Key Points
- In relation to a summary assessment on an indemnity basis, it may be appropriate to adopt rates that are marginally in excess of the guideline rates but what is reasonable depends ultimately not on the value of the litigation as a whole but on the nature of the application in respect of which costs are sought. Anything in excess of the guideline rate has to be justified.
- In this case, it was not considered appropriate, even on an indemnity basis assessment, that there should be no less than seven fee earners attending the hearing. All but one were disallowed.
Another reminder that even with an award of indemnity basis costs the test of reasonableness still applies.
In April last year The Honourable Mr Justice Calver said in the course of summarily assessing costs on the indemnity basis in Louis Dreyfus Company Suisse S.A. v International Bank of St. Petersburg (Joint-Stock Company) [2021] EWHC 1039 (Comm) …
“It is of course the entitlement of the Claimant (and any Claimant) to appoint Counsel of its choice and here to appoint leading counsel, Mr. Houseman QC, who has conducted and presented the case throughout with his customary skill, rather than instructing him with junior counsel and allowing the bulk of the work to be carried out by junior counsel. However, that does not mean that the Claimant should be entitled to recover from the Defendant, even on an indemnity basis, costs which are significantly greater in amount than it might otherwise reasonably have incurred, whilst still having its case conducted and presented proficiently.”
In this case, HHJ Pelling QC made a number of like observations concerning the limitations of an indemnity costs award, especially in relation to hourly rates and the number of fee earners in attendance at the hearing.
Hourly Rates
“I accept that in relation to a summary assessment on an indemnity basis, it may be appropriate to adopt rates that are marginally in excess of the guideline rates but what is reasonable depends ultimately not on the value of the litigation as a whole but on the nature of the application in respect of which costs are sought. This was a relatively straight forward application for an extension of time to serve witness statements. Whilst I am prepared to adopt the London 1 rates, essentially on the basis of an acceptance by the defendant that that is appropriate in the circumstances, given the nature of the application it is entirely inappropriate that I should attempt to exercise whatever jurisdiction I have to assess costs by reference to a rate that is higher than the guideline rate. Anything in excess of the guideline rate has to be justified, and Mr Sprange realistically has not attempted to do so. Therefore all sums for which payment is due under this assessment will be calculated at the London 1 guideline rates applicable for the appropriate fee earners.“
Multiple Fee Earners
“What I do not accept is appropriate, even on an indemnity basis assessment, is the notion that there should be no less than seven fee earners attending a hearing such as this. I accept that, having regard to be importance of the application to Mr Sprange’s clients, it was appropriate that him to appear. What I do not accept is that it is appropriate to have all the other fee earners attending at the hearing. I am prepared to allow, having regard to the fact that this is an assessment on an indemnity basis, the attendance of Ms Walker, but I disallow the attendance of all others.”
VARIOUS AIRFINANCE LEASING COMPANIES & ORS V SAUDI ARABIAN AIRLINES CORPORATION [2021] EWHC 3509 (COMM)
INDEMNITY BASIS COSTS | HOURLY RATES | GUIDELINE HOURLY RATES | SUMMARY ASSESSMENT
VARIOUS AIRFINANCE LEASING COMPANIES & ORS V SAUDI ARABIAN AIRLINES CORPORATION (INDEMNITY COSTS) | KEY EXCERPTS
“It is plain that the hourly rates claimed by the claimants’ solicitors are substantially in excess of what is reasonable being massively in excess of even the London 1 guideline rates published by the Master of the Rolls for use in summary assessment only as recently as the middle of last August. So, for example, Mr Jawad Ali’s hourly rate is £1,083-odd; Mr Sprange’s is £1,045-odd, Ms Walker’s is £1,030-odd. Each of those are grade A fee earners. Even if I were to adopt the London 1 rate (which I indicate immediately is one I accept because it is, in effect, conceded), the guideline rate for London 1, that is to say for very heavy commercial litigation by centrally-based London law firms, is £512 an hour. So far as the grade B fee earners are concerned, those are Mr Bhalla and Ms Warwick. Mr Bhalla’s rate is £697 an hour, Ms Warwick’s £663 an hour. The London rate for a grade B fee earner is £348 an hour. So far as the grade C and grade D fee earners are concerned, those figures are also massively in excess of the guideline rates.” [16]
“This is not an appropriate way to proceed in relation to summary assessment even on an indemnity basis. The sums which I have identified are in excess of what is reasonable in the circumstances.” [16]
