, like any self employed but, crudely assessed, their break even
point is much lower. Close examination, however, throws up other factors crucial to
33
long term viability. There are funding costs, both in respect of tuition fees previously
incurred, and to service cash flow facilities. There must be provision for the
interminable delays in getting paid, bad debt provision, insurance cover and pension
funding. There is a large coffee bill. There is clothing and travel expenditure to
Circuit. All told, there is enough in these factors to arrive at a floor level of practice
expenditure for the barristers in his first year of €35,000, and if he is to take home the
same earnings as his starting grade solicitor counterpart, he should be billing another
€65,000 of which €25,000 (or 35%) is earmarked for pension funding. Accordingly,
his hourly rate must be €100. Note is passing that it is the link with the solicitor’s rate
(which is largely market determined as above outlined) which is the one market place
reality which informs the calculation for junior counsel. €100 per hour is his basic
salary rate. He will earn more through uplifts the more skilled he becomes, the more
responsibility he assumes, and the “bigger” his cases get.
Barristers, of course, do not usually receive fees of €100K in their first year.
The reality is that they cut corners, and postpone a decision on career viability for as
long as possible in the hope that their professional qualities will be revealed to all in
time, or that lady luck will adopt them. (Survival may not be on merit alone). This
reality also leads to classic loss leading behaviour, in discounting fees (or not
charging at all), in forgiving amnesiac solicitors, and those who exploit, and in
“voluntary” work for the solicitor who hasn’t the time to attend court.
These are the realities underlying the huge variability of earnings around the
median identified by the Competition Authority but which the authority apparently
did not consider it worth its while to investigate. Condemning the two thirds brief fee
practice out of hand, the authority did not refer to the fact that the practice dates from
a time when the senior brethren felt it essential to (in economic terms), “protect the
fledging junior bar” from “exploitation” by solicitors. The ideologues of competition
often cannot see the wood for trees: a thriving junior bar is vital for justice and for
society.
Both branches of the profession are justified in charging increased fee rates for
members as they progress up the ladder of experience. The starting rate for solicitors
with no post graduate experience may be, as I have postulated, €140 per hour, and that
34
of his junior counsel contemporary €100, but after his devilling year and first year of
solo practice, the barrister’s rate will rise more sharply than his solicitor
contemporary. The barrister will reach the equivalent of solicitor senior partner rates
after, say, ten years, and soon thereafter will break through to the Senior Counsel
level. The solicitor’s climb is more regular, more assured, slower, and will plateau at
a rate comparable to other senior management and professionals.
The story is incomplete, though, until we add to both branches “full standard”
rates the uplifts which reflect the complexities (if any) of each case and reward the
special skills (if any) of the practitioner as demonstrated in his handling of same,
including the skills displayed in negotiating early resolution of the dispute to the
client’s satisfaction.
It is worth remembering, at this point, that the exercise is about attempting to
spell out standard costs levels. These will be the basis for quantifying recoverable
costs on a party and party taxation. It does not mean that a party will be limited to
spending at these levels: it just means that if he spends more, he won’t recover the full
amount from the paying party. For example, junior counsel may be briefed
unnecessarily for a motion in the Master’s Court: it will not tax. The receiving party
will only recover costs necessarily and properly incurred, and these will be allowed
only on the standard basis, together with any addition which is considered appropriate
having regard to any unusual complexity in the case.
Guideline rates are published in the civil bench book on costs issued to U.K.
Judges by a Judicial Studies Board, a copy of which I have appended to this decision,
and on page 3 of a four page addendum updating guideline rates to January 2007, the
hourly rate for a City of London solicitor with over eight years post qualification
experience including at least eight years litigation experience is £380 sterling. Two
years previously the figure was £359 sterling. But these are London figures (even
more precisely, City of London). Litigators in Birmingham or Teesside are slated at
£167 per hour.
35
Another feature of the U.K. system is the designation of four different grades
of fee earners in a solicitor’s firm, with (A) Grade as described, followed by (B)
solicitors and legal executives with over four years post qualification experience; (C)
other solicitors and legal executives and (D) trainee solicitors, paralegals and fee
earners of equivalent experience. This last category is apparently worth only one
third of the grade A’s hourly rate in the City of London, but over a half in Teesside.
In the UK, judgments often refer to the “A factor” and the “B factor”. To the
cost of doing the work (the “A” factor) must be added to the solicitor’s reasonable
profit (the “B” factor) to ascertain the hourly charging rate. The “B” factor is not
solely concerned with profit, it also covers such matters as unrecordable time and
supervision which would otherwise be unremunerated. The profit percentage in
routine matters is generally accepted as 50%. This, from the judgment of Kerr J. in
Leopold Lazarus Limited v. Secretary of State for Trade and Industry [1976] 120 Sol.
Jo. 268 QBD: “The computation of the ‘a’ figure involves an assessment of the
reasonable direct cost, that is to say the grade of person (senior solicitor, assistant
solicitor, legal executive etc.) whom it was reasonable to employ at each stage; an
approximation of the cost of employment of each individual by considering the
number of hours for each of them to be reasonably engaged; and assessing a rate per
hour sufficient to cover the salary and appropriate shares and general overheads of
each such person. … together with an allowance for letters, telephone calls and telex
messages, this produces what the Court of Appeal referred to as the ‘a’ figure. The
‘b’ figure is then conventionally assessed by adding a percentage to the ‘a’ figure
which is appropriate in all circumstances to cover matters which cannot be calculated
on an hourly basis, that is to say supervision and other indirect expenses, together
with what the Master referred to in his Answer as ‘imponderables’ which reflect the
degree of skill, responsibility and the other factors set out in CPR Rule 44.5.
The guideline hourly rates in the SCCO guide are based on a 50% mark-up for
profit. Time not capable of being recorded was described by Walton J. in Maltby v.
D.J. Freeman & Co. (a firm) [1978] 2 A.E.R. 913 Chancery Division thus ‘No
professional man stops thinking about the day’s problems the minute he lifts his coat
and umbrella from the stand and sets out on the journey home. Ideas, often very
valuable ideas, occur in the train or car home, or in the bath or even whilst watching
36
television. Yet nothing is ever put down on a time sheet, or can be put down on a time
sheet adequately to reflect this out of hours devotion of time.’
(One wit commented that this dictum suggested that solicitors were now to be paid for
having baths and watching television.)
Litigators prepared to undertake legal aid work in the UK are paid by the
Legal Services Commission. The Legal Services Commission should be thought of as
the biggest single consumer of legal services in UK litigation. Naturally, as such they
continually search for value for the taxpayer’s money, and the payment rates for
lawyers are significantly below rates in the private sector. But not so low as to be
unprofitable to the point where lawyers decline the business. Still, they drive a hard
bargain and take full advantage of every cost saving available including, for example,
the UK Law Society’s Practice Rules which provide that
“Attendance on counsel will normally be dispensed with in small claims track
and fast track civil cases except: (a) where the case is more complex than a typical
small claims or fast track case; (b) where the determination of costs at the conclusion
of proceedings requires the presence of a solicitor; (c) where one of the parties in the
case is a child; (d) where the client is unable to understand the proceedings or give
adequate instructions to counsel because of inadequate knowledge of English, mental
illness or other mental or physical disability; (e) where counsel is representing more
than one party; (f) where the client is likely to disrupt the proceedings if counsel were
to appear alone; (g) where there are any issues likely to arise which question the
client’s character or the solicitor’s conduct of the case; (h) where there is any other
exceptional circumstance which makes it desirable that counsel be attended.”
The Legal Services Commission is also reluctant to allow its solicitors carte
blanche in regard to the briefing of a Q.C., and seems to regard this as justifiable only
for exceptional cases. Annexed to this decision is a file of LSC forms which may be
of interest. What they demonstrate clearly is that UK solicitors providing legal
services to the LSC can, and do, detail “actual work done”, almost successfully
reducing it to a single page claim format. There is no significant difference between
the legal systems here and in the UK which would suggest that such a format cannot
be used here and, clearly, the spade work had been largely done for us.
