Following dismissal of his application for permission to appeal a decision that his CFAs had been validly assigned the claimant returned to the SCCO this month for determination of an application by the defendant solicitors for an Interim Costs Certificate under CPR 47.16 in the sum of £636,583.83.
Relevant Background Facts
- The underlying claim related to claims by the claimant against Mr Ricky Burns, a boxer, for breach of contract and against Mr Burns’ manager, Mr Alex Morrison, for defamation.
- The claimant was successful in both of his claims. However, both Mr Burns and Mr Morrison were subsequently bankrupted and nothing was recovered from either party. The defendant thus looked to the claimant for payment of their fees.
- The claimant applied for detailed assessment of the defendant’s costs under Part 8 of the Civil Procedure Rules on about 8 April 2016, within a month of the delivery of the defendant’s four bills, and so was made under section 70(1) of the Solicitors Act 1974.
- In the meantime the defendant had, on 24 March 2016, issued a CPR Part 7 claim in the Queen’s Bench Division for the recovery of the sums billed.
- The claimant sought to strike out the defendant’s Part 7 claim on the basis that it was issued contrary to section 69 of the Solicitors Act 1974 (which prevents the issue of proceedings for the recovery of solicitors’ costs before the expiration of one month from the date of delivery of a bill, except in certain defined circumstances).
- An SCCO order was made in standard form on 17 May 2016, providing for an initial directions hearing. That hearing was, by the agreement of the parties, vacated with the option of applying to relist following the resolution of applications pending in the Queen’s Bench division.
- In the event, the Queen’s Bench proceedings were stayed pending the outcome of these detailed assessment proceedings.
- On 26 March 2018, Master Leonard handed down judgment,  EWHC B6 (Costs), on two preliminary issues in which he found for the defendant, finding that the CFAs had been validly assigned between PSB and Hill Dickinson.
- Following the determination of the preliminary issues, directions were given for the service of full Points of Dispute and Replies with a view to moving forward to a full Detailed Assessment hearing. Bill breakdowns, Points of Dispute and Replies were served.
- On 6 July 2018 the defendant made an application under CPR 47.16 for an Interim Costs Certificate in the sum of £636,583.83.
On 17 July 2018 the claimant sent a letter of claim to the defendant pursuant the Professional Negligence Pre Action Protocol concerning (inter alia) the advice he was given when the CFAs were entered into.
- On 13 September 2018 the defendant filed a request for a Detailed Assessment hearing, which was provisionally listed for 18 March 2019.
The Points of Dispute
The claimant took a number of points, including that he was provided with inadequate costs information and was given only one early estimate of £110,000, which was never revised. He also took issue with the success fees claimed, the hourly rates and the level of costs generally in the light of the fact that Knowles J (the trial judge) had ordered that he recover only a limited amount of costs from Mr Burns and in particular that on assessment of costs, a Costs Judge should assess reasonableness and proportionality as if the Claimant’s pleaded claim was less than £100,000, rather than (as it was) £1.8 million. This, he blamed upon the defendant’s failure “to effectively justify the principal head of claim”.
The Defendant’s Position
It was submitted on behalf of the defendant (inter alia) that:
- the sum of £636,583.83 was sought from the claimant on an interim basis primarily because it represented the total amount of a Default Costs Certificate obtained by the claimant against Mr Burns and Mr Morrison at the conclusion of his litigation against them.
- those certificates were obtained by the defendant on the instructions of the claimant. It followed therefore, that he regarded each of the sums certified as reasonably recoverable costs as between himself and, respectively, Mr Burns and Mr Morrison. Accordingly, it was not now open to him to argue that anything less than those amounts was payable by him to his solicitors.
- the sum sought represented just under 69% of the defendant’s bills. The preliminary issues have been determined in the defendant’s favour, and this being a solicitor/client assessment on the indemnity basis, subject to the presumptions set out at CPR 46.9, the court could be satisfied that the final costs certificate in favour of the defendant would be for a sum comfortably in excess of that.