“I accept that in relation to a summary assessment on an indemnity basis, it may be appropriate to adopt rates that are marginally in excess of the guideline rates but what is reasonable depends ultimately not on the value of the litigation as a whole but on the nature of the application in respect of which costs are sought. This was a relatively straight forward application for an extension of time to serve witness statements. Whilst I am prepared to adopt the London 1 rates, essentially on the basis of an acceptance by the defendant that that is appropriate in the circumstances, given the nature of the application it is entirely inappropriate that I should attempt to exercise whatever jurisdiction I have to assess costs by reference to a rate that is higher than the guideline rate. Anything in excess of the guideline rate has to be justified, and Mr Sprange realistically has not attempted to do so. Therefore all sums for which payment is due under this assessment will be calculated at the London 1 guideline rates applicable for the appropriate fee earners.“ [16]
“What I do not accept is appropriate, even on an indemnity basis assessment, is the notion that there should be no less than seven fee earners attending a hearing such as this. I accept that, having regard to be importance of the application to Mr Sprange’s clients, it was appropriate that him to appear. What I do not accept is that it is appropriate to have all the other fee earners attending at the hearing. I am prepared to allow, having regard to the fact that this is an assessment on an indemnity basis, the attendance of Ms Walker, but I disallow the attendance of all others.” [18]
“So far as work on documents is concerned, Mr Sprange realistically accepted that there was what he called ” a haircut” to be taken here, having regard to the concession he made as to what applications costs were to be recoverable for. I am satisfied that it is appropriate that he should recover the work done on the skeleton argument, as identified. I am satisfied that he should recover his costs of preparing for the hearing and I am satisfied that Ms Walker should also recover her costs for the preparation for the hearing, consistent with what I indicated a moment ago concerning attendances for the purposes of this application. What I do not accept is that any of the other fees for preparation should be permitted. I allow the costs of preparing the schedule of costs as claimed, and I allow the costs of working on the cross-application, preparing the exhibit, and reviewing the exhibit as claimed, that is to say lines 5, 6 and the second 6. I do not accept that line 1 is recoverable, having regard to the concession that is made, and I accept Mr Robertson’s submissions concerning 2, 3 and 4.”
Link to Judgment
VARIOUS AIRFINANCE LEASING COMPANIES & ORS V SAUDI ARABIAN AIRLINES CORPORATION (INDEMNITY COSTS) | FULL COSTS DECISION
15. This is an application for the costs of and occasioned by the application for an extension of time. The claimants submit that they have been successful and therefore ought to receive their costs of and occasioned by the application. I agree that the claimants should recover their costs. Technically the defendants have succeeded in obtaining an extension but they only had to apply for the extension obtained because of serial non compliance with the order made originally and with the various extensions that followed. The claimant’s position on this application was one they were fully entitled to adopt and directing the defendant to meet the costs of the application is plainly appropriate having regard to the order that I have made.
16. The second point they make is that costs should be assessed on the indemnity as opposed to the standard basis. The test that applies for whether or not costs on an indemnity basis should be ordered is that identified by the Court of Appeal in Excelsior and is concerned with conduct which is outside the norm to be expected, or substantially outside the norm to be expected, for litigation of the class concerned.
17. This is high value commercial litigation being conducted by global full service law firms and highly experience specialist counsel in which high standards of compliance are legitimately to be expected. The defendants have fallen substantially short of that expectation by not complying with seven previous extensions notwithstanding that the trial is due to start on 22 March 2022. Mr Robertson submits, and I accept, that some of the extensions were for a relatively short time, but that is not the point. The point that has be to borne in mind is that the extensions were agreed but then not been complied with. It is that feature together with the sheer number of extensions that takes this case outside the norm, together with the nature of the grounds advanced for seeking this, the latest, extension. In my judgment, in the circumstance of this case, it is plainly appropriate that costs should be directed to the paid on the indemnity basis and therefore that is the basis on which I propose to summarily assess those costs if invited to do so.
LATER
15. This is a summary assessment of the claimants’ costs in relation to the application I disposed of a few moments ago. I have directed that the costs be assessed on a summary basis. The test that I have to apply does not have regard to proportionality but only reasonableness, with the claimants being entitled to recover payment for the work which it was reasonable for the claimants to carry out in the circumstances, and in respect of such work a reasonable amount.
