What are Common Legal Costs Issues?

Time is money so it should not be wasted in disputing items that depend upon application of long-established principles!

The Lawyer has the obligation to inform the client of what they will charge and the extent of their entitlement to charge. If costs are recoverable from a third party it is necessary for the client to be advised as to the extent, if any of the costs incurred by the client that are potentially recoverable. This element may have major implications for both the lawyer and the client. The retainer with the client may itself contain limiting factors regarding the entitlement to charge that are dependent upon the extent of recovery of costs from a third party.

Whilst many consider the issue of costs to be contentious and have nothing to do with non-contentious matters such as the making of a will or the sale or purchase of property we see, all too often, how such matters can turn contentious and litigious. The obligation to advise in relation to costs is embedded within the Solicitors Code of Conduct and is generally contained within engagement letters and/or terms of business.

Despite this very fundamental requirement there remain instances where some very basic principles are still made the subject of expensive legal challenges. An interesting example, in my view, is Monex Europe Ltd v Charles Pothecary and Guy Kaufman. The judgment relates to the summary assessment by Clive Sheldon QC, sitting as a deputy High Court Judge, of the successful defendant’s costs of a failed application by the claimants for an injunction. The costs were claimed at £85,446, a schedule of costs was produced and the judge directed that each party should file submissions in respect of the summary assessment.

Although reported as a decision confirming that comparison between each sides cost is not a reason to reduce winning party’s costs there are other relevant factors.

When costs are being assessed, whether by summary or detailed assessment on the standard basis, the court will allow a sum that is reasonable and proportionate.

In determining what is reasonable and proportionate, the Civil Procedure Rules, in particular, CPR 44.3 and CPR 44.4 will be considered. Whilst the issue of conduct of the opposite party may be a factor to take into account, there is no reference to the amount of the opponent’s bill of costs being a relevant factor in the assessment of the bill of the receiving party.

If the case is subject to budgeting by the court CPR 3.17 provides:

“(1) When making any case management decision, the court will have regard to any available budgets of the parties and will consider the costs involved in each procedural step.

(2) Paragraph (1) applies whether or not the court has made a costs management order.”

 So the Court will have regard to the opponents ‘budget’  for the purpose of making decisions about the steps to be taken in the case going forward. If there are issues raised at the budgeting appointment the judge may make a comment concerning the reasonableness of any budgeted costs which can subsequently be taken into account at assessment (CPR 3.17(4)).

It is apparent from the relatively short judgment published that the he did direct his mind to the provisions of CPR 44. He looked at the specific items for which costs were claimed and applied the test of reasonableness and proportionality.

The procedure adopted by him is not uncomment in assessments He looked at the grade of fee-earners who did work on the case, the charge rates applied for the costs lawyer, the time spent on considering and preparing documents, and the extent of witness evidence.

He decided that there were disproportionate costs incurred in attending witnesses owing to duplication between fee-earners and that there was excessive time spent in attendances and on documents. He allowed the costs of engaging an experienced costs lawyer in this case. The claim was reduced to £74,041. This was still much higher that the claimant’s costs of £44,669.

Implications for practitioners

So in applying basic principles consideration should be given to preparing a case plan, employ a disciplined monitoring process throughout the case and ensure that the work that is or has been undertaken and the costs incurred will meet the test of reasonableness and proportionality. Although proportionality may not be relevant in cases where there is an assessment on the indemnity basis it is not until the end of the case that this will be known. If you do have information about the size of the opponent’s costs keep it in mind but do not allow that alone to determine the advice to the client about challenging the receiving party’s claim for costs. Concentrate on those factors that will get results on assessment.

Also bear in mind that the judge will have been a practising lawyer and will be entitled to draw upon his or her own experience of previous cases to determine what is reasonable to allow. Reflect this in the planning of your case and advising your client on costs.

In order to advise your client, it is important to have regard to the comparison of each side’s costs in the case planning and budgeting stages. An unfavourable comparison is not enough to find a bill unreasonable, but the judge may consider any disparity when evaluating the reasonableness and proportionality of individual elements. Do not disregard the comparison but do not allow this to be your only or bad egg in the basket.

Implication for the Clients

In order to understand the advice being given about the costs of the case and risks of adverse orders or failure to recover own legal costs form a general overview and do not be afraid to ask questions. Every lawyer should be able to provide answers but not necessarily predictions.

This blog was based on 'Dispute Resolution Blog' published on 13th September 2019 on the Thomson Reuters website.