37
My task today is to pencil in figures for litigators in Dublin. Happily, in this
regard, I have been assisted by the materials produced to me by practitioners in the
course of this four month exercise. Interestingly, the materials disclose quite a
surprising disparity in the hourly rates which solicitors feel they ought to be charging
their clients in the event that the rolled up instructions fee is no more.
Although most solicitors do not appear to know how to approach the question
of what the hourly rate should be (to achieve breakeven) or what they should mark up
as profit, individual firms must make the effort to do so, if only so that they will be in
a position to quote a price for litigation services to any prospective client. It is more
likely, however, that individual firms will rely on market wide independently
calculated rates as a basis for such quotations. The proposed guidelines will be one
such set.
The guidelines must allow for what might be called a full standard rate
(appropriate grade of lawyer, appropriate time commitment) together with some scope
for “uplifts” to reflect what Flynn and Halpin refer to as “intangible factors”. The
instructions fee of today’s practitioners, which is not particularised, can be reproduced
as a bottom line total in respect of actual work timed and priced at the full standard
rate with an uplift appropriate to the particular case.
In other words, the fee total for the full litigation package (settlement at door
of Court/hearing and judgement) should work out as virtually identical, if the rates,
times etc have been correctly measured. Of course, “actual work done” for a case
which settles at an early stage, is likely to produce (priced at the same rates) a fee
figure far lower than that payable after a full fight. But if the settlement offer is
reasonable, the case should settle: it is the client’s interests that are paramount, not the
size of the lawyers’ fees. For that reason, cost sanctions (including wasted costs
orders) are available in the UK when reasonable offers are rejected. These encourage
responsible responses to reasonable offers. The skills employed in securing early
settlement in the client’s interest should be rewarded with an appropriate uplift.
38
Uplift
Having computed the base cost of the litigation, the court then considers the
other matters set out in O. 99, r. 37(22)(ii) namely complexity and difficulty or
novelty of the questions; skills, specialised knowledge and responsibility; number and
importance of documents prepared or perused; place and circumstances in which the
business involved is transacted; the importance of the cause or matter to the client; the
amount or value of the money or property involved and “all relevant circumstances”.
The provisions of the rule cannot be described as a formula for transparency and
certainty. Indeed, some of the specified considerations appear to overlap and some are
meaningless. Why should a solicitor be paid more for “responsibility”? Is it OK for
him to have been irresponsible in relation to any file? Why should the client have to
pay more for the service just because it was more important to him (and how do you
measure the importance to the client?). Why should the skill and specialised
knowledge of the solicitor be rewarded over and above the standard rate for the fully
qualified solicitor and experienced litigator? These are, however, only rules of court
and guidelines for the Taxing Master and the court retains full discretion (subject to
law) to award such costs as are “just”. And of course it is “just” that litigators giving
exceptional value for money be rewarded at rates which exceed the standard rate.
Flynn and Halpin confirm that the allowance in respect of the factors is to be
“in addition to what would be considered to be the normal remuneration in any given
set of standard circumstances” and is “intended to take into account the care and
attention and conduct of a case”. At p. 520 they say “there is no secret formula in
applying the factors of O. 99, r. 37 but the application must be subjective in that they
are applied to a specific case for specific reasons.”
In their analysis of what they describe as “intangible factors” Flynn and
Halpin accept that the assessment of these factors is “difficult and to a large extent an
exercise of subjective judgment”. Looking at a report of the Royal Commission on
Legal Services October 1979, (at p. 508 of their book) the authors note that the
Commission recommended that the set of criteria should include time, skill and
knowledge, responsibility and effort, and refer to the characterisation of such factors
as “adrenalin factors” in Greenslade’s book on Costs (Longman 1993). In Best v.
Welcome Foundation Limited (3) [1996] 3 I.R. 378 at 387, Barron J., looked at the list
39
(a) to (g) set out in O. 99, r. 37(22)(ii) and reduced the seven to three, viz. the
difficulty of the matter, the skill and specialised knowledge of the solicitor and the
amount of damages.
In England the judges described such an add-on as an “enhancement” and
routinely add a percentage to fees occasionally up to 100% of the base fee. The
following is from Cook on Costs 2005:
“Where someone has made a meal or a mess of a case, the percentage
increase for care and conduct for that work could be nothing. In other cases, it could
be much higher than average. For example, where a legal executive has done work
which could justifiably have been done by a senior partner he may be rewarded with
a 200% mark-up for care and conduct on his hourly expense rate. Similarly, if
someone has been brilliant, or had extraordinary responsibility, or has been very
expeditious, this is the place to take it into account – otherwise the fee earner would
be penalised by his own expedition.” And also this:“A solicitor who is expeditious
and efficient is entitled to benefit from, and not be penalised by the lack of time he has
spent on the matter. But the higher the level of fee earner, the more he is expected to
know. Therefore the higher the expense rate the lower the mark-up – you cannot
expect to be rewarded twice.”
In Finley v. Glaxo Laboratories Limited [1997] Costs L.R. 106 QBD,
Hobhouse J. was concerned with whether an uplift factor of more than 50% ought to
be applied. “The court is required to take into account, among other things, the
complexity of the item or of the cause or matter in which it arises; the difficulty or
novelty of the questions involved; the skills, specialised knowledge and responsibility
required; the time and labour expended by the solicitor; the number and importance
of documents; the importance of the cause or matter to a client; the amount of money
involved, and so on. The solicitor claimed 125%. The solicitor was, at the material
times, effectively a sole practitioner. He had a special experience and knowledge of
vaccine and similar matters. He had brought to the consideration of the plaintiff’s
case a familiarity of the subject matter and the measure of expertise appropriate to a
lawyer dealing with that class of case. The medical issues were ones which, although
complicated and technical, were not outside the expertise of the solicitor; and it is
40
because of this expertise that the matter was being dealt with by a senior partner. He
assessed the evidence, on a priority basis, and advised the client against the
continuation of proceedings and, far from his deserving to be marked down for that,
he deserves credit for taking upon himself that responsibility and also being prepared
to say, of his own judgment, that the proceedings should not continue as to do so
would not be in the interests of the client and would, indeed, be a waste of time and
money.”
Notwithstanding all of that, the judge awarded only 75% noting that: “One
must bear in mind that this case was at a very early stage: it was at a stage of,
essentially, perusal and advice. His solicitor was not involved in the preparation of
complicated documents, nor was he involved in the conduct of any negotiations. Still
less was he actually involved in the conduct of any litigation.”
Commenting on that and other cases, Cook concludes that: “Solicitors cannot
expect to obtain mark ups in excess of 75% except in the heaviest and most complex
cases and probably only those which involve contested hearing.”
In regard to the LSC fees in the UK, the Civil Proceedings (Remuneration)
Regulations, 1994 provide for: “Enhancement where the work was done with
exceptional competence, skill or expertise, with exceptional dispatch or that it
involved exceptional circumstances or complexity. Enhancement could be as high as
100%, or higher where “the item or class of work relates to exceptionally complex
matters which have been handled with exceptional competence or despatch.” But the
prescribed rates may also be partly disallowed: “Where it appears reasonable to do
so having regard to the competence or dispatch with which the item or class of work
was done.”
Cook comments that: “Enhancement is all that stands between the assessment
of costs remaining a judicial process and not becoming a bureaucratic arithmetical
exercise. It is all that prevents the paying party (the State) being the arbiter of the
fees it is willing to pay. It is all that preserves any semblance of judicial discretion in
costs officers under the principle of payment of a reasonable amount for work
reasonably done.”
41
CONCLUSION: Suggested Guiding Principles of cost assessment for work actually
done
(a) The recoverable costs for each chargeable item or task will be measured
objectively and not subjectively.
(b) The costs will be determined by reference to the hourly rate of the lawyer of
appropriate grade for the task, and not by reference to the rate of the lawyer who
actually performed it.
(c) The basic hourly rate for each grade of lawyer remains the same no matter what
item or task is being costed, or in what court the matter was dealt with.
