England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE BASILDON COUNTY COURT
(His Honour Judge Worsley)

		Royal Courts of Justice Strand London WC2 Friday, 23rd February 2001

Friday, 23rd February 2001

1. LORD JUSTICE PETER GIBSON: Remarkably this is a second appeal relating to a sum of only £2,115 legal fees claimed by solicitors from their clients. I say "remarkably" because the relevant judicial decisions in this case have all been given since the Civil Procedure Rules came into force in April 1999 and that part of the overriding objective in Part 1 which refers to proportionality in the conduct of cases might have been thought significant. The judge in the County Court, who on the appeal to him reversed the decision of the District Judge, referred, with evident disapproval, to the appeal having been "a Rolls Royce operation" and substantially reduced the successful appellant's bill of costs on a summary assessment. At the moment we do not know the amount of costs incurred by each side on this appeal, but given the volume of paper which has been put before us and the extensive skeleton arguments, it would come as no surprise if the costs of each side substantially exceeded the amount at stake. This does not seem to me to be litigation conducted in a manner proportionate to the amount of money involved or the importance of the case or the complexity of the issues. Further, a disproportionate share of the court's resources have been allocated to this case for which a half-day time estimate was given.
2. The dispute arises out of a contract of retainer whereby the claimant, Peter Carter-Ruck & Partners, on or about 5th June 1997, was engaged to act as solicitors to the first defendant, Mr Holmes, and the second defendant, his mother, Mrs Holmes. At the outset the terms on which the claimant would charge fees, including the hourly rates, was made clear. The reason why the defendants had gone to the claimant was that they were unhappy about statements made by two other firms of solicitors in letters sent to the defendants and their solicitors. The claimant is well-known as a specialist in the field of defamation law.
3. Ruth Collard was the partner in the claimant initially instructed to act. She was not optimistic as to the outcome of taking any libel proceedings against the two firms, and made clear to the defendants her reservations. On instructions from them, she prepared draft letters to be sent to the two firms. Protracted correspondence and telephone calls between Miss Collard and the defendants about those letters and about Miss Collard's advice ensued. The defendants were unhappy with her advice. She suggested that the defendants go to other solicitors, but the defendants refused. When the relationship deteriorated further, she wrote to the defendants proposing to terminate the retainer. The defendants urged her not to abandon them in their "dire circumstances". It was agreed that another partner in the claimant, Nigel Tait, should take over from Miss Collard and again the hourly rates were agreed. Further work was done by him on the defendants' instructions. Again the relationship with the defendants became strained. On 3rd December 1997 Mr Tait terminated the retainer. Two bills issued by the claimant, one for work done by Miss Collard and the other for work done by Mr Tait, each in the sum of £587.50, were paid. The defendants refused to pay three other bills totalling £2,115.
4. The claimant commenced proceedings in the Basildon County Court against Mr Holmes on 5th February 1999, Mrs Holmes being added as second defendant later. The claimant claimed £2,115 for breach of contract by the defendants in failing to pay the outstanding bills. The defendants defended the claim, alleging that the claimant acted in bad faith in its dealings with the defendants, rendered an inadequate professional service, and that the costs were excessive and out of all proportion to the nature of the matter in which it was instructed. The defendants counterclaimed for the return of the £1,175 paid.
5. The dispute went to small claims arbitration before District Judge Dudley. The hearing commenced on 26th February 1999, but was not completed that day. It was concluded at a hearing three months later. The claimant was represented by a solicitor, the defendants by counsel, Mr Haidemenos, who appeared before the judge and appears before us today. A comprehensive bundle of documents was placed before the District Judge. He heard the oral evidence of Miss Collard, Mr Tait and Mr Holmes. He reserved his judgment, making his award on 4th June 1999. In it he set out the history of the relationship. He said that Mr Holmes was in error in calling for a remuneration certificate at one point when he should have been asking for a solicitor and own client taxation of costs pursuant to the Solicitors Act 1974. He considered four issues which had been raised by Mr Haidemenos in his closing submissions. One of those issues was: "Were costs charged out of all proportion with what was being achieved?" On that issue and one other, he found against the claimant, albeit that he said that Mr Holmes was insisting that the claimant undertook further work at a time when the claimant was suggesting that it should withdraw. On two issues the District Judge decided against the defendants. The District Judge said that the claimant should not recover on its claim, because by the time fees to the value of £1,175 had been incurred it must have been clear that the defendants were deeply unhappy with the claimant's advice, that the possibility of progressing the matter to any significant extent was very remote and that once this had become clear the claimant should have taken the initiative and withdrawn, notwithstanding the defendants' protests. He therefore dismissed the claimant's claim. He also dismissed the defendants' counterclaim.
