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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		18/04/2013

Mr Justice Tugendhat :

1. This appeal, by the Claimant, arises out of a detailed assessment of the bills of both the Claimant and the Defendant in April 2012. The Claimant was represented before the Master and is represented on the appeal by Mr Wise, who describes himself as the Chairman and sole shareholder of the Claimant. At the end of the hearing I stated that the appeal was dismissed for reasons that would be given in writing. These are they. I am indebted to Master Gordon-Saker and Mr Jaque for their assistance.
2. A brief outline of the course of the dispute between the parties is necessary for the understanding of the issues on the costs assessment.
3. The Claimant is an English company. The Defendant is a Canadian company based in Ontario. On 19 January 2004 they had made an agreement headed Master Reseller Agreement ("MRA") for the distribution by the Claimant of software products of the Defendant. The Defendant gave notice to terminate the agreement on 13 November 2006. The MRA contained a choice of Ontario and the federal laws of Canada as the governing law. It also contained an arbitration clause, requiring that all disputes be settled by arbitration to be held in Toronto.
4. The Claimant claimed compensation, put at £1.75m, under the Commercial Agents (Council Directive) Regs 1993 for termination of a commercial agency agreement. In support of that claim in April 2007 it obtained a valuation of the agency in accordance with the law as stated in Lonsdale v. Howard & Hallam Ltd [2007] UKHL 32; [2007] 1 WLR 2055. But the Claimant deferred proceeding with this claim when the Defendant insisted on arbitration in Ontario. Whether the Claimant was the Defendant's commercial agent was an issue in dispute in the proceedings and was not resolved.
5. The Defendant alleged that the Claimant was in gross breach of the agreement. That issue was resolved in favour of the Claimant in the Ontario arbitration. But the arbitrators did not determine the claim under the Commercial Agents (Council Directive) Regs.
6. On 13 July 2007 the Claimant issued the claim form in England in the Chichester District Registry. It applied for permission to serve out of the jurisdiction pursuant to CPR r6.20. CPR 6.21(1) requires that an application for permission under rule 6.20 must be supported by written evidence stating that the claimant believes that his claim has a reasonable prospect of success.
7. On 9 February 2009 the Defendant filed an application notice challenging the jurisdiction on a wide range of grounds which the District Judge rejected (these included the allegation that the claim did not have a reasonable prospect of success). But, by an order dated 29 May 2009 the District Judge allowed the application on the basis of an erroneous submission that had been made to her by the Defendant. The Claimant appealed, and the appeal came before myself.
8. I upheld the appeal for reasons set out my judgment: [2009] EWHC 2655 (QB), [2009] 2 Lloyd's Rep 599. By order sealed on 2 November 2009 I also ordered that:

"The Claimant's costs of and occasioned by this appeal and by the Defendant's application and hearing below shall be paid by the Defendant to the Claimant, to be assessed on the standard basis if not agreed".

9. Particulars of Claim were dated 26 January 2009. On 16 November the case was ordered to be transferred to the Commercial Court. On 18 December the Defendant served a Defence and Part 18 request. On 25 January 2010 the Claimant served a Reply and response to the Part 18 request. On 29 January 2010 Burton J made an order with directions, including the adjournment of the hearing of an application by the Defendant on 19 November 2009 for security for costs.
10. The Defendant's estimate of costs from 28 October 2009 to 19 May 2010 was £59,941.32. The estimate of costs up to and including a three day trial (but not the application for security for costs itself) was a further £266,540. The total of these two figures was £326,481.32. On 9 June 2010 Clyde & Co for the Defendant had certified that the costs incurred and anticipated in respect of the application for security for costs was £24,747.67.
11. On 17 June 2010 the application for security for costs was restored. Burton J ordered the Claimant to provide security for costs of £65,000, in three tranches: £15,000 on 1 July, £25,000 on 31 July and £25,000 on 31 August. In the same order he gave directions for disclosure to be given by 14 July (with inspection by 28 July) and exchange of witness statements by 3 September. He also ordered the Claimant to pay the costs of the application for security.
12. The Claimant did not provide any security. On 2^nd August 2010 it served notice of discontinuance by the Claimant.
13. The result of this was that the Claimant is liable to pay the Defendant's costs of the claim and the Defendant is liable to pay the Claimant's costs of the interlocutory appeal, and the hearing before the District Judge, in accordance with my order of November 2009.
14. By order dated 13 April 2012 Master Leonard assessed the Claimant's bill at £34,503.69 and the Defendant's at £74,199. He also ordered the Claimant to pay the Defendant's costs of the assessment of both bills, assessed at £20,700.