The Claimant’s Position
On behalf of the claimant it was submitted (inter alia) that:
- the court had no jurisdiction to make the order sought by the defendant. If, contrary to that submission, jurisdiction does exist the court should decline to make any order.
- the defendant’s application for an Interim Costs Certificate was not made, as required by CPR 47.16, after the receiving party made a request for a detailed assessment hearing. The defendant’s application was dated 22 June 2018 and issued on 6 July 2018, whereas the request for a detailed assessment hearing was not filed until 13 September.
- in any event, these proceedings are not governed by CPR 47 but by CPR 46.10. The term “receiving party” at CPR 47.16 self-evidently refers to a party with the benefit of a costs order in its favour. The term does not make sense in the context of a solicitor/client assessment. It may not be possible to identify the receiving party until the detailed assessment has concluded, depending for example upon what has been paid to date by the client against the amount of the solicitor’s costs as assessed. In fact, Practice Direction 46 (at paragraph 6.18) refers only to the grant of an interim certificate in favour of the client.
- [whilst it was not said that the court has no power to make an order for an interim payment in any solicitor/client assessment], the court has no power to award an interim payment where (referring to In Re Brockman  2 Ch 170 and Szekeres v Alan Smeath & Co  EWHC 1733 (Ch)) the client has applied for an assessment within the one-month period laid down by section 70(1) of the Solicitors Act 1974. That is because the section provides for an unqualified and absolute right to an assessment, and that no action shall be commenced upon the solicitor’s bill until the assessment has been completed.
- section 70(1) also expressly provides that the court shall not require any sum to be paid into court. It would follow that the 1974 Act must be read as prohibiting the more generous remedy of ordering that money should pass from the client’s hands to the solicitor’s. This can be contrasted with section 70(2), applicable where an application for assessment has been made by the client after the expiry of one month from delivery of the bill, in which case the court has broad powers to impose such terms as it thinks fit.
- the prohibition on the commencement of proceedings until the assessment is completed is also significant for the purposes of this application. If a solicitor were entitled to bring proceedings he would be able to invoke the interim payment provisions of CPR 25 which, absent proceedings for recovery, has no application.
- as to the appropriate exercise of discretion (should the court find that it does have jurisdiction) [referring to the Letter of Claim dated 17 July 2018], the defendant had caused the claimant to incur a liability of (on the defendant’s case) almost £1 million in two actions for the prospects of actually recovering any money from the defendants were, to the defendant’s knowledge, negligible.
- that was extraordinary: the only plausible explanation was that all concerned were (or at least the claimant was) proceeding on the assumption that the defendant and PSB would not expect to be paid if the actions bore no fruit. Whilst the court had found this assumption on the claimant’s part was unfounded as a matter of law, it left the defendant exposed to the complaint that it did nothing to inform the claimant of the wholly uneconomic nature of the litigation which he was conducting. Nor did the defendant comply with its obligation to provide adequate costs information. This gave rise to a powerful set-off and counterclaim which would give a good answer to any application for an interim payment, even if the court could entertain it.
- the relevant case law indicated that significantly contested allegations of professional negligence are not suitable for resolution in the course of a detailed assessment. The matter should therefore await the outcome of the Claimant’s professional negligence action.
- the claimant’s purported approval of the sums claimed against Mr Burns and Mr Morrison by way of costs could not, in all the circumstances, be described as informed approval. [referring to Macdougall v Boote Edgar Esterkin  1 Costs LR 118 and to Herbert v HH Law Ltd  2 Costs LR 261. In any case, the costs incurred were massively in excess of the very limited estimates given, were on proper analysis of an unusual nature or amount and, as such, were never going to be recovered from the parties to the underlying litigation even if they had been capable of paying.
