England and Wales High Court (Senior Courts Costs Office) Decisions

IN THE HIGH COURT OF JUSTICE
SUPREME COURT COSTS OFFICE

		Clifford's Inn, Fetter Lane London, EC4A 1DQ
		11 November 2008

Master Gordon-Saker :

1. On 17^th March 2008 Master Bowles ordered that there be a detailed assessment of the Defendants' invoice number 26233/7602 dated 3^rd September 2004, such assessment being limited to the sum of £50,000 described on the bill as "Uplift on all bills since April 2001".
2. The questions which now arise on the detailed assessment are whether the Defendants were entitled to make that charge and whether the amount is reasonable.

The background

3. The Defendants are a firm of solicitors practising from offices in Cursitor Street. In 2001 the Claimant instructed them to act on his behalf in relation to a dispute over his entitlement to shares in a company called Clearsprings (Management) Limited ("Clearsprings"). The terms of that retainer were set out in a letter from the Defendants, then known as Stockler Charity, to the Claimant dated 25^th January 2001. Under the heading "Fees" Mr Stockler, a partner in the defendant firm, wrote:

Our charges will be calculated mainly by reference to the time spent by me, the other solicitors and executive staff dealing with this matter. This includes advising, attending on you and others, dealing with papers, correspondence, telephone calls, travelling and waiting time. These rates do not include VAT, which will be added to the bill.

As a partner my charging rate is £250.00 per hour. The charging rate for an Assistant Solicitor is £205.00 per hour. If any work is undertaken by a Legal Assistant, this will be charged at £150.00 per hour. In addition, we will charge all disbursements incurred on your behalf to include internal photocopying, telephone/facsimile charges, local fares and courier charges. The charging rates that I have quoted are reviewed annually, and therefore if this matter has not been concluded before the next review takes place, they will be subject to an increase. I shall let you know the new rates on the next review which will apply to work done from that date.

In matters such as this it is not possible to accurately estimate how many hours of work will be necessary to complete the matter. My firm therefore adopts a policy of charging for each hour (or part thereof).

4. It is common ground that there was no other correspondence between the parties setting out the terms on which the Defendants were retained.
5. In May 2001 the Claimant, through the Defendants, commenced proceedings against the then sole shareholder in Clearsprings, Mr King, for an order for specific performance of an agreement between them that they should each own 50% of the issued shares. Those proceedings were resolved in favour of the Claimant in November 2001 and a share in the company was issued to him.
6. In January 2002 the Claimant, again acting through the Defendants, commenced a second action against Mr King, under section 459 of the Companies Act 1985. On 15^th August 2003 Mr Registrar Baister made an order that Mr King and Clearsprings were jointly and severally liable to purchase the Claimant's share at a price and on terms to be determined. On 29^th October 2003 Lawrence Collins J. (as he then was) gave directions that the share was to be valued by a valuer appointed by the Court (acting as expert and not as arbitrator) and that the share should be purchased at the value certified within 21 days of receipt of the valuation.
7. The minute of that order was drafted by counsel but was the subject of some representations to the learned Judge. On 4^th November 2003 Lawrence Collins J. sent a memorandum to counsel:

There should not be an express liberty to apply. This is a final order, and the extent to which either party may make any further application should be left to the general rules.

8. The Defendants continued to act for the Claimant in relation to the valuation of the share and in relation to the detailed assessment of the costs of the proceedings.
9. The work done in relation to the valuation included the instruction of Grant Thornton to prepare detailed written submissions to the valuer and the instruction of counsel, principally to advise in relation to the agreements which underlay Clearsprings' business. In the event, by a letter dated 4^th August 2004 the valuer valued the Claimant's share at £6,600,000. That was considered to be a very good result for the Claimant.
10. The Defendants sent bills to the Claimant fairly regularly between 2001 and 2004 - initially monthly but subsequently less frequently. It seems to me that all of these bills were interim statute bills; that is, that they are final self-contained bills for the periods that they cover. Save for the last, all of the profit costs are charged by reference to hourly rates in accordance with the letter dated 25^th January 2001, although the rates increase as time passes.
11. It is only part of the last bill which is the subject of detailed assessment under the terms of the order made by Master Bowles.

