England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		13/09/2016

Chief Master Marsh :

1. This judgment concerns two issues. First, the extent to which the costs management regime under CPR 3.12 to 3.18 applies to the costs of a litigant in person. Secondly, the scope of litigant in person costs recoverable under CPR 46.5 where a litigant in person obtains legal assistance from a solicitor and a member of the bar.

Introduction

2. These issues arise in the course of a claim between two brothers who jointly own valuable interests in a jewellery manufacturing, retail and wholesale business which has been carried on through an English Limited Partnership, two Thai companies, a BVI company and a company registered in the USA. On 12 November 2015 Deputy Master Nurse gave directions to bring the claim on for trial and the trial is due to take place in early November 2016 over 8 days. On the same occasion the Deputy Master made orders requiring the parties to produce to each other of an extensive range of documents relating to the business. These were not orders for disclosure under CPR Part 31 but, rather, the precursor to the taking of an account between the parties about their liabilities to each other in connection with the business. The Deputy Master also directed that a costs management hearing should take place.
3. The claimant later alleged that the defendant had not fully complied with the orders for the production of documents and on 18 March 2016 I determined an issue of construction arising from the Deputy Master's order and made further orders for the production of business documents. That order was the subject of an application for permission to appeal out of time by the Defendant. Ultimately that application came before Mr David Foxton QC, sitting as a Deputy High Court Judge, on 14 July 2016 when the application was refused. The Deputy Judge took the opportunity to explain the Deputy Master's order and to clarify that the exercise of document production concerning the business was not intended to be the initial stages of the taking of an account in parallel with the progress of the main claim to a trial.
4. On 21 July 2016 at a further hearing directions were given for the much delayed costs management hearing to take place on 19 August 2016.

The Claimant's representation

5. The claimant instructed solicitors to act for him until 26 May 2016. On that date he filed notice of change and became a litigant in person. Mr Machell QC, who has acted for him from the outset of the claim, has continued to represent him through the Bar Public Direct Access Scheme ("Direct Access"). The claimant has also had assistance from Mr James Dickinson of Dickinson Gleeson, a Jersey firm of lawyers, and intends to obtain assistance from junior counsel, Mr Adil Mohamedbhai, who will be instructed by Mr Dickinson. Mr Mohamedbhai is not authorised under the Direct Access scheme and is therefore unable to accept instructions directly from the claimant.
6. The defendant was ordered to pay the claimant's costs of the permission to appeal hearing. By that stage the claimant was a litigant in person and the Deputy Judge had to consider whether the claimant was entitled to recover any of the expense he had incurred in obtaining assistance from Dickinson Gleeson. The Deputy Judge received written submissions on this point and handed down a judgment dated 20 July 2016 (Campbell v Campbell [2016] EWHC 1828 (Ch)) in which he decided that services provided by a lawyer qualified in another jurisdiction do not constitute "legal services" for the purposes of CPR 46.5(3)(b) and, therefore, Dickinson Gleeson's fees relating to the application were not recoverable by the claimant.