Conclusions on Jurisdiction
69. I am grateful to both parties’ counsel in assisting the court in picking through provisions of the Civil Procedure Rules which, as Mr Lawrence rightly says, are on the face of it not always easy to reconcile. Having done so
I am unable to accept that section 70(1) of the 1974 Act prohibits the issue of an Interim Costs Certificate in detailed assessment proceedings between a solicitor and a client, and it seems to me that the rules, on careful examination, do provide for it.
These are my reasons for that conclusion.
70. When considering the effect of section 70(1), it seems to me to be right not to conflate the application for an order for detailed assessment with the assessment itself. They are in my view separate, self-contained proceedings.
71. The application for an order for assessment, as required by CPR 67, is made under CPR Part 8, and it concludes when the order is made. The application may be dismissed, or it may conclude in an order for detailed assessment. If an order for assessment is made, the detailed assessment proceedings will be governed by CPR 46 (and insofar as applicable, CPR 47: I will come to that).
72. The Part 8 application will bear its own costs, which must be provided for if either party is to recover them. Precedent L, the standard form of order for assessment, contains a provision to the effect that the costs of the application will fall within the costs of the assessment. That is the order most commonly made when assessment is ordered, but that is entirely a matter for the discretion of the court. If the Part 8 proceedings and the detailed assessment proceedings were one and the same, no such order would be necessary.
73. Section 70(1) ensures that a client who makes a timely application for the detailed assessment of a solicitor’s bill will obtain an unconditional order to that effect. As Mr Bacon points out, it says nothing about the quite separate procedure to be followed after the required order for assessment is made. For that, one must look to the Civil Procedure Rules. On the interpretation urged on me by Mr Lawrence, section 70(1) would operate to prevent a solicitor, in the course of a lengthy detailed assessment, obtaining an order for the interim payment of (for example) an amount that is not actually in dispute but which the client refuses to pay. That to my mind would import into section 70(1) an additional provision with a potentially unjust effect.
74. If one looks at section 70 as a whole, it seems to me right to conclude that
section 70(1)’s prohibition upon the commencement of any action by the solicitor for recovery of fees does not point to any particular intention as far as interim payment is concerned.
I say that because section 70(2) empowers the court to combine that prohibition with the imposition of conditions, which might well include a requirement for interim payment. It is in fact standard for any order for assessment to contain such a prohibition, which is incorporated in Precedent L.
The real intention seems to me to be not to prevent a solicitor receiving what is clearly due, but to ensure that the same bill is not the subject of proceedings before two courts exercising different jurisdictions.
75. Nor does it seem to me to be evident that 70(1) effectively bars an application for an interim payment under CPR 25.1(1)(k). The application of CPR 25.1(1)(k) is not expressly confined to proceedings under CPR Part 7. One of textbooks referred to by Mr Lawrence in his submissions, Civil Costs: Law and Practice (Dr M Friston, 2 nd edition, 2010, at 18.100) accepts that the court may exercise the CPR 25.1(1)(k) jurisdiction in solicitor/client assessment proceedings.
76. As for the extent to which CPR 47 applies to solicitor/client assessments, Mr Bacon has referred me to a note at paragraph 46.10.2 of the “White Book” which reads:
“The procedure set out in Pt 47 (Detailed Assessment of Costs and Default Provisions) applies subject to the provisions of this rule and to any contrary order made by the court.”
77. That is an editorial footnote and not in itself a source of law. Nor does it cite any specific authority for what it says. I have concluded however that if one has regard to the specific provisions of CPR 47, its accuracy is, at least in part, indisputable.
78. Sections II III and IV of CPR 47 are headed “Costs Payable by One Party to Another”. They contain provisions which seem to me to be intended (or mostly intended) to apply only to costs awarded between opposing parties, such as the default costs certificate procedure under CPR 47.11 (which, as paragraph 6.8 of Practice Direction 46 makes clear, has no application on a solicitor/client assessment).
79. Parts VI and VIII of CPR 47 apply to specific proceedings (the detailed assessments of costs payable from a fund and appeals from costs officers) and have no bearing on solicitor/client assessments.