6. Under rule 27.12 of the Civil Procedure Rules, which by then was the operative rule in force, a right of appeal is limited to cases where a serious irregularity affecting the proceedings or a mistake of law by the court has occurred. The claimant duly served its notice of appeal against the dismissal of its claim. Long out of time the defendants sought permission to appeal from the dismissal of their counterclaim. But that was refused by His Honour Judge Worsley.
7. The claimant's appeal came before that judge. Mr Allen, who now appears before us, appeared for the claimant. In a reserved judgment the judge asked himself whether the District Judge had made a mistake, or mistakes, of law. He said that both counsel agreed with the judge's formulation that the claimant was only entitled to be remunerated for work which was (1) in accordance with the retainer and its instructions from time to time and (2) properly carried out to the standard of reasonably competent and skilled solicitors holding themselves out as defamation specialists. Counsel also accepted that it was for the claimant to satisfy the court that its professional charges were reasonable; and the judge referred to this court's decision in Turner & Co v Palomo SA [2000] 1 WLR 37. The judge rejected an argument by Mr Haidemenos that there could only be recovery for work the defendants' likely benefit. That argument was based on the guidance set out in the 1999 Solicitors Code of Conduct paragraph 8 to Practice Rule 1. That paragraph refers to the Civil Justice Reforms, and states that the duty to act in the best interests of the client are tempered by the new requirements. For example, cases should be pursued only in a way which is proportionate to the likely benefit, the court will not allow every point to be pursued and some procedural tactics will no longer be permitted. The judge pointed out that that version of the Code was not in force at the relevant time when the solicitors were acting for the clients. The judge further said that it did not go further than what the claimant already needed to establish, which was that its work was properly carried out in accordance with its retainer and instructions and to the proper minimum standard and that its fees were reasonable.
8. The judge referred to Mr Allen's submission that the District Judge made two errors of law. One related to the issue posed by the District Judge whether the costs charged were out of all proportion with what was being achieved. The judge accepted Mr Allen's submission that that was not a proper question to ask in law. The other criticism that had been made by Mr Allen related to the judge's approach to the issue of termination of the retainer. Mr Allen relied on rule 12.10 of the 1996 Solicitors Code of Conduct, which prohibited termination by a solicitor of his retainer except for good reason. Again the judge accepted that the District Judge erred in law in failing to give effect to that rule.
9. The judge then turned to what, if anything, should be paid to the claimant. He had stated earlier in his judgment that if the claimant succeeded in showing an error of law he was invited by both counsel to proceed on the material before the District Judge and was not invited to hear any further evidence. The judge decided that all the work done by the claimant was within the retainer and in accordance with the claimant's instructions from the clients and that the charges made by the claimant were reasonable. He therefore allowed the claimant's appeal and gave judgment for the sum claimed, £2,115. He proceeded to assess the claimant's costs summarily. He awarded the claimant costs of £391.05 in respect of the hearing before the District Judge and £800 in respect of the appeal. But he gave the parties the further opportunity to address him in writing on the hearing costs before the order was drawn up. Both sides did put in further submissions. Mr Haidemenos submitted that the judge, having found that the District Judge had erred in law, should have referred the case back to the District Judge.
