28 July 2022

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Court of Appeal warns again over need to justify hourly rates that exceed guideline figures

Deputy head of civil justice makes clear that this applies to heaviest commercial work in London 1 as well

The Court of Appeal has issued another warning about the need to justify a significant departure from the guideline hourly rates (GHR) and made clear that this applied to heavy commercial work covered by London 1 rates.

In Athena Capital Fund SICAV-FIS SCA & Ors v Secretariat of State for the Holy See (Costs) [2022] EWCA Civ 1061, the court held that Simon Salzedo QC sitting as a deputy High Court judge, was wrong to impose a case management stay of the proceedings. It went on to consider a payment on account of costs in favour of the appellants.

Lord Justice Males said the hearing before the judge took place over two days but included “numerous issues which formed no part of the appeal”. The hearing of the appeal was listed for one and a half days but was concluded in one.

“It therefore came as something of a surprise that, according to the statements of costs filed by the parties, the total costs of the appeal amounted to over £730,000. The appellants' costs amounted to some £380,000, while the respondent's costs amounted to some £350,000, including some £30,000 in translation fees.”

The appellants' solicitors' costs comprised £175,000 – including hourly rates charged “well in excess” of the GHR – while the fees of leading and junior counsel exceeded £200,000. The respondent's solicitors' costs were £100,000, while counsel's fees (leading and two junior counsel) were £215,000.

Males LJ reiterated his comments from April, in Samsung v LG, that a party has to provide a “clear and compelling” justification for rates well above the GHR. “No such justification has been advanced in this case,” he observed.

He continued: “Counsel's fees are not subject to guideline rates in the same way that solicitors' fees are, but it is nevertheless important to stress that, whatever clients may be prepared to pay their own counsel, only a reasonable and proportionate fee may be recovered from the other side.

“While acknowledging the valuable assistance which we received from counsel on both sides, the fees charged in this case are well above that level.

“The only issue was whether the judge had exercised his discretion wrongly in granting a case management stay. It would be highly regrettable if a one-day appeal to this court, even in a commercial case involving international parties and some degree of complexity, could not be conducted without incurring the risk of liability for lawyers' fees on this scale.”

Males LJ said it was “a striking feature” of the case that, although “almost every possible point has been taken on both sides in the course of this appeal”, there had been no challenge to the appellants’ costs.

“However, the costs payable by the losing party on the standard basis are limited to those which are reasonable and proportionate. Where the costs of the paying party are also disproportionately high, that can make no difference…

“Taking these matters into account, I would make an order for payment on account of £100,000.”

Lord Justice Birss, the deputy head of civil justice, weighed in on one point: “In my experience there has been a view that the previous set of guideline hourly rates (before 2021) were not directed to the heaviest work such as takes place in the Business and Property Courts. In part no doubt this was because they were so out of date.

“Whatever the position was or was thought to be, it changed in the current set of guideline hourly rates, which were approved by the Master of the Rolls in August 2021. As my Lord pointed out in Samsung v LG, the current set includes a band called ‘London 1’, which is a set of rates directed expressly to very heavy commercial and corporate work by centrally London based firms.

“I would add that the London 1 rates band in the current guideline hourly rates is based on evidence from the Business and Property Courts themselves (see the Civil Justice Council's Final Report of April 2021). Therefore, the London 1 band is directly applicable to this case and so a justification for the much higher rates was needed.”

Charles Samek QC and Tetyana Nesterchuk (instructed by Withers) for the appellants. Charles Hollander QC, Samar Abbas Kazmi & James Bradford (instructed by Hill Dickinson) for the respondent.