(d) The rate of the lawyer who is the lead or responsible lawyer for the task is
subject to an automatic uplift as part of the prescribed guideline rate. The uplift rates
should be:
District Court – 20%;
Circuit Court – 30%;
High Court – 50%;
Supreme Court – 100%;
County Registrar – 25%;
The Master’s Court – 331/3%
(e) Any task requiring advocacy will normally be allowed as a team work item, but
the advocate will be allowed extra time (of no less than half of the hearing time) for
preparation for court appearances.
(f) Time will usually be measured in real time but for no more than prefixed time
budgets for standard items. Circumstances involving sharing of time on more than
one matter, or repetitive pro forma work, will be allowed on a reduced basis.
(g) Full fees (without uplift), will sometimes be allowable for adjournments
contested “on the day”, with reduced fees as appropriate in other circumstances (30
minutes only allowed on consent adjournments, reflecting a discount for time
sharing.)
(h) A percentage uplift may be allowed for items which, for litigation of that
particular type, involved
(a) unusual complexity, and/or
(b) exceptional skill on the part of the lawyer, and/or
(c) particular urgency (or dislocation), and/or
(d) patently exceptional value for the client
SAMPLE RECOVERABLE COSTS in the Master’s Court
Solicitor
1. Consent Adjournment
Paperwork: N/A
Solicitor Grade: no PQE (€140)
Hearing: 30 mins allowed
Counsel N/A
2. Consent Order
Paperwork ¾ hour €155
(eg extend time to deliver Statement of Claim)
Hearing 30 mins €70
-final order: costs include paperwork
Solicitor grade no PQE (€140)
Counsel N/A
3. Contested Adjournment
Paperwork: N/A
(eg motion to strike out Defence for failure to
Hearing 2 hours allowed
make Discovery as Ordered)
- adjournment: no uplift
- Solicitor Grade: no PQE (€140)
- Counsel N/A
4. Contested Motion of average complexity
Paperwork ¾ hour @ €140
(eg to extend time to appeal Circuit Court Order)
¾ hour @ €200
issue: whether to exercise discretion on
hearing
undisputed facts
2 hours allowed
- final order: costs include paperwork
uplift 33⅓%
- Solicitor grade 4 yrs PQE (€200)
preparation 1 hour
- Counsel N/A
Counsel
Total
€70
say €75
€225
say €250
€280
say €300
€255
€988
say €1000
€400
€133
€200
5. Complex motion: Contested (eg Discovery)
Paperwork ¾ hour @€200
€150 Drafting 1½ hours €225
€1255
- Multiple facts and law in issue: increased
Hearing 2 hours @ €140
€280 Hearing 2 hours
€300
say €1250
uplift 50%
Uplift
€150
- junior counsel briefed to draft and appear
Preparation €150
- final order costs include paperwork
- solicitor grade: mixed 4 yrs PQE (€200); no
PQE (€140)
- Counsel’s rate 3 yrs + (€150)
Hearing 30 minutes @ €140
Hearing 30 minutes @ €150
Say €150
- (plus: prior listing if any to fix a date)
NB LESS COMPLEX MOTION: Solicitor’s paperwork €255 (€105 + €150: for Counsel), hearing €280 Junior Counsel <3 years (2 hrs @ €100)
33⅓% uplift; preparation … total €900
But: briefing Counsel may be a luxury unless it’s cheaper for the client to do so (which it usually is at this level) - see 4 above (€1,000)
And finally, a cautionary tale from the International Herald Tribune dated
Tuesday, 27th March, 2007, (editorial page 6):
“A dispute has been raging between elderly holocaust victims and Bert
Neuborne, a lawyer who helped to win a $1.25 billion settlement from Swiss banks,
over the size of the fees Neuborne has requested. A US magistrate judge has wisely
recommended significantly reducing the fees. If the Federal District Court accepts
the recommendation, it will put an end to an unfortunate aspect of an important law
suit.
“Neuborne, a New York University Law Professor, played a key role in
helping holocaust victims win compensation from Swiss banks, which they accused of
looting the deposits of Jewish customers and of laundering Nazi money. He did that
legal work without a fee, but submitted a bill of far more than $4 million for helping
to allocate the settlement money.
There were several problems with Neuborne’s request. He originally
submitted a larger bill backed up by slipshod hourly records, which included billing
for 30.5 hours of work in a single day. It is not the kind of care a lawyer should use
in billing for any case, much less one in which holocaust victims are paying the bill.
Holocaust victims objected to the hourly rate Neuborne put in for, $700.
United States Magistrate Judge James Orenstein recommended that the hourly rate
be reduced to $450. The market for a lawyer to take a case for elderly holocaust
victims is different, Orenstein noted, than for lawyers in the sort of ordinary
commercial litigation that might produce $700 an hour fees. A $450 hourly fee is
certainly more reasonable.
The holocaust victims also say the Neuborne indicated that he was doing the
whole case without charge and so he had no right to bill for any of it. Orenstein
rightly criticised Neuborne for the “murkiness” of his statements about whether he
expected to be paid for his settlement work. Nevertheless Orenstein was right to
conclude that Neuborne was entitled to be paid for his work.
The Swiss banks’ case did tremendous good, and Neuborne did an able job in
pursuing it. He failed, however, to approach the issue of fees with the good judgment
that was required. Orenstein’s resolution, if it is accepted, will bring this episode to a
close.”
44
Awards
1.
Mitsubishi Electric v. Design Air
This was the plaintiff’s application for liberty to enter final judgment. The
motion was adjourned on the return date. The plaintiff was a Dutch company, a fact
which in itself gives rise to complexity. In addition, two replying affidavits were filed
and after perusal of same the court dealt with, in effect, two different parts of the
claim in different ways. The taking of instructions was, therefore, unusually time
consuming involving updating instructions as to facts.
Solicitors had drafted an affidavit of debt in case no appearance was entered,
but the costs of this are not recoverable as over cautious.
The plaintiff’s Solicitor acted as advocate in court and is therefore entitled to
the advocate’s uplift and preparation on time allowance. If it is a “luxury” not to avail
of counsel as advocate if it would be less costly for the client, then this might be such
a case, but only a borderline one.
Liberty having been granted, costs of the motion and action have to be
measured.
I measure costs at €2850 to which must be added €325 costs of appearing for
this measurement.
2.
ACC v. Crystal Tiles
The plaintiff’s motion was for liberty to enter final judgment against the
defendant. The quantum is not material. There was no appearance in Court on behalf
of the defendant, even though he had previously entered an appearance by solicitor.
The plaintiff was given liberty. Accordingly the costs to be measured are not the
costs of the motion, but the costs of the action as a whole.
These include time taking instructions, perusing paperwork, preparing, issuing
and serving the summons. Then come the costs of preparing a motion and grounding
affidavit; arranging for it to be checked and sworn by the client, issuing and serving
same.
A solicitor of no PQE could have made the application, given that no replying
affidavit had been filed. There being no appearance at first call, it went to second call
and consequently falls outside the 30 minutes allowance and must be allowed two
hours.
45
I measure recoverable costs @ €2250 to which must be added €325 costs of
attending for measurement.
3.
Andrews v. Eircom
In this case the plaintiff applied to have the defendant’s defence struck out for
failure to make ordered discovery. As is not unusual with such applications, there
were (contested) applications by the defendant to adjourn the motion. Eventually
discovery was made, but it was “delivered” on the morning of the third listing and had
to be considered, urgently, by counsel for the plaintiff and the matter was put back to
the afternoon.
As with Mitsubishi (above) it may have been less costly for a Cork based
solicitor to engage Junior Counsel than to appear herself.
I measure costs, including counsel’s fees, and appropriate costs for contested
adjournments and uplift of 331/3 % at €4,450 to which must be added €325 costs of
attending here for measurement.
4.
AXA v. Whitham
This was an ex parte application for leave to enforce a foreign judgment. It is
a UK judgment so there is no uplift for language complexity. The costs, nevertheless,
include paperwork costs of an unusual nature, and the grounding affidavit is technical.