10. On 7th December 1999 the judge gave further reasons in writing on costs. He did not alter his decision. In refusing permission to appeal he referred to paragraph 8.10 of the Part 27 Practice Direction which states that if the judge allows a small claims track appeal, he will, if possible, dispose of the case at the same time without ordering the claim to be reheard and may do so without hearing further evidence. The defendants then applied to this court for permission to appeal. That was granted by the single Lord Justice, Otton LJ, on paper.
11. Six grounds of appeal were originally raised by the defendants, but not all of them have been pursued before us today. I shall consider in turn those which are maintained.
12. (1) The first relates to the judge's criticism as an error of law of the District Judge's consideration of whether costs were charged out of all proportion to what was achieved. It is to be noted that the other error of law found by the judge, that is to say that by the end of June 1997 the claimant should have terminated the retainer, is not the subject of any ground of appeal.
13. Mr Haidemenos submits that the District Judge was not applying a legal test. But in my judgment it is plain that he was regarding the question whether costs were proportional to what was achieved as a relevant question in the assessment of the claimant's claim. Indeed, the District Judge refers to it again in relation to another of the four issues which he answered when considering Mr Tait's fees. If that was not a relevant consideration in law, then the District Judge erred in taking it into account. In my judgment, the entitlement of a solicitor to be paid by his client for work done by the solicitor is not dependent on what is achieved in the ordinary case, such as this, where there is no conditional fee arrangement and rates charged by the solicitor had been notified to the client at the outset and can be taken to have therefore been agreed. As the District Judge himself said when dismissing the counterclaim, the defendants

"... sought advice and debated this and the draft letters with the Claimant. They knew the Claimant's charge rate and that they were running up legal fees in approaching the matter in this way. They themselves made clear their dissatisfaction with the Claimants and thus once it was suggested that the Claimants withdraw, it would have been sensible of them to accept this advice rather than argue. They must expect to pay for what they actually got, which was the benefit of a view on the merits of their position and answers to the various challenges they raised."

14. Accordingly, in my view, the District Judge erred in law in taking into consideration whether the costs were proportionate to what was achieved, unless any of the further points taken by Mr Haidemenos under this head detract from that conclusion.
15. First, Mr Haidemenos said that the District Judge was applying the letter and spirit of the Civil Procedure Rules, and in particular the overriding objective in Part 1, and was adopting a just and fair approach. If the District Judge was purporting to apply the Civil Procedure Rules, he was doing so silently, because I can see nothing in his award, nor in the submissions made to him, whether orally or in writing, that suggested that this was the approach he was approaching or had to adopt. In any event, why should the District Judge, assessing what was due under a contractual claim for solicitor and client fees, apply the Civil Procedure Rules and the overriding objective? Although statute has intervened in relation to what a solicitor may recover by way of fees, there is no difference in principle between a claim by a solicitor for his fees and a claim by a non-solicitor for work done for a customer or client (see Lumsden v Shipcote Land Company [1906] 2 KB 433 at page 438 per Stirling LJ). The Civil Procedure Rules and the overriding objective relate to the conduct of court proceedings and in particular as to how courts should apply the rules. That has no bearing on a contractual claim such as there is in the present case. Mr Haidemenos sought again to rely on the guidance in paragraph 8 to Rule 1 of the 1999 Solicitors Code of Conduct. But that paragraph is only dealing, in my view, with the solicitor's conduct of litigation to which the Civil Procedure Rules apply. Mr Haidemenos also referred in his skeleton to two decisions of this court to which Otton LJ had drawn attention. One, Scutt v Lomax unreported 25th January 2000, related to the assessment of damages for trespass to land where the claim was for the reasonable reinstatement of the land; and this court said that the amount of damages must be objectively fair to both parties. The other case was Purdy v Cambran, an unreported decision of this court on 17th December 1999, in which, in the context of the appropriate remedy under the Civil Procedure Rules on an application for striking out for want of prosecution, it was said that it was necessary to concentrate on the intrinsic justice of the particular case in the light of the overriding objective. With all respect to those who think otherwise, I do not see that either case assists on a contractual claim to solicitor and client fees. I am therefore unable to accept Mr Haidemenos's submission that the judge erred in any way in relation to the first ground of appeal.