16. The first issue which arises concerns hourly rates. As I indicated in the course of the argument, the statement of costs has been denominated in dollars throughout and then the grand total converted to sterling. That is an unsatisfactory way of proceeding because it makes it impossible to arrive at judgments as to the rates which are being claimed, for example, without converting the hourly rates adopted. In fact I was able to do that for myself prior to the hearing.
It is plain that the hourly rates claimed by the claimants’ solicitors are substantially in excess of what is reasonable being massively in excess of even the London 1 guideline rates published by the Master of the Rolls for use in summary assessment only as recently as the middle of last August. So, for example, Mr Jawad Ali’s hourly rate is £1,083-odd; Mr Sprange’s is £1,045-odd, Ms Walker’s is £1,030-odd. Each of those are grade A fee earners. Even if I were to adopt the London 1 rate (which I indicate immediately is one I accept because it is, in effect, conceded), the guideline rate for London 1, that is to say for very heavy commercial litigation by centrally-based London law firms, is £512 an hour. So far as the grade B fee earners are concerned, those are Mr Bhalla and Ms Warwick. Mr Bhalla’s rate is £697 an hour, Ms Warwick’s £663 an hour. The London rate for a grade B fee earner is £348 an hour. So far as the grade C and grade D fee earners are concerned, those figures are also massively in excess of the guideline rates.
This is not an appropriate way to proceed in relation to summary assessment even on an indemnity basis. The sums which I have identified are in excess of what is reasonable in the circumstances.
I accept that in relation to a summary assessment on an indemnity basis, it may be appropriate to adopt rates that are marginally in excess of the guideline rates but what is reasonable depends ultimately not on the value of the litigation as a whole but on the nature of the application in respect of which costs are sought. This was a relatively straight forward application for an extension of time to serve witness statements. Whilst I am prepared to adopt the London 1 rates, essentially on the basis of an acceptance by the defendant that that is appropriate in the circumstances, given the nature of the application it is entirely inappropriate that I should attempt to exercise whatever jurisdiction I have to assess costs by reference to a rate that is higher than the guideline rate. Anything in excess of the guideline rate has to be justified, and Mr Sprange realistically has not attempted to do so. Therefore all sums for which payment is due under this assessment will be calculated at the London 1 guideline rates applicable for the appropriate fee earners.
17. I remind myself that since this is a summary assessment, the benefit of the doubt, both as to the work done and the sums charged for such work in terms of the hours spent on it, is to be accorded to the receiving party and against the paying party. I accept Mr Sprange’s submission that in relation to internal costs, the relevant comparator is between what would take place between a major London law firm and external leading counsel. I agree that is so in principle. Whilst the work done is on the high side, having regard to the fact that this is an indemnity costs basis, I accept that in principle those sums should be recoverable.
18.
What I do not accept is appropriate, even on an indemnity basis assessment, is the notion that there should be no less than seven fee earners attending a hearing such as this. I accept that, having regard to be importance of the application to Mr Sprange’s clients, it was appropriate that him to appear. What I do not accept is that it is appropriate to have all the other fee earners attending at the hearing. I am prepared to allow, having regard to the fact that this is an assessment on an indemnity basis, the attendance of Ms Walker, but I disallow the attendance of all others.
19. So far as work on documents is concerned, Mr Sprange realistically accepted that there was what he called ” a haircut” to be taken here, having regard to the concession he made as to what applications costs were to be recoverable for. I am satisfied that it is appropriate that he should recover the work done on the skeleton argument, as identified. I am satisfied that he should recover his costs of preparing for the hearing and I am satisfied that Ms Walker should also recover her costs for the preparation for the hearing, consistent with what I indicated a moment ago concerning attendances for the purposes of this application. What I do not accept is that any of the other fees for preparation should be permitted. I allow the costs of preparing the schedule of costs as claimed, and I allow the costs of working on the cross-application, preparing the exhibit, and reviewing the exhibit as claimed, that is to say lines 5, 6 and the second 6. I do not accept that line 1 is recoverable, having regard to the concession that is made, and I accept Mr Robertson’s submissions concerning 2, 3 and 4.
20. Overall, therefore, the costs that will be recoverable on this assessment are those that I have indicated are recoverable, assessed at the guideline rate applicable for the fee earner concerned at the London 1 rate. Unless I hear to the contrary from Mr Robertson, that is to be paid within 14 days of today.
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Author
Toby Moreton