I am satisfied that it was proper to retain counsel to draft and move the
application. It is a 30 minute brief, but with a 50% uplift and 30min preparation.
I measure costs @ €890 to which must be added €325 costs for attending here
for measurement.
5.
Breslin v. Panorama
The defendant sought to strike out the proceedings for failure to deliver a statement of
claim. It was a contested application and the outcome was an extension of time by
five weeks with costs to the defendant.
I measure recoverable costs @ €900 to which must be added €325 costs of
attending for measurement.
6.
Galway v. FAS
This was an application to dismiss for want of prosecution. Unlike No. 5,
there was no appearance in Court at first or second call. The case was dismissed with
costs of the motions and action to the defendant.
Accordingly to the Motion costs must be added the defendant’s costs from
service on it of the proceedings to date.
46
I measure costs all together @ €1750 to which must be added €325 costs of
attending for measurement.
7.
Foley v. Hamilton
The defendant sought by motion to extend the time for appealing a Circuit
Court order, but didn’t appear in court to move the application. Consequently it was
struck out, at second call, with costs to the plaintiff.
A replying affidavit had been filed by the plaintiff. It was not a pro forma
affidavit, and had been drafted by counsel, which was probably a luxury. There was
extra time needed to refresh in regard to the Circuit Court file, to explain and take
client’s instructions and on correspondence concerning a late appeal.
I am allowing costs in the sum of €1600 to which must be added €325 costs of
attending for measurement.
8.
King v. Brophy
There were three contested applications for adjournment of this motion to
dismiss for no statement of claim. In parallel, there was significant correspondence
(albeit of a non technical nature) and phone calls, the drafting of a supplemental
affidavit and attendances on the client (probably not recoverable).
There was justification enough to brief counsel because a court order had been
breached, and the outcome was discretionary.
I measure costs (including adjournments) @ €2250 to which must be added
€325 costs of attending for measurement.
9.
Monahan v. McCafferty and Another
This motion was struck out at the consent stage, with an extension of time for
discovery by three weeks and, by consent, costs to the defendant. It was an
application to strike out a defence, so no issues of complexity and no need to brief
counsel.
I measure costs @ €750 to which must be added €325 costs of attending for
measurement.
10.
Noonan v. Ballyconway and Another
Discovery having been received the night before, this motion (to strike out a
defence) was struck out with costs to the plaintiff. Given that there were no issues of
complexity, the briefing of counsel must have been a luxury, except that it may have
been less costly for the client to retain counsel at the €100 per hour rate, to deal with
the matter instead of the solicitor himself coming down to court. In the event, counsel
47
was asked to assess the adequacy of (straight forward) discovery prior to the strike
out. I measure costs @ €1000 to which must be added €325 costs of attending for
measurement.
11.
Bank of Ireland v. Gaynor
Another motion for liberty to enter final judgment. The defendant had entered
an appearance but after correspondence between the solicitors, furnished a letter of
consent on the return date. The matter was dealt with accordingly, at first call.
Very similar to No 1. above, except that significant office time had been
clocked up in correspondence. This is a cost caused to the plaintiff by the defendant
and must be allowed on a party and party costs of the action.
I measure costs at €2,100, to which must be added €325 costs of attending for
measurement. (Note that the costs allowed for Nos. 1 and 11 are of the same order,
even though counsel was briefed in one and not in the other). Outlay on counsel’s
fees was not “certified” and must be borne by the plaintiff without recourse to the
defendant.
12.
Unecol v. Healy
Plaintiff sought liberty to enter final judgment for the cost of diesel supplied,
on three invoices.
There being no answer at first call, the matter was put back and must therefore
be allowed two hours. The briefing of counsel was a luxury. Recoverable costs
would be for a solicitor of moderate experience (say €175 per hour).
Costs to be measured are costs of the motion and action. I measure costs @
€1800 to which must be added €325 costs of attending for measurement.
13.
Wright v. Foley
At the consent stage, this motion to strike out for breach of court order was
struck out with costs to the second defendant. The discovery had been received the
day before, after significant correspondence.
The motion had been adjourned once before. (€300)
I measure costs @ €1450 to which must be added €325 costs of attending for
measurement.
Approved: Master of the High Court
PILOT COSTS MEASUREMENT EXERCISE
1.
MOTION TYPE (Please Highlight)
Return Date on Summons;
Liberty to enter final; Adopt;
Dismiss for want of prosecution;
2
Discovery;
Failure to comply with discovery;
Inspection; Add / Substitute a Party;
Other;
DRAFTING AND CORRESPONDENCE
APPROXIMATE TIME
ENGAGED
 Consideration of case circumstances prompting motion (or decision to oppose)
 Drafting formal letter; notice of motion
 Inter correspondence re motion
 Consultation with client re affidavit(s) and drafting same
3.
PREPARATION BY ADVOCATE (Solicitor / Counsel: delete )
 All contacts with briefing Solicitor / Client
 Perusal of all documents likely to be considered by court
(Total Pages:
)
 Check relevant law and precedents
 Negotiations with opponent (other than on date of hearing)
4.
HEARING AND OUTCOME (Attendance: Solicitor/Town Agent/Counsel)
 Pre-hearing adjournments: how many?
(
)
 Consent order
y/n
 No appearance by opponent
y/n
 Contest leading to decision/transfer
y/n
 In Court (waiting and hearing)
 Noting / Communicating outcome
5.
6.
ORDER (Specify)
And as to costs (specify)
COMPLEXITY
(One to ten scale; moderate = 4)
Brief description of complexity factors in supporting of rating entered:
7.
8.
TOTAL FEE
Suggested (including outlays; excluding VAT)
Additional information or comments, if any (considered as relevant to fee measurement)
€
BENCHMARK COSTS
REPORT TO THE MASTER OF THE ROLLS
FROM THE SENIOR COSTS JUDGE
OCTOBER 2001
THE BACKGROUND
1.
This Report has been prepared by the Senior Costs Judge at the request of
Lord Woolf when he was Master of the Rolls. Lord Woolf discussed the possibility of
benchmark costs in his Final Access to Justice Report at Chapter 7,
paragraphs 35 to 37
(Appendix 1). At the time the report was written, Lord Woolf envisaged a fixed or capped
scheme of costs in the fast track and his ideas for benchmark costs related to those
proceedings on the multi track which have a limited and fairly constant procedure.
The consultation paper “Controlling Costs” issued by the Lord Chancellor in
2.
May 1999 set out the difficulties encountered by the Lord Chancellor’s Department in
attempting to arrive at a satisfactory regime for pre-trial costs on the fast track. Paragraph 8
concludes:
“... the Lord Chancellor remains committed to controlling costs and intends to
monitor costs in fast track cases with a view to introducing a fixed costs regime when
sufficient information is available to ensure that the regime is fair and workable.”
3.
At a subsequent meeting between the Head of Civil Justice (Sir Richard Scott
V-C) and the Lord Chancellor’s officials, at which Lord Woolf was present, it became
apparent that no monitoring was taking place. As a result of this the Department agreed to
50
set up a scoping study to examine ways in which data could be collected which could be used
both as the basis for a pre-trial costs regime on the fast track and for benchmark costs.
4.
In July 1999 the Senior Costs Judge produced a paper “Benchmark Costs”
suggesting how the proposals in the Access to Justice Report relating to benchmark costs on
the multi track could be developed. Both Lord Woolf and Sir Richard Scott were keen,
given the lack of activity elsewhere, that progress should be made with benchmark costs.
THE FIRST CONSULTATION
5.
When it became apparent that the Lord Chancellor’s Department was carrying
out no monitoring of fast track cases, Lord Woolf decided that benchmark costs should be
extended to the fast track to cover the period up to the introduction of a costs regime for pretrial work on the fast track. On 30 March 2000 the Senior Costs Judge wrote to Judges at all
levels at the request of Lord Woolf asking them to consider the situation within their own
particular jurisdiction; to identify proceedings/applications suitable for benchmark costs;
and, after consultation with court users and the professions, to arrive if possible at a
suggested figure or bracket of figures for the particular procedure (Appendix 1).