Costs management and litigants in person

7. Although the sums at issue in this claim may exceed £10 million, the claim is not automatically exempted from costs management because the value of the claim is expressed in the claim form in terms that "… it is expected to be in excess of £300,000" and no application has been made for a direction that a costs management should not apply. When the initial directions for costs management were made both sides were represented. The defendant has been represented throughout and, therefore, it has always been necessary for the court to make a costs management order in relation to the defendant's costs. Indeed, it is regrettable that the hearing to deal with this aspect of the claim has been delayed for such a long period.
8. By the time the hearing took place on 21 July 2016, the claimant was no longer represented by solicitors. It was, however, his intention to continue to instruct Mr Machell QC on a Direct Access basis and to obtain additional legal assistance falling short of a firm of lawyers having conduct of the claim. Given the size and complexity of the claim it was obvious that, even without solicitors conducting the claim, the claimant's costs would be substantial. The claimant's costs budget dated 5 August 2016 provided for future expenditure up to the end of trial of slightly in excess of £315,000. This figure takes no account of costs already incurred of £547,620.99.
9. On 21 July 2016 both sides asked the court to make a costs management order in respect of the claimant's costs and the court's jurisdiction to do so was not debated at any length. The claimant was directed to produce a budget. However, the court's jurisdiction to make such an order, and to make a costs management order in relation to litigant in person costs, is not entirely clear. I considered it might be helpful to set out my reasons for concluding that such a power exists.
10. In an ordinary case, in which a litigant in person conducts the case with limited assistance, there may be little need for the court to exercise control over the costs which are recoverable by the making a costs management order. The litigant in person hourly rate is currently set at £19 per hour and the amount of costs should rarely be disproportionate to what is at stake. Where, however, the claim is complex and counsel is instructed on a Direct Access basis, the litigant in person's recoverable costs may be substantial when disbursements and the cost of legal services are taken into account.
11. The starting point is CPR 3.12 (2) which explains the purpose of costs management:

"The purpose of costs management is that the court should manage both the steps to be taken and the costs to be incurred by the parties to any proceedings so as to further the overriding objective."

This objective is expressed in general terms and no indication is given that a claim involving one or more litigants in person may not benefit from costs management.

12. CPR 3.13 makes provision for the filing and exchange of budgets and discussion reports and sets out a default set of provisions which apply "unless the court orders otherwise". These provisions expressly exempt litigants in person from the requirement to file and serve a budget. The Editors of the White Book 2016 suggest that in spite of this exemption it is open to a litigant in person to file and exchange a budget if they wish.
13. CPR 3.15(2) provides that "… the court may manage the costs to be incurred by any party in any proceedings." [my emphasis] CPR 3.15(2) gives the court power to make a costs management order and CPR 3.15(3) explains that once a costs management order has been made "… the court will thereafter control the parties' budgets in respect of recoverable costs." Unlike CPR 3.13, no indication is given that different provisions apply to litigants in person.
14. Practice Direction 3E has four parts to it. Part A deals with claims which fall outside the costs management regime due to the value of the claim. Paragraphs 2 to 5 deal with "Other cases" and paragraph 2(a) provides:

"In any case where the parties are not required by rules 3.12 and 3.13 to file and exchange costs budgets, the court has a discretion to make an order requiring them to do so. That power may be exercised by the court on its own initiative or on the application of a party. Where costs budgets are filed and exchanged, the court will be in a position to consider making a costs management order: see Section D below. In all cases the court will have regard to the need for litigation to be conducted justly and at proportionate cost in accordance with the overriding objective."

15. Part B of Practice Direction 3E deals with the budget format. Although Precedent H is the standard format, express provision is made for the court to direct that a budget is prepared in a different style. The statement of truth, which is an important part of Precedent H, is drafted on the assumption that it will be signed by a solicitor who is certifying that the budget is a fair and accurate statement "… of incurred and estimated costs which it would be reasonable and proportionate for my client to incur in this litigation." There is no difficulty, however, in the statement of truth being adapted to apply to a budget prepared by a litigant in person.
16. Part C of Practice Direction 3E deals with budget discussion reports which can be prepared whether or not a litigant in person is involved. The Budget Discussion Report is not a prescribed form.
17. Part D of Practice Direction 3E applies where a costs management order has been made. There is nothing in its provisions which is inconsistent with a costs management order relates to a litigant in person being made albeit that the provisions have been drafted principally with the standard position, where all parties are represented, in mind. Paragraph 7.8 makes it a requirement for a litigant in person, "even though not required to prepare a budget", to be provided with the budgets of every other party. I do not read the words which qualify the obligation as meaning that a litigant in person may never be required to serve a budget. Rather, they make it clear that in the normal situation where a litigant in person does not prepare a budget, the litigant in person is still entitled to receive the represented party's budget
18. The default provisions for the service of budgets in CPR 3.13 exclude litigants in person because the majority of cases in which litigants in person appear will not require the litigant in person's costs to be managed. But a litigant in person may opt to serve and file a budget, or the court may order a litigant in person to do so. Furthermore, the court may decide to make a costs management order in relation to a litigant in person's budget. Indeed, in a case in which a litigant in person is likely to be seeking a substantial costs order, whether because there will be fees of counsel under the Direct Access scheme or otherwise, it may well be desirable to do so.
19. There are, however, ancillary orders which may need to be made to adapt the provisions of Practice Direction 3E, including adapting Appendix H to suit the case and amending the form of the statement of truth.