The last bill

12. On 5^th August 2004, the day after the valuer produced his figure, Mr Stockler sent a memo to Mr Holding-Parsons, a consultant at the defendant firm who had done much of the work in relation to this matter:

I have also asked Neil to prepare an up-to-date bill on the Bilkus's matter. It seems to me that we ought to be entitled to charge an uplift for success. It seems to me that you ought perhaps to talk to Neil when he returns about how to do this. I have had a quick look at Cook on Costs and I cannot immediately find anything which deals with the matter. It seems to me that one thing is quite clear, namely that we are entitled to charge interest on the balance of our outstanding bills and I seem to remember that, in any event, during our last meeting with Michael Bilkus he discussed with me the possibility of my adding something to the bill if I agreed not to press him too hard for existing payment, provided of course we won.

13. I was told that "Neil" is the firm's costs draftsman.
14. On 26^th August 2004 a draft final bill was prepared. That draft bill again charged for the work done by reference to hourly rates. However it also included as part of the profit costs:

Value Factor ( ¼ % ) £16,500.00

15. £16,500 is ¼ % of £6,600,000, the value of the Claimant's share.
16. In relation to the proceedings in front of Master Bowles, witness statements were signed by both the Claimant and Mr Stockler and they have been referred to in the hearing before me.
17. In his statement dated 15^th August 2005, the Claimant explained:

8. Following settlement of the matter I received a bill from the Defendant dated 26 August 2004. This covered the professional charges for the period 2 June 2004 to 26 August 2004. Listed in the breakdown for this bill is something which is referred to as "value factor" (¼ %). This amounted to £16,500. The bill was sent by, I think, Berry Holding-Parsons, a Consultant at the Defendant, in William Stockler's absence on holiday. I queried this "value factor" with William Stockler who said he did not know anything about it.

9. Following William Stockler's return from holiday he asked to meet. This meeting had to be delayed a little due to my work commitments and we finally met, together with my partner, Helen Bettles, on the 8^th September 2004. During that meeting he skirted around the issue of the £16,500 "value factor" and said that he thought it was only right that he should have £50,000 for getting such a good result. I was initially speechless. Helen pointed out that this was not at all what had been agreed at the outset and that at no point since the beginning of the matter had the possibility of an uplift in addition to the costs set out in the client care letter been raised. I was very surprised at this suggestion and didn't really know what to do about it at first. I had been very pleased with the result but didn't see why I should pay so much more than had originally been agreed. I told him I would need time to take it in and would get back to him. In the meantime I asked for the remainder of the monies held on the Defendant's client account to be transferred to my company, Britaven Ltd.

10. I did not agree to the uplift. I was particularly surprised at this request as I had asked at the outset whether there was any possibility of a deal being struck on the basis of the outcome of the case but the Defendant had always maintained that this was not possible.

18. In his witness statement in response, dated 12^th September 2005, Mr Stockler explained:

5. … On 8^th September 2004 I had a meeting with the Claimant and his partner, Helen Bettles. At that meeting, I asked him to agree an uplift of £50,000 on the final bill for the valuation work, based on the success we had achieved in obtaining a valuation of £6.6 million, even though Mr Bilkus had been prepared a few months before to sell his share to Mr King for £1.5 million. … He and Ms Bettles said that they would think about my proposal but never reverted.

19. The final bill that was delivered to the Claimant is dated 3^rd September 2004 but was sent to him under cover of a letter dated 9^th September 2004, the day after the meeting. That bill again charges for the work done by reference to hourly rates but includes as part of the profit costs:

Uplift on all bills since April 2001 £50,000

20. The letter which accompanied the bill (sent apparently by fax on 9^th September) explained:

Second, I attach an account for the period to 26^th August 2004.

In accordance with our discussion, I have incorporated an uplift figure of £50,000. This relates to both of the cases since I was first instructed in the year 2001.

The total profit costs (excluding disbursements such as Counsel's fees) on all bills in relation to the whole of the Clearsprings matter from day one have amounted to approximately £310,000. Although one cannot be precise, because the rates of charge have changed over the years, an uplift of £50,000 is approximately equivalent to 16%.

In order to give you the maximum possible information, I can do no better than to attach copies of a number of pages out of "Cooke on Costs". This book is unfortunately a little out of date, but the principles referred to in it still apply.