80. This leaves parts I, V and VII of CPR47. Part I, headed “General Rules About Detailed Assessment”, is evidently intended to have some application to solicitor/client assessments because it provides at CPR 47.3(1)(c) that a costs officer has no jurisdiction to assess costs between a solicitor and client except in specified circumstances.
81. Part V is headed “Interim Costs Certificate and Final Costs Certificate” and includes CPR 47.16. It is not expressly limited to costs between the parties. The wording of the Pre-April 2013 Rules and Practice Directions suggests that 47.16 is intended to apply to solicitor-client assessments, and I have seen nothing to suggest that the intention behind the rules has changed since. Notably a Final Costs Certificate is issued in the same enforceable form (N256) whether the detailed assessment has taken place between parties or between solicitor and client.
82. Part VII provides for the costs of detailed assessment proceedings, expressly subject to statutory provisions, rules or practice directions to the contrary. Again, it is not expressly limited to costs between the parties.
83. The Costs Precedents appended to Practice Direction 47 include standard forms of application and orders in proceedings under section 70 of the 1974 Act, Precedent L and Precedent P (a model detailed breakdown of a solicitor’s bill for use in solicitor/client assessments).
84. It seems to me to be right to conclude that
at least parts I, V and VII of CPR 47 and the corresponding parts of Practice Direction 47 apply to solicitor/client detailed assessments except in so far as they are inconsistent with CPR 46 or Practice Direction 46 (or for that matter CPR 67 and Practice Direction 67) or with the primary statutory provisions governing solicitor/client assessments.
85. I have already considered the primary legislation. The remaining question is whether CPR 47.16 is inconsistent with CPR 46 or Practice Direction 46.
86. Mr Lawrence argues that the wording of CPR 47.16, in permitting an application for an interim costs certificate to be made after a request for detailed assessment hearing has been filed by the receiving party, indicates that it is not intended to apply to solicitor/client assessments. After all, he says, one may not know who the receiving party is until the conclusion of the assessment process. That is a fair point, but it seems to me that on full analysis the rules do leave room for the application of CPR 47.16 to solicitor/client assessments.
87. CPR 47.14 requires the receiving party to file a request for a detailed assessment hearing, whereas CPR 46.10(5) provides that either party may file the request. It may well be that CPR 47.16 has no application to a solicitor/client assessment under CPR 46 if the request for a hearing was not filed by the receiving party. Even if that is right, it would not however necessarily follow that CPR 47.16 has no application at all.
The term “receiving party”, unless the context requires otherwise, does apply to solicitor/client assessments under CPR 46. It is sufficiently widely defined to apply to either the solicitor or the client, depending upon which if them is entitled to payment.
In most solicitor/client assessments the identity of the receiving party will be fairly obvious by the time a detailed assessment hearing is requested. If it is not not, then it will self-evidently not be appropriate to issue an Interim Costs Certificate.
88. On the rules as worded, I have concluded that
if the receiving party in a solicitor/client assessment can be identified, and if that receiving party has filed a request for a detailed assessment hearing under CPR 46.10(5), then that receiving party can apply for an interim costs certificate under CPR 47.16.
That conclusion is consistent with the overriding objective, in particular the requirement to deal with cases justly, so that (to revert to my earlier example) where a client refuses to pay the undisputed part of a solicitor’s costs pending the completion of a detailed assessment, the court can avoid injustice by issuing, under CPR 47.16, an interim costs certificate for the undisputed sum pending the final outcome.
89. Mr Lawrence points out that if CPR 47.16 were to apply in detailed assessment proceedings between a solicitor and client, then paragraph 6.18 of Practice Direction 46 (in providing specifically for an interim payment to a client) would, on its face, seem to be otiose. Mr Bacon counters with the observation that if CPR 47 generally did not apply, then paragraph 6.8 (excluding the default costs certificate provisions of CPR 47.11) would, equally, be otiose.