CPR 46.5

20. Pursuant to the order made on 21 July 2016, the claimant served and filed a budget dated 5 August 2016 substantially in the form of Appendix H. As directed, it deals only with estimated costs. It has statement of truth is in the following form:

"This budget is a fair and accurate statement of estimated costs which it would be reasonable and proportionate for me to incur in this litigation".

21. The assumptions section of the budget states:

"The estimate does not deal with costs incurred prior to 7 July 2016. Dickinson Gleeson's fees have been included on the basis that David Foxton QC's decision dated 20 July 2016 will be appealed. James Dickinson's fees have been included on the basis that he has applied for a practising certificate and intends to seek to act for the Claimant in his capacity as a solicitor of the Senior Courts of England and Wales (although the Claimant will remain a litigant in person)."

Mr Dickinson has confirmed that he was re-admitted to the roll of solicitors in England and Wales on 10 August 2016."

22. Each phase of the budget includes time costs for the claimant at the rate of £19 per hour, time for Mr Dickinson at £415 per hour, fees for Mr Machell QC and fees for junior counsel, Mr Mohamedbhai. No point arises concerning the claimant's time and Mr Machell QC's fees.
23. At the hearing I was asked to make declarations concerning the claimant's entitlement to recover Mr Dickinson's fees and those of junior counsel. This was opposed by Ms Jhittay who appeared for the Defendant. Despite her objections, I made the declarations sought by the Claimant and said I would give reasons in a judgment to be handed down.
24. CPR 46.5 makes provision for the recovery of costs by a litigant in person. So far as material it provides:

(1) This rule applies where the court orders (whether by summary assessment or detailed assessment) that the costs of a litigant in person are to be paid by any other person.

(2) The costs allowed under this rule will not exceed, except in the case of a disbursement, two-thirds of the amount which would have been allowed if the litigant in person had been represented by a legal representative.

(3) The litigant in person shall be allowed –

(a) costs for the same categories of –

(i) work; and

(ii) disbursements,

which would have been allowed if the work had been done or the disbursements had been made by a legal representative on the litigant in person's behalf;

(b) the payments reasonably made by the litigant in person for legal services relating to the conduct of the proceedings; and

(c) the costs of obtaining expert assistance in assessing the costs claim.

25. CPR 44.1(1) includes a definition of "costs" which applies unless the context otherwise requires –

" "costs" includes fees, charges, disbursements, expenses, remuneration, reimbursement allowed to a litigant in person under rule 46.5 and any fee or reward charged by a lay representative for acting on behalf of a party in proceedings allocated to the small claims track;"

26. These provisions, and the relevant authorities (in particular Agassi v Robinson (Inspector of Taxes No. 2) [2005] EWCA Civ 1507) were analysed by Mr Foxton QC in his judgment dated 20 July 2016. His decision turned on the proper construction of the expression "legal services" in CPR 46.5(3)(b). Dickinson Gleeson are a firm of Jersey lawyers and Mr Dickinson is one of the partners. He qualified as an English solicitor in 1997 and moved to Jersey in 1999 where he qualified as an Advocate of the Royal Court of Jersey in 2004. At the material time he did not hold a practising certificate as an English solicitor. He undertook work for the Claimant on his instructions. Mr Foxton QC's decision can be found at [17]:

"In my view, services provided by a lawyer qualified in another jurisdiction do not constitute "legal services" for the purposes of CPR 46.5(3)(b):

i) I do not see any material difference between the position of a lawyer qualified in another jurisdiction, and the specialist tax advisers considered in Agassi. In each case, the provider of those services no doubt has valuable knowledge and expertise to provide, but in neither case are they authorised to conduct litigation, nor are subject to the wasted costs jurisdiction of the court.

ii) While Dickinson Gleeson are qualified by reference to the law and procedure of their own jurisdiction, their position so far as English proceedings are concerned is that of lay persons. It seems clear that where a lay person such as a McKenzie Friend provides services of a kind which a lawyer would provide, their fees for doing so are not ordinarily recoverable from the opposing party (see for example Practice Note (McKenzie Friends: Civil and Family Courts [2010] 1 WLR 1881 at [27] to [29]).

iii) The use of lawyers qualified in another jurisdiction to provide "legal services" in relation to the conduct of English litigation seems to me to be very far from the "unbundling" of legal services which Lord Woolf had in mind in Access to Justice – Final Report (1999) Section II Chapter 7 para. 45 (which contemplated a solicitor or barrister providing legal services in relation to aspects of litigation, without being instructed for the conduct of the litigation as a whole)."

27. CPR 46.5 deals with what a litigant in person is allowed to recover by way of costs where such costs are to be paid by another person. Under the general definition in CPR 44.1(1) "costs" is a widely defined term which includes "disbursements" and "reimbursement allowed to a litigant in person under rule 46.5" as well as the more common types of costs.
28. CPR 46.5(2) contains a cap on the costs, other than disbursements, which may be recovered by a litigant in person, namely "two-thirds of the amount which would have been allowed if the litigant in person had been represented by a legal representative". The rationale for the two-thirds cap is explained in Cook on Costs 2016 at [35.5]:

"The reasoning behind this figure is that a solicitor's charges have usually included a 50% profit mark-up on his expense rate, but as a LIP may not make a profit out of the costs of litigation, the 50% is deducted, leaving two-thirds.

Since there is no profit mark-up on disbursements, the two-thirds rule does not apply to them."