THE ISSUES ON THIS APPEAL

15. There are three decisions under appeal:

i) Proportionality – Mr Wise submits that the Master was wrong to hold that the Defendant's costs were not disproportionate.

ii) The hourly rates allowed for the Defendant's solicitors.

iii) The disallowance of the Claimant's costs incurred before the application made in February 2009.

16. Initially the Claimant served a bill of £376,000 but that was replaced by a bill of £196,000. A large part of it was the costs of the Ontario arbitration. The Master disallowed the costs of the arbitration and there is no appeal from that decision. The Defendant had claimed costs of £106,052. The Master ordered a set-off and awarded the Defendant the costs of both assessments, principally because the Defendant had offered a "drop hands" settlement in February.

THE PROPER APPROACH TO AN APPEAL

17. There is no dispute as to the law. This is an appeal by way of review, not a rehearing. An appellant bears the burden of persuading the court that the court below has erred in principle, or that it has reached a conclusion that is plainly wrong.

PROPORTIONALITY OF D'S BILL

18. The Master gave a judgment on proportionality. He held that the Defendant's bill was not disproportionate. He remarked that this claim was for a very substantial amount of money involving some very technical issues of law and of fact. He referred to the very large number of documents (mainly e-mails) disclosed.
19. In Home Office v Lownds [2002] EWCA Civ 365 Lord Woolf CJ said:

"31. In other words what is required is a two-stage approach. There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which Part 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the cost for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary and, if necessary, that the cost of the item is reasonable. If, because of lack of planning or due to other causes, the global costs are disproportionately high, then the requirement that the costs should be proportionate means that no more should be payable than would have been payable if the litigation had been conducted in a proportionate manner. This in turn means that reasonable costs will only be recovered for the items which were necessary if the litigation had been conducted in a proportionate manner….

36. Based on their experience costs judges will be well equipped to assess which approach a particular case requires. In a case where proportionality is likely to be an issue, a preliminary judgment as to the proportionality of the costs as a whole must be made at the outset. This will ensure that the Costs Judge applies the correct approach to the detailed assessment. In considering that question the costs judge will have regard to whether the appropriate level of fee earner or counsel has been deployed, whether offers to settle have been made, whether unnecessary experts had been instructed and the other matters set out in Part 44.5(3). Once a decision is reached as to proportionality of costs as a whole, the judge will be able to proceed to consider the costs, item by item, applying the appropriate test to each item."

20. Mr Wise has presented the case for the Claimant with care and restraint. But as a layman he is at a disadvantage in matters of law, most particularly in a field as technical as the law on costs, and the procedure for conducting commercial litigation.
21. Mr Wise has also been confused by some of the different figures put forward. He has simply been unable to point to any error of principle on the part of the Master in the conclusion that the costs were not disproportionate.
22. Mr Wise complained that in a letter dated 9 March 2009 (which must be an error for 2010, since it refers to the order of 29 January 2010) Clyde & Co had written that it was unnecessary for further costs to be incurred while there was pending an application for security for costs, but that further costs were incurred by the Defendant, apparently up to the beginning of August.
23. However, as Mr Marven submits, the Defendant was entitled to continue preparation for the trial, and to seek to comply with the directions given in the order of 17 June, up to the point at which the Claimant served Notice of Discontinuance. Whatever reason there may have been for the Claimant to defer giving Notice of Discontinuance until after the expiry of the date for compliance with the order for security to be given for the last tranche, the Defendant cannot be criticised for continuing to prepare for trial, particularly given the imminence of the long vacation.
24. This ground of appeal must be dismissed.