May I specifically refer you to the following:-

1. The factors referred to in what used to be RSC Order 62, Appendix 2, Part 1 and set out at the foot of page 7 and the top of page 8.

2. The explanation of those factors in relation to contentious business as set out in pages 29-35.

I quite accept that each case must be looked at on its own merits, but I do believe that an uplift of such a relatively small percentage (16%) in the context of a highly complicated and extremely valuable claim is far from unreasonable. I hope that you will agree that we carried out an excellent job for you and recovered more than you expected.

21. Order 62 Appendix 2 Part 1 of the Rules of the Supreme Court 1965 dealt with the amount of costs that should be allowed on taxations inter partes, fees to counsel, and particular items that may not be allowed in certain classes of case. In paragraph 1(2) were set out what became commonly known as "the seven pillars of wisdom" – the particular factors to which the taxing officer should have regard in exercising his discretion when deciding the amount of costs to be allowed.
22. The Claimant responded to that letter on 14^th September 2004 when he stated that he would "consider" the Defendants' "request" and he asked that the sum of £50,000 retained by the Defendants should be transferred to his company "until an agreement is met".
23. In March 2005 the Claimant instructed solicitors in relation to this matter. They wrote a lengthy letter to the Defendants on 17^th March 2005 contending that the "uplift" of £50,000 should be repaid to the Claimant, failing which they would apply for an order for detailed assessment. The Defendants responded on 18^th March 2005:

We refer you to Cook on Costs 2005, pages 226-7, 245-251, and 255. It is clear that the same considerations as to uplift in contentious matters as before still apply. Perhaps more importantly, the period to which the account dated 3^rd September 2004 relates was one in which the work carried out was non-contentious. There had already been a court order and the issue was one of valuation. Here, the considerations set out on pages 251-254 also apply.

24. On 23^rd March 2005 the Defendants wrote again to the Claimant's solicitors:

Mr Bilkus is of course well aware of the fact that he was prepared to agree to a valuation of £1,500,00 and that, as a result of our efforts, he managed to recover in excess of £6,500,000, more than 4 times as much. If that does not justify an uplift of 16%, it is difficult to see what does.

25. On 19^th August 2005 the Claimant commenced proceedings under CPR Part 8 for an order for the detailed assessment of all of the bills delivered to him by the Defendants in relation to the Clearsprings matter.
26. In his witness statement in opposition to those proceedings, dated 12^th September 2005, Mr Stockler explained that the reference to an uplift on all of the bills was mistaken:

5. It is correct that, on the face of invoice no 7602 dated 3^rd September 2004 and in my second fax of 9^th September 2004, I wrote that the uplift of £50,000 related to "… all bills since April 2001". In fact, this was incorrect. … [He then referred to the meeting on 8^th September 2004]. … What I was trying to point out in the text was that £50,000 was a small fraction of all the costs he had had to pay since the beginning to achieve a highly successful result, not that the £50,000 related to those earlier costs. There was no cause for any uplift to any of the bills relating to the two pieces of litigation, only to those relating to the hugely successful valuation process. He and Mrs Bettles said that they would think about my proposal but never reverted. The error on the face of the invoice dated 3^rd September 2004 and in my fax did not and cannot in my submission have the effect of retrospectively turning what had been final bills for the contentious work into interim bills. The earlier invoices were not a series of invoices, to be taken as a whole, but final invoices. Only invoice no 7602 was subject to uplift.

27. On 14^th September 2005, two days after the date of the witness statement, the Defendants wrote to the Claimant:

Please take note that, at the first hearing of your client's application in this matter, we shall be applying to withdraw our account 26233/7602 dated 3^rd September 2004 and to replace it with an account in the form attached hereto. You will see that that account is identical in quantum, but the narrative in relation to the uplift has been corrected.

28. As I understand it the proposed amended bill is identical to the bill dated 3^rd September 2004 save that the words:

Uplift on all bills since April 2001 £50,000

have been replaced by:

Uplift to reflect the factors set out in the £50,000

Solicitors' (Non-Contentious Business)

Remuneration Order 1994

29. In the event, the order made by Master Bowles is in relation to "invoice number 26233/7602 dated 3^rd September 2004, such assessment being limited to the sum of £50,000 described on the bill as 'Uplift on all bills since April 2001' ".
30. Accordingly Mr Bacon, Counsel for the Defendants, sought at the detailed assessment before me permission to amend the bill to the form enclosed with the Defendants' letter dated 14^th September 2005.

