England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM MASTER SIMONS

		Royal Courts of Justice Strand, London, WC2A 2LL
		23 July 2012

Mr Justice Eady :

1. Kent County Council ("the Council") appeals against decisions made by Costs Judge Simons following a detailed assessment which took place on 16 June 2011. There are three grounds of appeal, in respect of which Globe J gave permission on 14 March 2012.
2. It is necessary to have well in mind the test for an appellate court in these circumstances: see CPR 52.11(3). Since the appeal is by way of review, rather than a rehearing, I have to consider whether the Costs Judge was "wrong". Did he misdirect himself or make an error of law? Did he take into account any irrelevant factors or vice versa? Did any of his decisions fall outside the range of reasonably possible solutions? See e.g. Tanfern Ltd v MacDonald [2000] 1 WLR 1311 and Solutia v Griffiths [2001] EWCA Civ 736.
3. The first ground concerns the hourly rates allowed. It is said that the Costs Judge applied a wrong legal test (i.e. subjective rather than objective) and that this led him to allow an inappropriately high rate. The Respondents' contention is that no error of law was made.
4. The second ground is that he was wrong to allow an uplift once he had determined that his starting point should be Central London guideline hourly rates (not least because for some years an uplift of 50% has been built in to those rates). The Respondents, on the other hand, submit that the decision to allow an uplift was within the band of reasonable decisions he was entitled to make, having regard to CPR 44.5 (and the so-called seven pillars of wisdom).
5. The third ground relates specifically to the time allowed in respect of the documents section in Part 2 of the bill. The submission is that he must have made an arithmetical error (i.e. of fact) in carrying out his "broad brush" approach. In this instance, the Respondents argue that the Council has misinterpreted the Costs Judge's conclusions and that there is no reason to suppose that an error of fact was made.
6. Irwin Mitchell was instructed in 2003, through the Official Solicitor, on behalf of four young sisters who wished to bring a claim against the Council for having failed to protect them, by removal from the family home, against sexual, physical and emotional abuse. It is not in dispute that the case was complex in a number of respects. There is no need at this stage for me to go into the detail, although it is conveniently set out in a full note by Ms Gumbel QC prepared for the costs assessment. In particular, there were difficulties over causation, since three of the sisters had been exposed to an element of abuse for which the Council could not be liable. At a case management conference in August 2009, it was directed that issues of liability should be determined first, leaving causation and quantification of loss for later.
7. It is also true that, at the stage when the potential claims were originally referred to the Official Solicitor, the law in relation to liability on the part of local authorities in such circumstances was unclear. Later, in the case of JD v East Berkshire Community Health NHS Trust (2005) 83 BMLR 66, the Court of Appeal recognised that there was a common law duty of care to children who were the victims of abuse. It could no longer be said, as had previously been thought to be the position, that there was simply no common law duty of care owed to a child in respect of the investigation of suspected child abuse and/or in the initiation and pursuit of care proceedings. That is not to say, of course, that thereafter the law or its application had been rendered simple. This was one of the first cases to be pursued in the light of the newly established principles, and it was by no means clear in what circumstances such a duty of care would be imposed or how the applicable standards would be defined.
8. Until a relatively late stage, it appeared that the Council was contesting liability in reliance upon an expert report suggesting that, judged by the standards of the relevant time, no breach of duty had taken place.
9. The matter was set down for a trial on liability, to take place on 26 April 2010, but in due course a settlement was achieved at a round table meeting on 4 March of that year, whereby the four sisters accepted £60,000, £35,000, £35,000 and £25,000 respectively.
10. The main challenge under the first ground of appeal is that the Costs Judge applied the wrong legal test in assessing the hourly rates; in that he confined himself to asking whether the Official Solicitor had, judged subjectively, acted reasonably in instructing Irwin Mitchell when he should have asked the question what it was reasonable to require the paying party to pay. It is necessary to have regard to CPR 44.5 and to consider whether the costs were proportionately and reasonably incurred and/or proportionate and reasonable in amount.
11. My attention was also drawn to the decision of the Court of Appeal in Wraith v Sheffield Forgemasters Ltd [1998] 1 WLR 132. It was there determined that the appropriate question was whether the client had acted reasonably in instructing his particular solicitors, having regard to all the circumstances. Those would include the importance of the matter to the client, any legal and factual complexities, the location of his home in relation to the relevant court, how the solicitors came to be instructed and whether they had relevant experience in relation to the type of work. Reference was made by Kennedy LJ, at pp 141-142, to the test applied by Potter J at first instance, which he approved: see [1996] 1 WLR 617, 624-625:

" … In relation to the first question 'Were the costs reasonably incurred?' it is in principle open to the paying party, on a taxation of costs on the standard basis, to contend that the successful party's costs have not been 'reasonably incurred' to the extent that they had been augmented by employment of a solicitor who, by reason of his calibre, normal area of practice, status or location, amounts to an unsuitable or 'luxury' choice, made on grounds other than grounds which would be taken into account by an ordinary reasonable litigant concerned to obtain skilful competent and efficient representation in the type of litigation concerned … However, in deciding whether such an objection is sustainable in practice, the focus is primarily upon the reasonable interests of the plaintiff in the litigation so that, in relation to broad categories of costs, such as those generated by the decision of a plaintiff to employ a particular status or type of solicitor or counsel, or one located in a particular area, one looks to see whether, having regard to the extent and importance of the litigation to a reasonably minded plaintiff, a reasonable choice or decision has been made. If satisfied that the choice or decision was reasonable, it is the second question 'What is a reasonable amount to be allowed?' which imports consideration of the appropriate rate or fee for a solicitor or counsel of the status and type retained. If not satisfied that the choice or decision was reasonable, then the question of 'reasonable amount' will fall to be assessed on the notional basis of the costs reasonably to be allowed in respect of a solicitor or counsel of the status or type which should have been retained. In either case, the solicitors' hourly rates will be assessed, not on the basis of the solicitor's actual charging rates, but (in a case where the decision to retain was reasonable) on the basis of the broad costs of litigation in the area of the solicitor retained or (in a case where the choice made was not reasonable) of the type or class of solicitor who ought to have been retained."

12. In this case, it was accepted on behalf of the Council, when the point was expressly raised in the course of submissions, that it was not unreasonable to instruct Irwin Mitchell in this particular case. Accordingly, the only question is how to assess the hourly rates, on the basis of the broad costs of litigation in the area of the solicitor retained. The Costs Judge allowed the following hourly rates:

Grade of fee earner	Hourly Rate allowed
A (partner)	£335
B (associate)	£255
C (assistant)	£180
D (trainee & litigation assistant)	£120
Costs draftsman	£130

13. There is a helpful note in Civil Procedure, Vol I at 47.14.5 on the court's general approach to hourly rates which makes the point, based on the judgment of Evans J in Johnson v Reed Corrugated Cases Ltd [1992] 1 All ER 169, that the court is not concerned with charges, only with costs; it is not concerned with any market, except indirectly, certainly not to influence any market. Its function is to assess the reasonable amount of costs for work reasonably done; that, and nothing else. Moreover, the guideline figures are not supposed to replace the experience and knowledge of those familiar with the local area and the field generally: Higgs v Camden & Islington Health Authority [2003] 2 Costs LR 211 (Fulford J).
14. In arriving at his hourly rates, the Costs Judge, in the course of a fairly lengthy ex tempore judgment, gave his reasons at paragraphs [24] and [25]. It was necessary, in the context of an assessment on the standard basis, to apply the test of whether or not they were proportionately and reasonably incurred, and proportionate and reasonable in amount.
15. There is no doubt that the test is an objective one, but the Costs Judge reminded himself of this on a number of occasions in the course of his observations. In any event, of course, it is hardly likely that he would miss such a fundamental principle in view of his considerable experience in the role. Furthermore, he referred, quite appropriately, to Sullivan v Co-operative Insurance Society Ltd [1999] 2 Costs LR 158.
16. The rates selected were undoubtedly on the high side, but I cannot accept that they exceed the bounds of the reasonable options available to him in carrying out his task. Before allowing for uplifts (which is essentially the subject-matter of Ground 2), it is clear that the Costs Judge's assessment was based upon the Central London guideline rates. That was largely a factor of having concluded, after careful deliberation, that it was reasonable to have instructed Irwin Mitchell (see paragraphs [8]-[23]). Once that decision was made, the reasonableness of which is not effectively the subject of challenge, it was naturally appropriate to select Central London rates as the basis for his consideration.
17. In these circumstances, I cannot see that Ground 1 can be sustained, whether on the basis of a supposed error of law, a misdirection or irrationality.
18. In addressing the question of uplift, it is appropriate to have in mind the discussion in Higgs, cited above, and the factors listed in CPR 44.5(3):

