Costs News

30 May 2019
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Costs of appeal over costs order slashed because of excessive work by solicitors

The Court of Appeal has slashed the costs claimed by a party that was successful in overturning an earlier costs order because most of the work should have been done by counsel.

In Jofa Ltd and Anor v Benherst Finance Ltd and Anor [2019] EWCA Civ 899, the Court of Appeal overturned a decision by HHJ Melissa Clarke, sitting as a High Court judge, who ordered the appellants pay a proportion of the respondents’ costs of applying for a Norwich Pharmacal order.

It found that the judge was wrong to adopt as the starting point that the usual order would be that no order should be made as to the costs of the application; rather the applicant should normally be ordered to pay the costs of the party ordered to give disclosure, including the costs of the application.

There was disagreement between the parties as to the extent of this presumption and the circumstances which justify departure from the general rule.

Lord Justice Leggatt – with whom the Master of the Rolls, Sir Terence Etherton, agreed – said that, while it was not an absolute rule, “I find it hard to envisage circumstances in which it would be just to award costs against a respondent to a Norwich Pharmacal application who, before agreeing to disclose documents, has done no more than require the applicant to satisfy the court that such an order is appropriate”.

In this case, it was “not unreasonable” for the appellants – who did not resist the application – to require the respondents to satisfy the court that an order for disclosure should be made and to insist that any order should include, “as an undertaking to the court and not merely as a promise made in correspondence”, a requirement to reimburse them for any costs reasonably incurred in complying with it.

The judge decided not to make an order for costs, first because it had not been suggested that the appellants incurred any costs of legal advice or assistance in connection with the application which they ought to have been awarded. Further, there was some criticism to be made of the appellants’ failure to respond to a pre-action letter.

In a postscript on the costs of the appeal, however, Leggatt LJ observed: “Remarkably, the amount of costs claimed by the appellants – for an appeal against a costs order for £23,000 – is £71,072. To say, as counsel for the appellants does, that this figure ‘may be seen as slightly higher than anticipated’ is a mastery of understatement.”

He said the appellants should be paid the costs of the appeal, which, “as the preparation was straightforward and the hearing lasted less than two hours, should be summarily assessed”.

Counsel’s own fees for advice on the appeal and for the hearing amount to £6,662, which the judge said were reasonable and proportionate.

The costs claimed by the appellants’ solicitors, AMZ Law, however, included “very large sums which appear, on their face, to be manifestly unreasonable as between themselves and their clients, let alone as costs claimed from the respondents”.

Among the “glaring” examples were 15 hours spent “considering” the witness statement filed in support of their Norwich Pharmacal application, “most of which was of little relevance to the issues on this appeal”, and 14 hours preparing a five-page witness statement from one of the appellants “although no application was ever made (or could realistically have been made) to introduce this statement as evidence on the appeal”.

Leggatt LJ also highlighted 18 hours billed for preparing a “straightforward” 200-page bundle, with a further 14 hours then spent “reviewing” the bundle, and eight hours of attendance by each of two solicitors at a hearing for which the time estimate was one hour, with a further two hours each of travelling time.

He continued: “As indicated in the Guide to the Summary Assessment of Costs, para 65, where both counsel and solicitors have been instructed on a short appeal, the reasonable fees of counsel are likely to exceed the reasonable fees of the solicitor, the main element of the solicitor’s work is to instruct counsel and prepare the appeal bundle, and there is usually no reason for the solicitor to spend many hours perusing papers or to work on legal submissions when the legal argument is being handled by counsel.

“In my view, a reasonable allowance for the costs incurred by the appellants’ solicitors on this appeal is £4,500 (representing 20 hours of work at an hourly rate of £225). Taking into account court fees of £1,727 and some other minor expenses incurred, I would summarily assess the costs recoverable by the appellants in a sum of £13,000.”

Graeme Kirk (instructed by AMZ Law) for the appellants, and Jonathan Cohen QC (instructed by Edmonds Marshall McMahon) for the respondents.

 

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