Amendment of the bill

31. The jurisdiction of the Court to allow a solicitor to amend a bill (or to withdraw a bill and substitute another) was considered by the Court of Appeal in Polak v Marchioness of Winchester [1956] 1 WLR 818. Jenkins LJ concluded (at 827):

I entirely agree with the judge when he said that one has to take a strict view to maintain the necessary safeguards, and nothing I say is to be regarded as suggesting to solicitors that they can be careless or unbusiness like in a matter such as this, and then as of course apply for and receive the assistance of the court. It is only in exceptional cases, cases of special circumstances, of genuine mistake of inadvertence, that assistance ought to be given.

32. In his skeleton argument, at paragraph 20, Mr Bacon submits that there could be no real objection to the application to amend the bill for "there was an obvious error in the original version of the bill in applying the value element to contentious business".
33. I am afraid that I do not agree. There is evidence which is contemporary to the 3^rd September 1994 bill which is, in my judgment, consistent with the intention to claim an uplift on all of the Defendants' fees. Mr Stockler's memorandum dated 5^th August 2004 referred to "an uplift for success". While the draft bill dated 26^th August 2004 did seek a "value factor" claimed as a percentage of the value of the share, the decision not to proceed with that and to replace it with a, larger, uplift must surely have been made consciously.
34. At the meeting on 8^th September 2004 according to the Claimant^[1] Mr Stockler "thought it was only right that he should have £50,000 for getting such a good result". In his own statement Mr Stockler^[2] referred to the uplift as "based on the success we had achieved". In his letter dated 9^th September 2004 Mr Stockler stated that the "uplift figure of £50,000" "relates to both of the cases since I was first instructed in the year 2001". He sought to justify the figure as approximately 16% of all of the profit costs billed "in relation to the whole of the Clearsprings matter from day one" (approximately £310,000). He then went on to refer, in the same letter, to the factors relevant to the assessment of costs in contentious business in the days before the Civil Procedure Rules when care and conduct was charged as a percentage of the solicitor's direct expense rate.
35. Indeed the passage in Cook on Costs enclosed with that letter (at tab 6 page 10 ff in the bundle provided by the Claimant) refers at the foot of page 7 – the passage to which Mr Stockler drew attention in his letter – to "the guidelines for calculating the general care and conduct element in contentious costs" (emphasis added).
36. In his letter to the Claimant's new solicitors dated 18^th March 2005 Mr Stockler referred to the £50,000 as "a reasonable uplift for care and attention". In his letter to them of 23^rd March 2005 he again referred to "an uplift of around 16%". That can only be a percentage of all of the profit costs in relation to the Clearsprings matter – the litigation and the valuation.
37. All of this is consistent with the intention to claim an "uplift", whether for "care and attention" or for "success" (and I suspect having regard to the passage in Cook on Costs referred to that it was probably the former), rather than a value factor.
38. On the balance of probabilities it seems to me that at the material time the Defendants intended to claim an uplift rather than a value factor – hence the abandonment of the value factor in the draft final bill dated 26^th August 2004. From the repeated justification of the uplift by reference to a percentage of all of the costs in the Clearsprings matter it seems to me that the Defendants intended to claim an uplift on all of their bills since April 2001 whether the work was contentious or non-contentious.
39. In paragraph 5 of his statement^[3] Mr Stockler submits that the mistake is manifest because, as a matter of law, no uplift could be charged on a series of final bills in the last bill. However it seems to me that, whatever the legal analysis, this is precisely what was intended – to charge an uplift on a series of bills. The mistake was not the description of the uplift, as the Defendants contend, rather it was the failure to appreciate that no uplift could be charged on these bills because they were final.
40. I cannot be satisfied "that the error in the bill as originally delivered was due to a bona fide mistake": per Jenkins LJ in Polak.^[4] Indeed I am satisfied that the opposite is true. Accordingly, in my judgment, it would be inappropriate to permit the Defendants to substitute the proposed amended bill.

The issues

41. The issues articulated in counsels' skeleton arguments were:

i) Was the business to which the £50,000 fee related contentious or non-contentious? Counsel agreed that no value element can be charged for contentious business (see paragraph 8 of Mr Bacon's skeleton argument).

ii) Did the terms of the retainer prevent a value element being charged?

iii) Is the value element reasonable?

