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Unusual costs will be considered to be unreasonably incurred

View profile for Rebecca Peters
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Some useful advice was provided by Master Rowley in the matter of Breyer Group & Ors v Prospect Law Limited (SCCO) (26 July 2017) in relation to solicitor own-client costs.  The Defendant in this matter was one of several firms who successfully brought judicial review proceedings on behalf of a number of clients against the Secretary of State for the Department of Energy and Climate Change.  The Claimants challenged the costs claimed by the Defendant on the basis that the work carried out was unusual.

CPR46.9 governs the assessment of solicitor client costs. CPR46.9(3) states:-

(3) Subject to Paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed –

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

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

    (c) to have been unreasonably incurred if –

(i) they are of an unusual nature or amount; and

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

Paragraph 6.1 of Practice Direction 46 includes the following:-

"A client and solicitor may agree whatever terms they consider appropriate about the payment of the solicitor's charges.  If however, the costs are of an unusual nature, either in amount or the type of costs incurred, those costs will be presumed to have been unreasonably incurred unless the solicitor satisfies the Court that the client was informed that they were unusual and that they might not be allowed on an assessment of costs between the parties.  That information must have been given to the client before the costs were incurred".

10 minute units

The Defendant's terms and conditions with the Claimants stated that routine correspondence would be charged at one sixth of an hourly rate, being 10 minutes.  Of course, routine items are ordinarily charged at one tenth of an hour, being 6 minutes and CPR PD 47, paragraph 5.22 makes it clear that routine correspondence will be charged at 6 minutes.  In his judgment Master Rowley confirmed that as a result of this Practice Direction, the prospect of recovering 10 minute units between the parties was non-existent. The Defendant's argument was that it was a time period expressly agreed by the Claimants and as such ought to be presumed reasonable. 

Master Rowley went on to confirm that it was uncommon practice and that whilst a routine letter could hardly be described as unusual in nature, the charging of 10 minutes could properly be described as being unusual in nature and that it was beyond doubt that it was unusual in amount. 

The warnings given by the Defendant in relation to the recoverability of the fees was also considered.  The Defendant's general terms set out the detailed assessment procedure and stated that almost every bill was reduced from the sum claimed and a factor of 30% envisaged by the Defendant's warning was a common percentage used.  However, Master Rowley found that this was not a sufficient warning and he accepted the Claimants' challenge to the use of 10 minute units on routine items.

Master Rowley went on at [30] to state:

‘It seems to me to be unrealistic in such circumstances that the client is given a warning before every instruction that such work may not be recoverable from the opponent.  In my view, the client safeguard in 46.9(3)(c) operates at a higher threshold than this.  It is designed to protect the client from, as I have found, matters such as 10 minute units being claimed which could not possibly be recovered from the Defendant in a between the parties’ assessment.  It is not a method of importing all of the expectations of a standard basis between the parties' assessment into a solicitor and client relationship'.

Incoming correspondence

The Defendant charged for considering routine items, however, CPR PD 47, Paragraph 5.22 is clear on the fact that you can claim routine correspondence out but not routine correspondence in.  Master Rowley held that given that there is a clear indication in the Practice Direction that considering correspondence in will not be recoverable on a detailed assessment against the opponent, the decision to charge for such items should be explained to the client before such costs are incurred.  Master Rowley stated that it was not uncommon or unusual practice for solicitors to charge their clients for incoming correspondence and he therefore did not consider that charging for such was unusual in nature.  However, charging for incoming correspondence in this case was exacerbated by the fact that the applicable rate equates to one sixth of the hourly rate and not one tenth.

Master Rowley concluded that to disallow all of the incoming correspondence would be inappropriate just as allowing the full rate would be. A broad brush approach was therefore applied and all incoming correspondence claimed was allowed at half the rate of the outgoing correspondence (i.e. one twentieth of an hourly rate). 

Potential Claimants

Charges were made for communicating with and attending upon potential Claimants.  The Claimants argued that such costs were not recoverable for two reasons.  The first being that work done by solicitors in gathering new clients is essentially work done on the solicitors' own behalf and that before the retainer is entered into the solicitor is acting on his own behalf rather than on the clients.  The second argument was that the costs relating to Claimants who did sign up to the claim would have such costs ascribed entirely to them as being individual costs and not common costs. 

The Defendant argued that the actual Claimants had instructed the Defendant to garner as many clients as possible and that by recruiting more clients, the overall cost to each client would be reduced.  Master Rowley agreed entirely with the Defendant's point and stated that, in his judgment, this was a simple case of solicitors being expressly authorised to carry out work under the terms of their retainer and is in principle no different to being instructed to engage a PR consultant or other expert.  For these reasons, Master Rowley did not accept that the costs were unusual in nature or amount.

Preparing and providing client care letters

The Claimants argued that the costs claimed in relation to preparing and providing client care letters to potential Claimants was not recoverable.  However, for the same reasons applied above, Master Rowley did not accept that the costs were unusual in nature or amount.

Invoicing and credit control

The Claimants argued that these costs were administrative and not fee earner work.  Master Rowley confirmed that invoicing and credit control is generally speaking an administrative matter which ought to be covered by the solicitor's overheads.  Master Rowley stated that where disputes regarding the level of the invoice and the promptitude of payment are such that the conducting solicitor is required to broach matters with his client, then on a solicitor client basis it would seem such costs are recoverable.  However, such matters would naturally fall within the individual costs rather than the common costs because the financial status of the client and any laxity in the client's own administration should fall to be paid by that client, rather than the Claimants in general.

Conclusion

This case and CPR46.9(3) highlights the importance of warning a client of any costs which may not be recovered from the other party where the costs claimed are of an unusual nature or amount, as a failure to tell your client may result in significant costs consequences.  This case also highlights the importance of recording time in 6 minute units!

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