(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 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.

19. It is part of the complaint in this case that once Central London rates had been selected, a further uplift was inappropriate. This is not a tenable position, since the seven factors listed in CPR 44.5(3), and set out above, are just as relevant to take into account in London cases as in any other. It is true that, some years ago, when the rates were fixed, a built-in uplift of 50% was incorporated, but the Costs Judge was well aware of this and explained his position at paragraph [24]:

"As far as the rates are concerned, I do consider that they are entitled to uplifts on the hourly rates that are set out in the guideline rates and I think that it is a substantial uplift and I think that the uplift is in the region of 75 per cent for a grade A fee earner. Now, one thing I think that is a misapprehension is when I say that there is a 75 per cent uplift, it is not 75 per cent of the rate, because the rate already includes a 50 per cent uplift fee, so what I tend to do is to divide the rate as a cross-check by two-thirds and then multiply it by the factor I have allowed. As a cross-check, the figure I come up with is always not a mathematical figure but it is roughly that sort of figure that I think the rates that are claimed should be allowed."

No doubt the reasoning could have been expressed more elegantly or concisely, but it is clear enough what approach was adopted. It is one that falls very much within the remit of a costs judge and cannot be criticised on the grounds relied upon.

20. The third ground of appeal relates to an exercise of discretion with which an appellate court should be slow to interfere. It is to be noted, first, that the parties agreed at the hearing below that the Costs Judge should adopt a "broad brush" approach. Having done so, it is difficult for the Appellant now to challenge it.
21. The Council's reasoning is explained in paragraphs 28-29 of its skeleton:

"28. The Master's 'broad brush' assessment of the documentary time in Part 2 of the Bill of Costs was flawed in that the figure that the Master arrived at was greater than was reasonably credible given his own findings as to the costs of funding, legal aid, etc. In particular, the Master found that the costs of funding were to be disallowed, as were the costs of the pre-action disclosure, and legal aid costs. If those costs are removed from the total time claimed, the times claimed fell back to the figures in the 'adjusted' column in the table above. It can be seen that those times were not that much different from the times that he allowed; this means that the Master made almost no disallowance in respect of all the other points that the Defendant had made, of which there were many. This was inconsistent with the way in which he dealt with the documentary time generally, this being because (on the whole) he agreed with many, if not most, of the objections that the Defendant had made.

29. As such, the only sensible conclusion one can come to is that the Master made a simple arithmetical mistake when calculating the effect of the disallowances referred to above … "

22. On closer examination, however, it emerges that the situation is not so black and white. A clearer picture emerges upon examination of the transcript of the submissions. It would be tedious to set these out in extenso, but I am able to draw the following conclusions. First, it is clear that he did not disallow all costs incurred in dealing with the Legal Services Commission, simply because there was a degree of overlap. He was prepared to allow for some of the work which could be categorised as falling within that topic. He allowed some of the units on the basis that the work was not exclusively attributable to funding (see e.g. the transcript at pp. 64B-C and 77F-H). The Costs Judge's approach was more fine-tuned, therefore, than Ground 3 allows for. I have come to the conclusion that it is not possible to ascribe to him, so readily, a simple arithmetical error. This ground must therefore be rejected also.