Costs News

06 August 2020
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Council solicitor claiming guideline hourly rate did not breach indemnity principle

The High Court has rejected a challenge to the guideline hourly rate (GHR) sought by a council solicitor where the claimant said figures provided by the council showed there was a breach of the indemnity principle.

However, Mr Justice Mostyn also penalised the council for not submitting a Form N260 for the hearing at which the challenge was considered.

R (On the application of Kuznetsov) v London Borough of Camden [2019] EWHC 3910 (Admin) – which was handed down last November but only published last week – followed a judicial review in a housing dispute. The claimant argued that the summarily assessed costs of £11,614 awarded against him breached the indemnity principle.

The council’s in-house solicitor claimed at the GHR of £317. The claimant, following a Freedom of Information Act request he made to the London Borough of Camden, discovered that the maximum hourly rate paid to its in-house lawyers was £41.75. Even allowing for overhead costs, the figure would still be far below £317, he argued.

Mostyn J noted that the decision in Re Eastwood (Deceased) [1975] Ch 112 had survived the advent of the CPR. There, the Court of Appeal held, where a party was represented by a salaried solicitor, their bill should be treated as though it were the bill of an independent solicitor assessing the reasonable and fair amount of a discretionary item, having regard to all the circumstances of the case and the principle that the tax costs should not be more than an indemnity to the party against the expense he had incurred in litigation.

The claimant’s counsel in Kuznetsov acknowledged that it would be “highly exceptional” to depart from the GHR, but argued the information obtained provided “good evidence… to show that the figure of £317 wildly exceeds the maximum possible costs that have been incurred by the London Borough of Camden, and that therefore the indemnity principle is being breached”.

Mostyn J ruled: “Although the argument has been very persuasively put, I do not agree with it. The £317 encompasses a great deal more than just the costs, the payroll costs, of the people sitting in the offices of the London Borough of Camden. It extends to a contribution to the infrastructural costs of the borough itself.

“Certainly, it extends to the costs of maintaining not only all the equipment, utilities and all other office costs, but the capital costs of the building in which the legal department is itself housed. So, one would be reasonably expected to apply figures for notional rent, for example.

“I cannot see that this case is, by virtue of the evidence that is before me, a special case allowing an exception to the general rule. I concur with Russell J [in Re Eastwood] that to investigate this matter would be unworkable in practice and to push abstract principle to the point where it ceases to give results consistent with justice.”

However, on the costs of this hearing, he refused to order costs for the council because it had not filed the Form N260.

Mostyn J said: “It is my practice in such circumstances, where the court is charged with a duty to bring closure by summary assessment, and where there is a positive duty to file a Form N260, the legal advisers having failed to do so they, having made that bed, must lie in it and they will not get an award of costs. In relation to today, there will be no order as to costs.”

During the ruling, the judge observed in passing that it was “surprising” that the GHRs have not been increased since 2010.

He also noted that costs have followed the event since the reign of Henry VIII, when Parliament passed a statute in 1531 entitled: "An Act that the Defendant shall recover costs against the Plaintiff if the Plaintiff be nonsuited or if the verdict passed against him."

Mr D Burkitt (instructed by Direct Access) appeared on behalf of the claimant, with Ms T Conlan (instructed by the legal department of the local authority) for the defendant.

 

Picture credit: Henry VIII, by Lucas Horenbout (circa 1526). From the collection of the Art Gallery of South Australia via Wikimedia Commons, and in the public domain.

Comments

Anonymous   10/08/2020 at 12:28

Its clearly a breach of the indemnity principle - there's a huge difference between the GHR and the real cost here. I hope this is appealed Re Eastwood needs revisited.

Caroline Cousins   10/08/2020 at 16:46

I think that this decision is clearly right. All cases challenging the issue have had the same result (say, see Cole v BT, R (on the application of Mazanov Bakhtiyar) v SSHD and Sidewalk Properties v Twinn, and the Maes Finance case is clear that the rates can include the care and conduct allowance for inhouse solicitors - so back to the old A&B rate elements. It's not just a question of the cost of the work done.

Anonymous   11/08/2020 at 08:18

Re Eastwood is flawed - its logic is that it is too complicated to work out how much an in-house solicitor costs so instead the GHRs are used. In reality it is not complicated and a close approximation can be arrived at by referencing the in-house solicitors salary. The GHRs are clearly too high and will almost always breach both the indemnity principle and the guidance that any doubt in costs matters will be resolved in favour of the paying party. A far better approach would be to base recoverable costs on the salary of the in-house solicitor (utterly simple to obtain) with a small uplift for ancillary costs, care and conduct allowance, etc. The receiving party could in exceptional cases challenge this if it was felt to he unfair. All of the cases cited have resulted in an injustice to the paying party and the receiving party being able to recover significantly more than they have spent. Flawed as it is, Eastman does allow recoverable costs for in-house solicitors to be looked at in exceptional circumstances, but this judgment didn't even recognise this in a case where the paying party has gone to the bother of obtaining evidence on the true costs and put it before the court. The court have ignored plain facts - in this case it is clear that GHRs are an inappropriate basis. So this decision was wrong both in the context of the flawed Re Eastman rules (obsolete and in need of fresh CoA review) and even within the existing flawed guidelines set out in Re Eastman.

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