6.
The scoping study prepared by D.L. Magill Ltd was received by the Lord
Chancellor’s Department on 28 April 2000 and was the subject of a presentation to the Civil
Justice Reform Strategy Committee on 5 July 2000.
At that meeting, to which members of
the senior judiciary were invited, it was decided not to implement the recommendations in the
scoping study (which had been for a sampling exercise across the country) and the situation
therefore was that, apart from the material collected in the Supreme Court Costs Office, no
data was being collected in any courts.
In the absence of data it is clearly impossible to set
51
up a fast track costs regime.
Lord Woolf and Sir Richard Scott were firmly of the view that
the benchmark exercise should continue with judicial input, informed by consultation with
court user groups and the profession generally.
7.
Following the meeting of the Civil Justice Reform Strategy Committee the
Lord Chancellor’s Department set up the Civil Justice Reform Costs Working Group, which,
in addition to officials from the Lord Chancellor’s Department, has judicial representatives
from the Supreme Court Costs Office and the Association of District Judges and also
representatives from the Legal Services Commission, the Bar Council and the Law Society.
The Working Group held its first meeting on 27 July 2000. The terms of reference of the
Committee are as follows:
“(a)
To identify what types of costs information should be collected to evaluate the
success of the Civil Justice Reforms in making civil justice cheaper for users of the
system.
(b)
To identify what data is available to make a reasonable assessment of costs
both pre and post implementation of the Civil Procedure Rules (across the three
tracks), and to assess what data may be collectable within a reasonable time and cost
framework.
(c)
To make practical proposals for the methods of collection, and means of
evaluation.”
These terms of reference are of course a great deal wider than merely collecting data in
support of a fast track costs regime and benchmark costs but it is hoped that the work of the
52
Costs Working Group may be co-ordinated with the initiative set up by the Presiding Judges
which is described in paragraphs 12 and 13 below.
In March 2001 the Lord Chancellor’s Department issued a Report “Emerging
8.
Findings – An Early Evaluation of the Civil Justice Reforms” (Appendix 2).
In relation to
the question of costs the Report states:
“7.1
It is too early to provide a definitive view on costs.
The picture is still
unclear with statistics difficult to obtain and conflicting anecdotal evidence.”
Paragraph 7.12 acknowledges that this Report is awaited.
9.
The letter to Judges dated 30 March 2000 requested their preliminary reports
by 1 June and their final reports by 31 July 2000.
In the case of Designated Family Judges
there had been some delay in their being circulated but a large number of responses were
received by those dates. So many responses made similar points that the Senior Costs Judge
wrote a further letter to Judges, dated 19 June 2000, dealing with those points (Appendix 1).
A list of the persons who responded to the consultations appears at the end of this report
(Appendix 3).
10.
An early draft of this report was considered by the Court of Appeal Users
Group at their meeting on 12 October 2000.
The topics selected for benchmarking in that
court were provisionally approved subject to certain modifications which have since been
made.
53
11.
The conclusions drawn from the many recurring points in the responses to the
first consultation are set out in Appendix 4.
DATA COLLECTION
12.
Mr Justice Thomas, Mr Justice Toulson, the Presiding Judges of the Wales and
Chester Circuit and the Western Circuit respectively, upon learning that the data collection
exercise proposed by the scoping study was not to proceed, agreed with certain District
Judges on their Circuit that they would collect data in respect of fast track cases commenced
after 26 April 1999, coming in front of them.
The Senior Presiding Judge is considering, in
the light of this exercise, whether such data collection should be extended to other parts of the
country.
13.
Following a meeting between the Senior Presiding Judge, the Deputy Head of
Civil Judge and the Senior Costs Judge it was agreed that the development of benchmark
costs should be further considered before any final decision is taken with regard to data
collection on a wider scale.
It is most important if benchmark costs are to develop and a
costs regime is to be set up on the fast track, that accurate data collection be undertaken
throughout the country on a permanent basis.
14.
The submissions from the first consultation were collated and analysed in the
Supreme Court Costs Office. Over one hundred procedures suitable for benchmarking were
suggested (Appendix 7). The benchmarks proposed at the end of this report are divided into
civil non-family proceedings and family proceedings, since rather different considerations
apply to the two types of proceedings. Although a very wide variety of applications and
proceedings was suggested in the responses, the proposals made by the SCCO were limited to
54
a number of the more simple and straightforward ones. These proposals were a cautious start
to a new system which, if successful, could be extended to other proceedings little by little.
THE SECOND CONSULTATION
15.
In February 2001 the Senior Costs Judge wrote to all those who had
previously been consulted asking them to undertake further consultation on the proposals
then being made for benchmark costs.
In addition the letter posed five further consultation
questions (Appendix 1).
16.
This consultation produced a considerable and helpful response. The original
responses to both the first and second consultation are retained in the SCCO and may be
inspected at any time.
The responses range from outright hostility to the idea of benchmark
costs, through apathy, to positive proposals for the way in which the scheme could be made
to work.
The responses to the second consultation have been collated, analysed and
summarised. Appendix 5 contains the main general comments and Appendix 6 comments
specific to particular benchmarks.
FINAL PROPOSALS
17.
Having taken these comments into account final proposals for benchmarks
accompany this report.
18.
The procedures identified by consultees as being suitable for benchmarking
are set out at Appendix 7, and those for which benchmark figures are proposed are listed in
Appendix 8. The assumptions and calculations made for each benchmark having taken into
55
account the submissions on consultation, are listed in Appendix 9.
Examples of each
calculation are given for each circuit. Similar calculations have been carried out for each
location. Although only 20 procedures are proposed for benchmarking, the list of
benchmarks classified by court and by locality is extremely lengthy (Appendix 10). A guide
to applying benchmarks is given in Appendix 11.
19.
Benchmarks 9, 10 and 11 deal with insolvency proceedings. Because of the
speed with which such applications are dealt with in the Bankruptcy Court (less than a minute
is spent on each matter) it is desirable that benchmark costs should apply automatically unless
the court makes a different order. The Practice Direction dealing with benchmark costs
could provide for this.
20.
Benchmarks 15 to 20 deal with family proceedings. The proposals for
substantive applications (BM15 contact cases, BM16 committal, BM17 maintenance pending
suit) roused strong opposition. For the sake of completeness figures have been suggested for
these procedures but on balance it is felt that benchmark costs should not be introduced in
respect of those procedures, at least until experience has been gained of benchmark costs in
other areas.
BANDING
21.
In order to assist Judges carrying out summary assessment the SCCO has,
since 1999, published guideline hourly rates for solicitors practising in different localities in
England and Wales.
The latest guidelines were published in September 2001 and state the
hourly rates for four different grades of fee earner in over 50 localities.
These rates are
approved by the Designated Civil Judges in each locality after consultation with their District
56
Judges, the Law Society representatives and others.
There is a groundswell of opinion that
these rates suffer from major inconsistencies between localities, for example the rates for fee
earners in the Liverpool area are substantially higher than the comparable rates for
Manchester, Leeds or Bristol.
This has a ratchet effect when rates come to be reviewed and
also leads to forum shopping by lawyers seeking the highest return.
22.
In order to introduce a more uniform system the second consultation letter of
26 February 2001 (Appendix 1) sought views on a proposal to reduce the number of
individual benchmark figures by placing different localities into one of five bands. The
bands suggested were: (1) City of London, (2) Central London, (3) Outer London and City
Centres outside London, (4) Cities and large towns and (5) other areas.
attracted little comment either for or against.
This proposal
If the benchmark scheme is implemented the
SCCO will publish individual benchmark figures for each locality but will also consult on the
banding proposals set out in Appendix 12 to this report.
Date
P.T. Hurst
Senior Costs Judge
APPENDIX 11
EXPLANATORY NOTES ABOUT
BENCHMARK COSTS
1.