THE DEFENDANT'S SOLICITORS' HOURLY RATES

25. Clyde & Co are a firm of solicitors well known in the field of commercial litigation, and in particular litigation and arbitration conducted in London. But they have an office in Guildford from which much of their London work is done.
26. The Claimant's argument is that the work was done in Guildford but the Master allowed (roughly) Central London rates plus 20% for the senior fee earners.
27. The Master reduced the rate for the senior partner, Jonathan Wood, from £435 to £385, on the ground that this was a Central London case, not a City case. He also reduced the rates for the junior fee earners at Clyde & Co to the rates claimed by Reynolds Porter Chamberlain (to which firm Mr Wood moved during the proceedings in question). The relevant guideline rates were:

	2009	2010	2010	2010	2010	2010	2010	2010
	A	B	C	D	A	B	C	D
City of London	402	291	222	136	409	296	226	138
Central London	312	238	193	124	317	242	196	126
Guildford	213	189	158	116	217	192	161	118

28. Mr Marven submitted that the Master rightly had regard to a number of cases in the past in which, for the purposes of costs, the Guildford office of Clyde & Co has been treated as part of its international practice. These included a decision of Aikens J (as he then was) set out in a letter dated 5 November 2001.
29. In my judgment the Master's decision on this point was well within the range open to him, and this ground of appeal must be dismissed.

THE CLAIMANT'S PRE- APPLICATION COSTS

30. Mr Wise pointed to three heads of costs totalling £21,223.48:

i) £5,800 for counsel's fees incurred in and between June 2007 and January 2009;

ii) £5,423.48 solicitors' fees for the period before February 2009;

iii) £10,000 for the expert who provided the valuation of the company obtained in 2007 referred to above.

31. The Master drew a distinction between work done in respect of the claim (which the Defendant is entitled to) and work done in respect of the application to the District Judge and the appeal from that (which the Claimant is entitled to). He held that the cost of the valuation report was part of the costs of the claim, not of the application or the appeal.
32. Mr Wise submits that this is wrong in principle. The Defendant had raised a wide range of issues on the application to the District Judge and on the appeal. The work done before February 2009 included advice on the merits necessary for the Claimant to comply with the requirements of CPR r.6.20 and 6.21, including, in particular the requirement to show a reasonable prospect of success. The fact that this work had been done in anticipation of the application for permission to serve out did not detract from the fact that the work was referred to and was material to the success that the Claimant achieved at this stage of the proceedings.
33. Mr Marven does not dispute that the costs incurred before the Defendant's application made in February 2009 assisted the Claimant in ultimately having that application dismissed. But he submits that it does not follow that these costs were, in the words of the order dated 2 November 2009, "costs of and occasioned by this appeal and by the Defendant's application and hearing below". He submits that the costs were occasioned by the need for the Claimant to apply for permission to serve out of the jurisdiction, and were thus properly to be regarded as costs of the action.
34. Mr Marven cited a number of authorities in support of that proposition: Cinema Press Ld v Pictures Pleasures Ltd [1945] 1 KB 356at p361 (citing Medway Oil & Storage Co v Continental Contractors Ltd [1929] AC 88); Dyson Technology Ltd v Strutt [2007] 4 Costs LR 597 para 56; Wright v Bennett [1948] 1 KB 601 at p 605.
35. In my judgment the Master's decision was in accordance with principle. The costs incurred before the Defendant's application made in February 2009 were not occasioned by that application. This ground of appeal must also be dismissed.
36. It is for these reasons that this appeal must be dismissed.