16. (2) Mr Haidemenos took a point on proportionality. He said that the judge ought to have held that the test of proportionality (which Mr Haidemenos derived from the overriding objective in Part 1 of the Civil Procedure Rules) applied to the circumstances and facts of the case and that this was a requirement to be proved by the claimant. He accepted that proportionality was a part of reasonableness. He said that the judge failed to consider whether the fees charged by the claimant were proportionate.
17. For the reasons already given, I do not see that the overriding objective enters into the question. Mr Haidemenos, to my mind, demonstrates his misconception of the position by drawing attention to the judge's reliance on proportionality when, on summarily assessing the claimant's fees of the hearings before the District Judge and the judge, he cut down the amount claimed. But the judge was exercising a discretion in relation to court proceedings, and so, in my view, quite properly had regard to the overriding objective and to that part of it which relates to proportionality. The District Judge and the judge were engaged on a different exercise when considering the contractual claims to fees.
18. The judge expressly accepted that it was for the claimant to establish the reasonableness of the fees charged. In my judgment, he was entirely right so to do. I can see no error whatever in the judge's approach to this. There is nothing in this ground of appeal.
19. (3) The third ground of appeal is against the judge's decision, once he found that the District Judge had erred in law, to proceed himself to assess the reasonableness of the claimant's charges. Mr Haidemenos accepts that the judge was entitled to determine the merits of the case. But he suggests that as paragraph 8.10 of the Part 27 Practice Direction only directs the judge to determine the case if possible, the judge should not have done so because the defendants did not have the opportunity to address the issues in detail. That is not an argument that it was not possible for the judge to dispose of the case, but some sort of complaint on the grounds of fairness. Mr Haidemenos lay some stress on the fact that the hearing before the District Judge lasted five hours, while that before the judge lasted one and three-quarter hours. That, in my view, in itself is not significant. The claimant had in its skeleton argument asked the judge to determine the charges if the judge found that there had been an error of law by the District Judge; and as I have already noted, the judge procured the agreement of both sides that he should do so. Mr Haidemenos did not ask for the case to be referred to the District Judge until he was making his further submissions after the judge had already given judgment. Before the District Judge the defendants had had the opportunity to cross-examine Miss Collard and Mr Tait on the reasonableness of the charges attributable to them. Little opportunity was taken to conduct such a cross-examination on that point. The judge had all the material which was before the District Judge; and what was of the greatest importance was the correspondence as well as the attendance notes. In my judgment the judge was well able to decide the matter as he did. Indeed, I think it would have been quite wrong for him to have allowed further costs to be incurred on this small claim by ordering a reference and hence causing a further hearing to be held. I therefore reject this ground of appeal too.
20. (4) Fourth and last, Mr Haidemenos sought to take a point that the judge had departed from the District Judge's findings of fact without the judge himself hearing evidence. He pointed to what the judge had said about Mr Tait's work, and in particular that none of the sum actually charged by Mr Tait was for duplicate reading. Mr Haidemenos contrasted that with the District Judge's general comment that, save for referring to the tort of harassment, Mr Tait did nothing that had not already been covered by work undertaken by Miss Collard and certainly did not achieve anything except to run up a further bill for the defendants.
21. The District Judge having decided that the claimant should not be entitled to charge for the period after the end of June was not concerned with the details of Mr Tait's work and did not have to make any finding about it. Mr Haidemenos accepted that there was no specific finding by the District Judge which was inconsistent with what the judge held after considering the details of Mr Tait's work. I have to say that having considered the correspondence and attendance notes, the District Judge's general comment does not seem to me to be well-founded. Mr Haidemenos did not press this point and I shall say no more about it.
22. For these reasons, therefore, I can find no substance in any of the grounds of appeal. I would dismiss this appeal.
23. LORD JUSTICE MUMMERY: I agree.
Order: Appeal dismissed with costs on a standard basis subject to detailed assessment.