INTRODUCTION
The benchmarks recommended by the Senior Costs Judge are intended to be used in
appropriate cases, but if in a particular case the benchmark figure cannot be used, it may be
treated as a guide for the judge when conducting a summary assessment in that case. The
benchmark figures have been arrived at after wide consultation with judges, representatives
of the legal professions, and other court users.
2.
INTENDED ADVANTAGES OF BENCHMARKS
It is hoped that benchmarks will achieve the following advantages:
(a)
In cases in which the receiving party is content to accept the benchmark, there may be
a substantial saving of preparation time and court time.
In cases in which a
benchmark is recommended, neither party is required to file a statement of costs
before the hearing, unless they intend to seek a sum greater than the benchmark.
(b)
Benchmarks may reduce the amount of inconsistency of approach between different
judges and different courts.
(c)
As between litigants benchmarks provide greater transparency as to the amount of
costs which may be payable or recoverable in a particular application.
3.
CASES SUITABLE FOR BENCHMARKING
The recommended benchmarks have been limited to proceedings which have a limited and
fairly constant procedure, and also to proceedings of such simplicity and brevity that it is
appropriate to iron out the small differences there may be between one case and another.
In
58
all of the cases identified as suitable for benchmarking, the benchmark figure has been fixed
by reference to the type of hearing rather than the length of hearing. In some cases however,
in order to emphasise the limitation to simplicity and brevity, the proceedings are further
defined by a relatively short listing time, or in some cases, hearing time.
The benchmark figures cover base costs only and not any additional liability (such as a
success fee or an insurance premium).
4.
THE COURT’S DISCRETION AS TO COSTS
Benchmarks are intended to assist and simplify the process of summary assessment of costs.
They do not in any way fetter the court’s discretion as to costs.
In all cases the court has full
power to determine by whom and to what extent the costs are to be paid.
This includes the
discretion whether to award benchmark costs.
5.
ASSUMPTIONS UNDERLYING EACH BENCHMARK
Benchmark figures are recommended for a number of proceedings in different courts in a
variety of localities. Each benchmark is based upon a series of assumptions the full content
of which is published on the SCCO website (www.courtservice.gov.uk/scco).
It is not
essential for the judge awarding costs to consider these assumptions, unless they are drawn to
his or her attention by the parties when seeking to challenge the appropriateness of the
benchmark.
After describing the relevant court and the type of proceeding, the assumptions
cover up to eight other topics, listed below. Each item in the calculation is rounded upwards
to the nearest pound.
(a)
Further description of the type of proceedings. In a few cases some further description
is necessary in order to emphasise the benchmark limitations.
59
(b)
Locality of solicitors’ firm:
solicitors’ charges depend upon the amount of time
spent, and the hourly rates of solicitors vary in different parts of England and Wales.
The hourly rates, upon which the assumptions are based are taken from the most up to
date edition of the Guide to the Summary Assessment of Costs and, for convenience,
are specified in the assumptions table.
(c)
Time spent by solicitor’s firm:
this shows the grade of fee earner or fee earners in
question and the time they are assumed to have spent, divided into four categories:
(i)
the preparation (eg taking instructions, working on documents and attending
counsel in conference where appropriate);
(ii)
correspondence and telephone calls;
(iii)
attendances at court; and
(iv)
travel and waiting time at court (in cases dealt with by telephone appointment
this figure is omitted).
(d)
Expenses of travel to court:
as a general rule no allowance is appropriate for travel
expenses within a radius of 10 miles from the court (Costs Practice Direction para
4.16(3)).
Where expenses are assumed, they are intended to cover second class rail
fares, taxi fares and some subsistence.
(e)
Counsel’s fees:
the figure given is for the total, i.e. including attendance at court,
travel and waiting, preparing skeleton arguments, settling other documents and
advising whether in writing or in conference.
counsel is stated:
for this purpose counsel are divided into three categories, 0 to 5
years, 5+ to 10 years and 10+ years.
(f)
In each case the assumed seniority of
Court fees and other items (if any).
60
Each benchmark is an objective assessment of the amount of costs it is reasonable to incur on
the proceedings in question. The figure does not cease to be appropriate merely because the
litigant in question was represented by different grades of fee earner or by solicitors who
instructed counsel of different seniority or who did not instruct counsel at all.
6.
IS IT NECESSARY TO PREPARE OR FILE A STATEMENT OF COSTS?
A party must file and serve a statement of costs, in advance of the hearing, if he intends to
seek costs exceeding the benchmark figure.
In other cases, a solicitor intending to seek an
order for costs should prepare a statement of those costs if:
(a)
the opponent puts him on notice that, if the opponent is ordered to pay costs, he will
allege that the benchmark figure is too high; and/or,
(b)
it is apparent to the solicitor that the claim for benchmark costs would breach the
indemnity principle (as to which see further paras 30-32 of the Guide to Summary
Assessment).
7.
DOES THE BENCHMARK APPLY IF THE ACTUAL WAITING TIME
EXCEEDS THE ASSUMED WAITING TIME?
Court appointments can be delayed for a variety of reasons outside the control or
responsibility of the receiving party’s solicitor or counsel.
In such cases it will be
appropriate to allow an additional sum to cover the extra expense which the receiving party
will be put to because of that delay.
In many cases the extra sum may be agreed by the
parties or assessed by the court without the need for a prior statement of costs.
assessing such a figure the court should consider the following points:
When
61
(a)
if the delay was substantial and foreseeable: whether the receiving party’s
representatives might reasonably be expected to have brought work with them to
minimise the waste of time;
(b)
if the receiving party’s solicitor has been delayed in more than one court appointment:
whether the reasonable sum for delay should be apportioned between each of the
cases.
8.
WHAT TRAVELLING TIME IS INCLUDED IN THE BENCHMARK?
In benchmark 1 an allowance has been made in respect of travel from each locality to the
Court of Appeal in London.
In the case of most other benchmarks an allowance of one hour
travelling time has been included (1½ hours in the case of solicitors in outer London
travelling to the High Court).
In the case of the remaining benchmarks, such as applications
for extensions of time, only a short time has been allowed for travel to reflect the fact that the
person attending will have more than one matter to deal with. In order to obtain the
advantages of a benchmark system it is appropriate to iron out small differences in travel time
costs.
It is incumbent upon solicitors to make appropriate use of telephone attendance
facilities or local agents. Moreover it is usually neither reasonable nor proportionate to
spend more than an hour travelling to a benchmarked appointment.
Where however longer
travel time is justified and the difference is not small, the court, in its discretion may make an
appropriate adjustment.
9.
DOES THE BENCHMARK APPLY IF THE ACTUAL COURT TIME IS
GREATER OR LESS THAN THE ASSUMED COURT TIME?
Given the criteria upon which benchmarks are based (see para 3, above), the time taken in
court in a particular case will not normally be a reliable guide as to the amount of costs it is
62
reasonable to allow.
Moreover, experience shows that cases which occupy the shortest
court time are often those which are the best prepared and/or are those in which the parties
have usefully communicated with each other. Thus, as a general rule, it will not be
appropriate to vary the benchmark costs where the time spent in court is less than expected or
is slightly more than expected.
On the other hand, the fact that the time spent in court was
substantially more than expected may lay the foundation for a submission that the benchmark
is inappropriate.
10.
WHEN IS IT REASONABLE TO INSTRUCT SOLICITORS WHO ARE
BASED IN AN EXPENSIVE INNER CITY AREA OR IN A LOCALITY DISTANT
FROM THE COURT IN QUESTION?
When costs are increased because the receiving party instructed solicitors based in an
expensive inner city area or in a locality distant from the court in question, the paying party
may complain that the instruction of those solicitors amounts to an unreasonable or “luxury”
choice. In deciding whether such a complaint is sustainable, the court should consider the
reasonableness of the receiving party’s choice of solicitor in accordance with the principles
laid down in Wraith v Sheffield Forgemasters Ltd [1998] 1 WLR 132 CA and Sullivan v CoOperative Insurance Society, The Times, 13 May 1999.