42. In view of my decision not to permit the amendment of the bill, much of the argument on these issues becomes redundant.

Non-contentious business

43. Contentious business is defined in section 87(1) of the Solicitors Act 1974 as:

business done, whether as solicitor or advocate, in or for the purposes of proceedings begun before a court or before an arbitrator, not being business which falls within the definition of non-contentious or common form probate business contained in section 128 of the Supreme Court Act 1981.

Non-contentious business is defined in the same sub-section as:

any business done as a solicitor which is not contentious business as defined by this subsection.

44. The argument that I heard was based on the assumption that amendment of the bill would be permitted. It follows from my decision not to permit amendment that the sum of £50,000 can only be charged as an uplift on all of the bills from April 2001 to September 2004.
45. Those bills clearly included work which was contentious. They covered work done in relation to the actions against Mr King and Clearsprings. Even the final bill of 3^rd September 2004 included contentious work - attending a detailed assessment hearing in relation to a costs order made in the litigation and considering the possibility of garnishee proceedings and a freezing order.
46. Indeed of the total fees of £310,000 (referred to in the Defendants' letter dated 9^th September 2004) only £69,190 is identified in the breakdown of the bill as relating to the valuation process.
47. The uplift claimed was in large part in relation to contentious business. But in any event it is not claimed in the last bill as a value element and therefore cannot be allowed as a value element under The Solicitors' (Non-Contentious Business) Remuneration Order 1994.

The terms of the retainer

48. The Defendants' letter dated 25^th January 2001 explained that their "charges will be calculated mainly by reference to the time spent" (emphasis added). No mention was made of the right to charge an uplift for care and conduct and no mention was made of the right to charge a value element.
49. The Claimant was told by the letter that the hourly rates quoted did not include value added tax "which will be added to the bill" and was told that "the charging rates … quoted are reviewed annually, and therefore if this matter has not been concluded before the next review takes place, they will be subject to an increase".
50. Mr Bacon sought to rely on the word "mainly" as permitting charges at other than hourly rates.
51. It seems to me that the difficulty with that argument is that the sentence

Our charges will be calculated mainly by reference to the time spent …

is followed by

This includes advising, attending on you and others, dealing with papers, correspondence, telephone calls, travelling and waiting time. (emphasis added)

52. It seems to me that "This includes" must refer to the charges that will be calculated by reference to the time spent. What would fall outside the "mainly" is the disbursements referred to in the following paragraph.
53. Where a solicitor and client have agreed an hourly rate at the outset of the retainer, the solicitor cannot then charge an uplift on that hourly rate at the end of the case unless his right to do so has been agreed by the client. In this case there is no evidence that the Claimant agreed to an uplift on the hourly rate or that the parties intended anything other than an all-inclusive hourly rate.
54. Mr Bacon sought to argue that the retainer set out in the Defendants' letter of 25^th January 2001 did not contemplate the non-contentious business required by the valuation exercise and therefore did not cover it.
55. Whether or not that is right, the uplift purported to be in respect of all of the work, most of which was covered by the retainer.
56. In any event, it would seem not to be in dispute that each of the bills delivered to the Claimant was an interim statute bill, that is, a final bill in respect of the period that it covers: see paragraph 5 of Mr Stockler's witness statement dated 12^th September 2005. A solicitor cannot deliver a series of interim statute bills and then seek an uplift on all of those bills in the last.
57. In my judgment there is simply no basis on which the fee of £50,000 can be charged to the Claimant as an "uplift on all bills since April 2001".

The reasonableness of the value element

58. Following my decision to refuse permission for the amendment of the bill, it seems to me that the £50,000 fee cannot be claimed as a value element. It is not therefore necessary for me to consider whether the amount would be reasonable if it were claimed as a value element.

Conclusion

59. The Defendants are not entitled to the fee of £50,000 claimed in their invoice number 26233/7602 dated 3^rd September 2004 as an "uplift on all bills since April 2001".
*****

Note 1   Witness statement, 16th August 2005, para 9    [Back]

Note 2   12th September 2005, para 5    [Back]

Note 3    12th September 2005    [Back]

Note 4    [1956] 1 WLR at 820    [Back]