29. CPR 46.5(3)(a) permits a litigant in person to recover "costs" for the same categories of work and disbursements that a represented party could recover. The emphasis is upon costs in categories of work and disbursements and is apt to apply to work undertaken, and normal disbursements incurred, by the litigant in person in the conduct of the claim. Therefore the litigant in person is able to recover broadly for the same type of work as a represented party. By contrast, in CPR 46.5(3)(b) the emphasis is upon "payments" made by the litigant in person for legal services relating to the conduct of the proceedings. CPR 46.5(3)(c) permits the "costs" of obtaining expert assistance in assessing the costs claim.
30. At first sight, the entitlement to recover a disbursement under CPR 46.5(3)(a), if it would have been recoverable had it been paid by a legal representative, appears to overlap with payments made for legal services relating to the conduct of the proceedings - CPR 46.5(3)(b). The payment to a barrister under the Direct Access scheme, for example, could be both a disbursement under (a) and a payment for legal services under (b). On balance, however, it seems to me that where a payment for assistance under the Direct Access scheme is made, it is more obviously recoverable under CPR 46.5(3)(b) because legal services are being provided to the litigant in person. However, for present purposes nothing turns on this point in relation to counsel's fees. The point may be of more significance in relation to a payment made to solicitors for legal services because their hourly rates will include a profit element.
31. CPR 46.5(3)(b) applies to payments relating to the conduct of proceedings as distinct from payments for the conduct of proceedings. The former is permissible and may lead to the recovery of the expense whereas the conduct of proceedings may only be carried out by a "legal or other representative" who has a right to conduct litigation. In any event, where recovery is sought for legal services provided to the litigant in person, it is implicit that the provision of the legal services must of a type contemplated by the rule, as the Deputy Judge held. Furthermore, it seems to me it is implicit in the rule that the provision of the legal services by the person providing them must be lawful.
32. I can see no reason, however, to construe CPR 46.5(3) narrowly so as to prevent a litigant in person recovering the cost of assistance in the course of the litigant in person conducting the claim. The Direct Access scheme, whether it is used for advocacy or other assistance, provides a litigant in person with expertise which may be essential to be able to progress a claim in an orderly manner and is likely to be of assistance to the court for that reason. Similarly, it is clearly contemplated that a litigant in person may pay for and recover the cost of "legal services" relating to the conduct of the proceedings. In a complex claim, the litigant in person may wish, for example, to obtain assistance with disclosure or the drafting of witness statements. This is part of the unbundling of legal services contemplated by Lord Woolf
33. There is an issue, as it seems to me, about the proper construction of "disbursement" in CPR 46.5(2). If fees paid to a barrister for legal services under CPR 46.5(3) are not treated as a disbursement, because they are properly characterised as "reimbursement allowed to a litigant in person under rule 46.5", then they will be subject to the two-thirds cap. On the other hand, if fees charged by a solicitor for legal services are a disbursement, they will not be caught by the cap in CPR 46.5(2). This issue was not argued before me and the claimant's budget was reviewed without the cap in mind. Although the point does not fall to be determined in this case, I incline to the view that in order to give effect to CPR 46.5(2) "disbursement" should be given a narrow meaning in that context and the cap will apply to all legal services whether provided by a barrister or a solicitor.
34. I was asked to declare what the position will be in the event that Mr Dickinson, having now obtained a practising certificate as an English solicitor, is retained by the Claimant as his client to provide legal services in connection with this claim, falling short of Mr Dickinson having conduct of the claim. Mr Mather QC's submission, in outline, was that it would be helpful for the court to make a declaration about the position on these assumptions to enable the Claimant's budget to be reviewed on the basis upon which the Claimant intends to proceed. He submitted that if legal services are supplied by Mr Dickinson to the Claimant as an English solicitor, and regulated as such, payments for those services will amount to "payments for legal services relating to the conduct of the proceedings" within CPR 46.5(3)(b) and be recoverable by the Claimant. This is subject to the payments for such services having been reasonably made. It appears to me these limiting word will operate to prevent recovery where the services were of no real benefit and limit the amount to what it was reasonable to pay.
35. Mr Mather QC points to rule 1.2 of the Solicitors Regulatory Authority's Practice Framework Rules 2011 which permits a solicitor regulated by the SRA to practise as a solicitor from an office outside England and Wales in a number of different situations including as a sole practitioner under rule 1.2(a), as a member of a business which is not required to be an authorised body provided that it has no office in England and Wales and meets certain other criteria under rule 1.2(e) and as a member of an overseas practice under rule1.2(g). There is no reason to doubt that Mr Dickinson is able to satisfy at least one of these criteria.
36. The position concerning junior counsel's fees arises in a different way. Mr Mohamedbhai is a member of the English bar practising in London. He is not, however, qualified to provide legal services under the Direct Access scheme. It is not in dispute between the parties, and plainly right, that the fees of a barrister who is permitted to provide services under the Direct Access scheme, such as Mr Machell QC, fall within CPR 46.5(3). For the period during which the Claimant was represented by solicitors, Mr Machell QC was instructed by them on behalf of the claimant and the claimant's ability to recover the fees charged by Mr Machell QC is unaffected by his decision to act in person.
37. Junior counsel will be instructed by Dickinson Gleeson. Mr Mather QC's case is that junior counsel's fees fall within CPR 46.5(3)(a) as being a disbursement of the type the Claimant would have been entitled to recover if he had been instructed by a legal representative or, alternatively, as a payment for legal services relating to the conduct of the proceedings. He accepts, however, that it must be lawful for junior counsel to undertake this work and, therefore junior counsel must be able comply with the requirements of the Bar Standards Board. The regulatory position is set out in section B3 of the BSB Rules under rule S24. For present purposes the relevant restriction is that a self-employed barrister may only supply "legal services" if instructed by a "professional client". There are two elements of the guidance at gS3 and gS4. First, under gS3 that a reference to professional client includes "foreign lawyers". Secondly, under gS4, if it appears to the barrister that the foreign lawyer "… is not taking reasonable steps to instruct someone authorised to conduct litigation, then you should consider whether to return your instructions under C25 and C26."
38. It appears to me that these elements of guidance are different in their nature. The guidance under gS3 is unequivocal and provides a clear statement about the meaning of the expression "professional client", whereas the guidance under gS4 requires the barrister to consider whether to return the instructions in certain circumstances. In the latter case the barrister must make a judgment about what is appropriate and it may not be necessary, depending upon those circumstances, to cease acting.
39. Ms Jhittay submitted that the court should not accede to the Claimant's request to make declarations but had no objection to costs management being dealt with upon an assumed basis. In the case of Mr Dickinson she submitted that it would be wrong in principle to make a declaration about a factual situation which has not yet occurred, namely before he is formally retained to act for the Claimant and evidence of the retainer is provided. In the case of junior counsel she submitted that the regulatory position is uncertain because it is unclear whether junior counsel will be instructed, and continue to be instructed, on a basis which is compliant with the BSB Handbook and it would be wrong for the court to give its blanket imprimatur to the recoverability of costs at this stage.
40. She further submitted that:

i. The difficulties faced by the Claimant, and the need for the court to make the determinations, is of his own making. It could easily be resolved by him instructing an English law firm to come on the record and he has not explained why he is unwilling or unable to do this.

ii. The claimant's approach is unorthodox and he is 'playing the system'. She did not, however, go as far as to say the approach is an abuse.

iii. The court should be cautious in approving the approach the claimant proposes to adopt because of the limited ability to control legal representatives who are not given conduct of the claim.

iv. The declarations will not lead to certainty because it is likely any decision will be appealed.

41. The starting point is that the claimant is entitled to act in person and does not need to justify his decision to conduct the litigation himself. He is also entitled to conduct the litigation with assistance from lawyers. The only issue is whether he may recover their costs under CPR 46.5
42. It seemed to me that it was desirable when setting the Claimant's budget to provide guidance about the scope of the legal expense which the Claimant will be able to recover. The trial of the claim will start in about two months and it is important for the parties to have a clear idea about the likely level of recoverable estimated costs. The parties to this claim have shown a propensity to litigate about every possible issue and it is right for the court to provide a ruling on the issues the claimant has raised. A reduction in the number of issues between the parties, even minimally, could be of assistance particularly in the light of a stated wish to try to resolve the dispute before the trial commences.
43. There is nothing in Ms Jhittay's submission about uncertainty and the possibility of an appeal because that submission could apply to every decision a court is asked to make and lead to an abdication of the court's role which primarily is to resolve issues the parties are unable to agree. An appeal is always a possibility but should not inhibit the court form making a decision on an issue before it where that is likely to be of assistance. Equally, whether the court has wasted costs powers is not of significance provided that the claimant is genuinely the person with conduct of the claim and he does not delegate that duty to others.
44. It is not necessary for the court to be unduly concerned about the possibility of future regulatory issues such as those which might arise under Guidance Note gS4. The grant of declaratory relief is premised upon the position at the time the declarations were granted. Should the position change that might affect the lawfulness of the provision of legal services.
45. The evidential basis for the declarations sought is adequate, particularly now Mr Dickinson has a practising certificate. The Claimant's budget sets out clearly the basis upon which he intends to conduct the litigation and this includes obtaining legal services from Mr Dickinson and junior counsel. In neither case will they be conducting the litigation and this leaves the Claimant as a litigant in person.
46. I concluded that it was right to grant the declarations sought on behalf of the claimant and not to leave the issues to the trial judge or to a detailed assessment. In the case of Mr Gleeson, provided he is retained to provide legal services to the claimant and it is lawful for him to do so, his reasonable fees will be recoverable. In the case of junior counsel, if he lawfully instructed to provide legal services, the claimant will be entitled to recover the amount he has reasonably paid for them. I leave open the question of whether or not the cap under CPR46.5(3)(2) applies to either or both charges.