The fact that it may have been
reasonable to instruct a less expensive firm does not necessarily mean that it was
unreasonable to instruct the firm he or she did.
If satisfied that the receiving party’s choice of solicitor was reasonable, the benchmark
appropriate to that solicitor’s locality should be considered. If the court is not satisfied that
the receiving party’s choice of solicitor was reasonable, the benchmark appropriate to a
solicitor located in the less expensive area should be considered.
63
11.
WHICH BENCHMARK APPLIES TO A NON LONDON FIRM INVOLVED
IN A CASE IN THE ROYAL COURTS OF JUSTICE?
This question arises only if the receiving party’s decision to instruct a non London firm is
reasonable: as to this see para 10, above.
Assuming that that choice was reasonable, the
next point to consider is whether it would be reasonable to claim the costs of the chosen
solicitor travelling to court rather than employing a London agent.
In benchmark 1 appeals to the Court of Appeal on quantum of personal injury damages only,
listed for one half day or less), travel by the chosen solicitor has been regarded as reasonable
and this is reflected in the different benchmarks suggested for each locality.
In most proceedings suitable for benchmarking the assumption has been made that the
attendance of a distant solicitor instead of an agent would be unreasonable where the costs of
doing so are greater than the benchmark recommended for outer London solicitors.
In these
cases the benchmark recommended for outer London solicitors is considered the nearest
approximation it is possible to give of the reasonable costs incurred in a matter attended by a
London agent.
Adopting this benchmark means that allowance is made for all the solicitor’s work at the
higher London rate even though some, if not most, of the work will actually be done at the
lower regional rate.
The choice of the outer London benchmark rather than the Central
London benchmark is for two reasons. First, although most London agents are located in
Central London, the rates they charge are often nearer the Outer London rates. Secondly, the
extra travel time allowance included in the Outer London rate (30 minutes) matches the costs
64
appropriate in respect of the additional costs of instructing an agent and perusing his report.
London hourly rates are higher than hourly rates in any other part of the country. In cases
suitable for benchmark costs the additional costs of instructing an agent should not greatly
exceed 30 minutes of the principal solicitor’s time.
If, in an exceptional case, the actual costs of instructing an agent and the agent’s reasonable
fees exceed the outer London benchmark, it is open to the receiving party to file and serve a
statement of costs and claim the actual costs instead.
12.
OUTSIDE LONDON, WHICH BENCHMARK APPLIES TO FIRMS
INVOLVED IN CASES IN COURTS DISTANT FROM THEM?
This question arises only if the receiving party’s decision to instruct a distant firm is
reasonable: as to this see para 10, above.
Assuming that that choice was reasonable, the
next point to consider is whether it would be reasonable to claim the costs of the chosen
solicitor travelling to court rather than employing a local agent.
No benchmarks are recommended for cases outside London in which it is reasonable to claim
the costs of the chosen solicitor travelling to a distant court.
In these cases a statement of
costs should be filed and served unless the receiving party is content to accept the benchmark
appropriate to an agent (see below).
In cases in which costs exceeding the costs of employing a local agent are unreasonable, the
benchmark to be considered is the benchmark for the area local to the court or the benchmark
for the distant locality, whichever is the greater.
Adopting the higher benchmark means
that allowance is made for all the solicitor’s work at the higher hourly rate, even though some
65
if not most of the work will actually be done at the lower hourly rate. If, in an exceptional
case, the actual costs of instructing an agent and the agent’s reasonable fees exceed the higher
of the two benchmarks, it is open to the receiving party to file and serve a statement of costs
and claim the actual costs instead.
13.
IS THE BENCHMARK APPROPRIATE WHERE ONE OR BOTH PARTIES
ARE LITIGANTS IN PERSON?
If the receiving party is a litigant in person the recommended benchmark has no relevance
save to indicate the cap upon the maximum costs recoverable by that party.
CPR rule 48.6
permits litigants in person to recover reasonable costs in respect of disbursements they have
made and a sum in respect of the time they have spent on work which might otherwise have
been done by a legal representative. This sum, which cannot exceed two thirds of the
amount which would have been allowed in respect of a legal representative doing the work,
should take into account any financial loss actually suffered by the litigant in person, or, if no
financial loss is suffered, an amount calculated at the rate of £9.25 in respect of time
reasonably spent.
In a case otherwise suitable for benchmark costs, the fact that the paying party was a litigant
in person will not normally bring about any increase in the reasonable costs which the
represented receiving party may incur.
Where it does bring about such an increase, the
represented receiving party should file and serve a statement of costs in advance of the
hearing.
A statement of costs may not be necessary if the only increase claimed is increased
time in the attendance at court.
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14.
CLAIMS THAT THE BENCHMARK IS TOO HIGH OR TOO LOW
As a general rule, if the paying party intends to claim that the benchmark is too high, he
should give his opponent reasonable notice about that claim so enabling the opponent to file a
statement of costs (see para 6, above).
In the absence of a statement of costs from the
receiving party the practical choices for the court will normally be between awarding the
benchmark (if appropriate) or ordering a detailed assessment, with or without a payment on
account.
It will not normally be appropriate to allow less than the benchmark costs merely
because the time spent in court is less than was allowed for in the benchmark (see para 8
above), or because, for example, the benchmark assumes certain counsel’s fees and the
receiving party did not instruct counsel (see para 5).
As a general rule, a receiving party who seeks costs exceeding the benchmark figure must file
and serve a statement of costs in advance of the hearing.
However, where the only extra
costs claimed are in respect of additional travel and waiting time, it may be appropriate to
summarily assess the costs in question without such a statement (see further, para 7 above).
15.
IN WHAT CIRCUMSTANCES IS VAT RECOVERABLE?
The VAT claimed in the bills delivered by a solicitor or counsel is a tax payable by the
person to whom the legal services were supplied, ie, the client.
If the client is a VAT
registered taxable person and the supply of legal services was obtained for the purpose of his
business, the client will be entitled to recapture the tax paid from tax he collects from others.
Thus, if the client in question is the receiving party, the relevant benchmark to apply is the
benchmark excluding VAT.
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In certain cases a person or company registered for VAT is only able to recapture a fraction
of any VAT they incur.
If such a person is a receiving party and produces to the court a
certificate substantially in Form F(6) in the Schedule of Costs Precedents the court may
consider awarding the benchmark exclusive of VAT plus that proportion of the VAT which
cannot be recaptured from tax collected from others.
The alternative in such a case is for
the court to order a detailed assessment of costs with or without a payment on account.
The benchmark exclusive of VAT is also appropriate in the following cases:
(i)
the receiving party is domiciled outside the European Union;
(ii)
the receiving party is domiciled outside the UK but is domiciled in the European
Union and received the supply of legal services for the purposes of his or her
business; or
(iii)
the receiving party is a solicitor representing himself (the “self supply” exception to
VAT).
16.
THE ORDER FOR BENCHMARK COSTS
Ideally, the order for costs should specify in pounds sterling the amount of benchmark costs
allowed. Uncertainty and confusion may arise if the court file merely records “benchmark
costs to the claimant”, “benchmark costs reserved”, “benchmark costs in the case” or
“defendant’s benchmark costs in the case” as the case may be.
is drawn up, the amount of benchmark costs should be stated.
In each case, when the order
Plainly, a reference to
benchmark costs only may cause uncertainty and confusion in cases where:
(i)
the receiving party’s solicitors are based in an expensive inner city area or in a
locality distant from the court awarding costs;
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(ii)
there was a dispute as to the recoverability of VAT by the receiving party but the fact
of that dispute and/or the ruling made does not appear in the court file.
Appendix 3
Guideline Figures for the summary assessment of costs
Solicitor’s hourly rates
The guideline rates for solicitors provided here are broad approximations only. In any
particular area the Designated Civil Judge may supply more exact guidelines for rates in that
area. Also the costs estimate provided by the paying party may give further guidance if the
solicitors for both parties are based in the same locality.
The following diagram shows guideline figures for each of three bands outside the London
area, and a further three bands within the London area with a statement of the localities
included in each band. In each band there are four columns specifying figures for different
grades of fee earner.
