Strand, London, WC2A 2LL
B e f o r e :
| Tim Martin Interiors Limited
|- and -
|Akin Gump LLP
Mr Geoffrey Cox QC and Mr Faisal Saifee (instructed by Candey LLP) for the Appellant/ Defendant
Hearing dates: 11th November 2010
Crown Copyright ©
Mr Justice Lewison:
The background facts
i) What is the correct approach that the costs judge should adopt on the assessment of a solicitor's bill at the behest of a third party who is liable to pay it?
ii) If the costs judge concludes that the bill is excessive, what is the appropriate remedial order?
Liability for costs
"Where a person other than the party chargeable with the bill for the purposes of section 70 has paid, or is or was liable to pay, a bill either to the solicitor or to the party chargeable with the bill, that person, or his executors, administrators or assignees may apply to the High Court for an order for the assessment of the bill as if he were the party chargeable with it, and the court may make the same order (if any) as it might have made if the application had been made by the party chargeable with the bill."
"Now, it is well settled that the bill to be taxed is the bill between the solicitor and his own client; and that the third party can only tax it on the condition of paying what is due to the solicitor from his own client, which may be more than the client, if he had paid it, could have recovered over from the third party."
"When a third party taxes a bill under s. 38 of the Act of 1843, it is clear, both from the wording of the section itself and the authorities, that the taxation must be on the footing of a taxation between the solicitor and the client. But the third party is not for all purposes in connection with the taxation to be treated as if he were himself the client. For instance, when the client has paid the bill, and might not be able to shew special circumstances sufficient to entitle him to have the bill taxed, it does not follow of necessity that the third party is thereby precluded from obtaining taxation."
"Again, the solicitor may have acted for the client in more than one completed matter, and the client may not be entitled as against the solicitor to obtain delivery of a bill and taxation, except on the footing of having all the matters included and taxed. But if the third party be only interested in and liable to pay the costs of one matter, it is clear in my opinion, as a matter of principle, that under s. 38 he can obtain taxation of the bill so far as concerns that one matter only, and on the footing of being liable to pay only the taxed costs of that matter. And that principle really decides this case, and shews that the appeal should fail. For in the present case the third party is a mortgagor, and he is only interested in the relations between the solicitor and his client so far as they concern the position of the client strictly in his character of mortgagee. The mortgagor, therefore, is entitled under s. 38 to have taxation of the solicitors' bill limited to the items of costs incurred by the client strictly in his position of mortgagee." (Emphasis added)
"It may well be that the client, as between himself and the solicitor, is liable for costs incurred in relation to the mortgaged property with which the mortgagor is not concerned, and for which the mortgagor is not liable. Those will be costs incurred by the mortgagee in his personal capacity so far as concerns the mortgagor, and not costs incurred by him in the capacity of mortgagee strictly and properly considered, and accordingly would not have to be taxed or considered by the taxing master in a taxation by the mortgagor as third party." (Emphasis added)
"I think he has contracted to pay solicitor and client costs to be taxed in the ordinary way without regard to any special arrangement which may have extended the client's ordinary liability. … To hold otherwise would be to prevent a third party from obtaining the benefit of s. 38. Either he would have to forego taxation, or if he obtained it would find himself liable to pay sums which could not be anticipated by him, and for which as third party he was not liable."
".. it is clear that the items disallowed by the taxing master were items for which Mr Edwardes was not liable." (Emphasis added)
"That case affords a very good illustration of the rule that there may be a considerable number of items for which the client may be liable to the solicitor, e.g., items incurred on his express instructions, which the third party may not be liable to pay. That is quite consistent with the rule that when once the items for which the third party is liable are ascertained the taxation of those items must proceed upon the footing of a taxation as between the solicitor and the party chargeable, and not as between the solicitor and the third party.
In re Negus affords another illustration of the same rule. It was there held that the lessee was not liable to pay for the costs of the counterpart lease, but it did not at all follow that the solicitor was not entitled to recover those costs from his client, the lessor for whom he had acted. It was an item for which the third party, the lessee, was not liable, but for which the party chargeable was nevertheless liable to his own solicitor." (Emphasis added)
"If, for example, in a case to which the scale fee would be applicable, the client makes an agreement with the solicitor under s. 8 of the Act of 1881 that an item bill shall be delivered, I think the third party cannot complain. He must tax on the footing of the agreement."
"It follows, therefore, that with respect at least to any piece of business properly inserted in the bill which the third party is liable to pay, it is not open to the third party to object that payments sanctioned by the client are excessive."
"With respect to matters falling within his liability under a contract express or implied, he cannot dispute the amount properly payable as between the solicitor and his own client, but in other respects his liability is not increased by obtaining a third party order to tax."
"Where the amount of costs is to be assessed on the indemnity basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party."
"(3) The court must also have regard to –
(a) the conduct of all the parties, including in particular –
(i) conduct before, as well as during, the proceedings; and
(ii) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;
(b) the amount or value of any money or property involved;
(c) the importance of the matter to all the parties;
(d) the particular complexity of the matter or the difficulty or novelty of the questions raised;
(e) the skill, effort, specialised knowledge and responsibility involved;
(f) the time spent on the case; and
(g) the place where and the circumstances in which work or any part of it was done."
"(1) This rule applies to every assessment of a solicitor's bill to his client except a bill which is to be paid out of the Community Legal Service Fund under the Legal Aid Act 1988 or the Access to Justice Act 1999– and
(1A) Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.
(2) Subject to paragraph (1A), 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 the 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 his client that as a result he might not recover all of them from the other party."
"(1) Where the court assesses (whether by the summary or detailed procedure) costs which are payable by the paying party to the receiving party under the terms of a contract, the costs payable under those terms are, unless the contract expressly provides otherwise, to be presumed to be costs which –
(a) have been reasonably incurred; and
(b) are reasonable in amount, and the court will assess them accordingly.
(The Costs Practice Direction sets out circumstances where the court may order otherwise)"
Master Campbell's judgments
"I discern from those notes that firstly, the claimant here cannot dispute the amount properly payable between Akin Gump and Bank of Ireland, but what he can do is to say that the amounts that are sought to be passed on to him under the covenants in the banking documents are unreasonable, and deciding whether those sums are unreasonable, it is the task of the court to examine those contractual documents to ascertain whether those costs are fair and reasonable under the Act."
i) What was properly payable as between Akin Gump and the Bank and
ii) What sums (in terms of quantum) could be passed on to TMIL.
"So I start from the proposition that the court is permitted to interfere with the hourly rate agreed between the Bank of Ireland and Akin Gump."
"The question, therefore is to decide whether the rates agreed were reasonable having regard to the case law to which Mr McPherson has drawn my attention. It seems to me that, where, as here, a mortgagee such as the Bank of Ireland puts itself in a position where it may wish to recover costs from a third party, here the mortgagor, if it instructs solicitors who charge hourly rates which are greater than those that are reasonable for the work in question, then it does so at its peril."
What should have happened
i) How much could Akin Gump have legitimately charged the Bank for dealing with the matters falling within the scope of its retainer by the Bank acting strictly in it capacity as mortgagee? and
ii) How much of that sum could the Bank legitimately pass on to TMIL?
i) By an assessment under CPR 48.3
ii) By an action for an account by TMIL.
The remedial order