Localities
The guideline figures have been grouped according to locality by way of general guidance
only. Although many firms may be comparable with others in the same locality, some of
them will not be. For example, a firm located in the City of London which specialises in fast
track personal injury claims may not be comparable with other firms in that locality and vice
versa.
In any particular case the hourly rate it is reasonable to allow should be determined by
reference to the rates charged by comparable firms. For this purpose the costs estimate
supplied by the paying party may be of assistance The rate to allow should not be determined
by reference to locality or postcode alone.
Grades of fee earner
The grades of fee earner have been agreed between representatives of the Supreme Court
Costs Office, the Association of District Judges and the Law Society. The categories are as
follows:
1. Solicitors with over eight years post qualification experience including at least eight
years litigation experience.
2. Solicitors and legal executives with over four years post qualification experience
including at least four years litigation experience.
3. Other solicitors and legal executives and fee earners of equivalent experience.
4. Trainee solicitors, para legals and other fee earners.
"Legal Executive" means a Fellow of the Institute of Legal Executives. Those who are not
Fellows of the Institute are not entitled to call themselves legal executives and in principle are
therefore not entitled to the same hourly rate as a legal executive.
70
Unqualified clerks who are fee earners of equivalent experience may be entitled to similar
rates and in this regard it should be borne in mind that Fellows of the Institute of Legal
Executives generally spend two years in a solicitor’s office before passing their Part 1 general
examinations, spend a further two years before passing the Part 2 specialist examinations and
then complete a further two years in practice before being able to become Fellows. Fellows
have therefore possess considerable practical experience and academic achievement. Clerks
without the equivalent experience of legal executives will be treated as being in the bottom
grade of fee earner ie. trainee solicitors and fee earners of equivalent experience. Whether or
not a fee earner has equivalent experience is ultimately a matter for the discretion of the
court.
Rates to allow for senior fee earners
Many High Court cases justify fee earners at a senior level. However the same may not be
true of attendance at pre-trial hearings with counsel. The task of sitting behind counsel should
be delegated to a more junior fee earner in all but the most important pre-trial hearings. The
fact that the receiving party insisted upon the senior’s attendance, or the fact that the fee
earner is a sole practitioner who has no juniors to delegate to, should not be the determinative
factors. As with hourly rates the costs estimate supplied by the paying party may be of
assistance. What grade of fee earner did they use?
An hourly rate in excess of the guideline figures may be appropriate for Grade A fee earners
in substantial and complex litigation where other factors, including the value of the litigation,
the level of complexity, the urgency or importance of the matter as well as any international
element would justify a significantly higher rate to reflect higher average costs.
Guideline Rates for Summary assessment
January 2007
Band One Grade *
A**
B
Guideline Rates
195
173
Aldershot, Farnham, Bournemouth (including Poole)
Birmingham Inner
Bristol
Cambridge City, Harlow
Canterbury, Maidstone, Medway & Tunbridge Wells
Cardiff (Inner)
Chelmsford South, Essex & East Suffolk
Fareham, Winchester
Hampshire, Dorset, Wiltshire, Isle of Wight
Kingston, Guildford, Reigate, Epsom
Leeds Inner (within 2 kilometers radius of the City Art Gallery)
Lewes
Liverpool, Birkenhead
Manchester Central
Newcastle - City Centre (within a 2 mile radius of St Nicholas Cathedral)
Norwich City
C
145
D
106
71
Nottingham City
Oxford, Thames Valley
Southampton, Portsmouth
Swindon, Basingstoke
Watford
Band Two Grade *
A**
B
C
Guideline Rates
183
161
133
Bath, Cheltenham and Gloucester, Taunton, Yeovil
Bury
Chelmsford North, Cambridge County, Peterborough, Bury St E, Norfolk,
Lowestoft
Chester & North Wales
Coventry, Rugby, Nuneaton, Stratford and Warwick
Exeter, Plymouth
Hull (City)
Leeds Outer, Wakefield & Pontefract
Leigh
Lincoln
Luton, Bedford, St Albans, Hitchin, Hertford
Manchester Outer, Oldham, Bolton, Tameside
Newcastle (other than City Centre)
Nottingham & Derbyshire
Sheffield, Doncaster and South Yorkshire
Southport
St Helens
Stockport, Altrincham, Salford
Swansea, Newport, Cardiff (Outer)
Wigan
Wolverhampton, Walsall, Dudley & Stourbridge
York, Harrogate
D
101
Band Three Grade *
A**
B
C
Guideline Rates
167
150
128
Birmingham Outer
Bradford (Dewsbury, Halifax, Huddersfield, Keighley & Skipton)
Cumbria
Devon, Cornwall
Grimsby, Skegness
Hull Outer
Kidderminster
Northampton & Leicester
Preston, Lancaster, Blackpool, Chorley, Accrington, Burnley, Blackburn,
Rawenstall & Nelson
Scarborough & Ripon
D
95
72
Stafford, Stoke, Tamworth
Teesside
Worcester, Hereford, Evesham and Redditch
Shrewsbury, Telford, Ludlow, Oswestry
South & West Wales
LONDON
BANDS
Grade *
City of London:
EC1, EC2, EC3, EC4
Central London:
W1, WC1, WC2, SW1
Outer London:
(All other London post codes: W, NW, N, E, SE, SW and Bromley,
Croydon, Dartford, Gravesend and Uxbridge)
A**
B
C D
380
274
210 129
292
222
181 116
210246
158210
152 111
*There are four grades of fee earner:
1. A.Solicitors with over 8 years post qualification experience including at least 8 years
litigation experience.
2. B.Solicitors and legal executives with over 4 years post qualification experience
including at least 4 years litigation experience.
3. C.Other solicitors and legal executives and fee earners of equivalent experience.
4. D.Trainee Solicitors, para legals and fee earners of equivalent experience.
Note:"legal executive`" means a Fellow of the Institute of Legal Executives.
**An hourly rate in excess of the guideline figures may be appropriate for Grade A fee
earners in substantial and complex litigation where other factors, including the value of the
litigation, the level of complexity, the urgency or importance of the matter as well as any
international element would justify a significantly higher rate to reflect higher average costs.
Counsel's Fees
The following table sets out figures based on Supreme Court Costs Office statistics dealing
with run of the mill proceedings in the Queens Bench and Chancery Division and in the
Administrative Court. The table gives figures for cases lasting up to an hour and up to half a
day, in respect of counsel up to five years call, up to ten years call and over ten years call. It
is emphasised that these figures are not recommended rates but it is hoped that they may
provide a helpful starting point for judges when assessing counsel’s fees. The appropriate fee
in any particular case may be more or less than the figures appearing in the table, depending
upon the circumstances.
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The table does not include any figures in respect of leading counsel’s fees since such cases
would self evidently be exceptional. Similarly, no figures are included for the Commercial
Court or the Technology & Construction Court.
Table of Counsel's Fees
Queens Bench
1 hour hearing ½ day hearing
Junior up to 5 years call £259
£450
Junior 5 - 10 years call £386
£767
Junior 10+ years call £582
£1,164
Chancery Division
Junior up to 5 years call £291
£556
Junior 5 - 10 years call £497
£931
Junior 10+ years call £757
£1,397
Administrative Court
Junior up to 5 years call £381
£582
Junior 5 - 10 years call £698
£1,164
Junior 10+ years call £989
£1,746
If the paying parties were represented by counsel, the fee paid to their counsel is an important
factor but not a conclusive one on the question of fees payable to the receiving party’s
counsel.
In deciding upon the appropriate fee for counsel the question is not simply one of counsel’s
experience and seniority but also of the level of counsel which the particular case merits.
Counsel’s fees should not be allowed in cases in which it was not reasonable to have
instructed counsel, but it must be borne in mind that, especially in substantial hearings, it may
be more economical if the advocacy is conducted by counsel rather than a solicitor. In all
cases the court should consider whether or not the decision to instruct counsel has led to an
increase in costs and whether that increase is justifiable.