90. Both points demonstrate that the correct application of the rules is far from obvious, but to my mind an answer can be found in reading the relevant paragraphs of Practice Direction 46 as offering guidance on the appropriate application of the Civil Procedure Rules.
91. On that reading neither paragraph is otiose. Paragraph 6.18 offers guidance as to the appropriate exercise of the court’s power, under CPR 47.16, to make an interim award of costs to a receiving party, where it is evident that the receiving party is the client rather than (as would more usually be the case) the solicitor. Paragraph 6.8 makes it clear that, as the heading to section III of CPR 47 indicates, the default provisions of that section are intended only to apply to assessments between opposing parties.
92. I need to address Mr Lawrence’s objection to the application having been made before the Defendant filed an application for a detailed assessment hearing. That does not seem to me to raise any real procedural obstacle.
CPR 46.16 empowers the court to issue an interim costs certificate at any time after the receiving party’s request for a detailed assessment is made. It says nothing about the timing of the application. Even if the application had been made prematurely, CPR 3.10 would (and in the circumstances, should) overcome any purely technical objection.
93. The Defendant is the receiving party in this particular case, and the Defendant has filed a request for a detailed assessment hearing. My conclusion, for the reasons that I have given, is that I am empowered by CPR 47.16 to issue an interim costs certificate.
The Amount (if any) to be Paid: The Letter of Claim of 17 July 2018
94. The questions that remain for me to determine are (a) whether it would be right for the Claimant to make any interim payment to the Defendant pending the final determination of the issues between the parties; and (b) if it would be right for a payment to be made, what the amount should be.
95. Mr Lawrence submits that no payment should be ordered pending the resolution between the parties of the issue raised in the Claimant’s Letter of Claim of 17 July 2018. He also says that the Letter of Claim raises issues that are not suitable for resolution within the detailed assessment proceedings.
96. This argument seems to me to have some potentially contentious procedural implications. The Claimant has chosen, over more than two years and at considerable expense to both parties, to pursue a solicitor/client assessment. That is a process at the conclusion of which the court is, in accordance with Practice Direction 46, to issue an enforceable certificate of the amount payable as between him and the Defendant. Following the determination of the preliminary issues identified by the Claimant at the outset, directions have been given and court time has been set aside with a view to completing that process in March 2019.
97. It has not been put to me (notwithstanding that the Points of Dispute seem to suggest it) that the conclusion of that process should now await the resolution in another forum of matters raised afresh in the Letter of Claim, and it is not difficult to identify the potential objections to that.
98. Procedural concerns aside, it seems to me in any event that there is nothing in the Letter of Claim that could not have been raised by way of a preliminary issue in these detailed assessment proceedings. In fact, many of the issues raised in that letter have been put to the court in the course of the determination of the preliminary issues, and much of its content seems to me to be inconsistent with the findings I have already made.
99. That includes the allegation that the Claimant had an expectation that he would not be charged absent recovery from his opponents and that Ms Basha, knowing of that expectation and that it was unfounded, allowed him to run up costs for his solicitors’ benefit rather than his own.
100. The charging arrangements between the parties, and their understanding of those arrangements, have been very thoroughly explored at the instigation of the Claimant. Ms Basha and the Claimant have both given evidence and been cross-examined for the purposes of identifying them. I have already found that Ms Basha made it perfectly clear to the Claimant that he might well be charged in full regardless of recovery from his opponent and that he could not have believed in the existence of any agreement to the contrary. Not only did he know that he might have to pay his solicitors’ irrecoverable costs, on at least one occasion he actually did so. That seems to me to leave no room for him to argue that it was reasonable for him [to] maintain any expectation to the contrary, much less that Ms Basha, the Defendant or PSB could in some way be bound by any such expectation or assumption on his part.
101. The Claimant may well have placed some confidence in the prospect that Ms Basha would, as she had before, forego all or part of her firm’s costs against Mr Burns and Mr Morrison in consideration of a continuing working relationship. That might have happened, had the relationship between the parties not broken down. Following that breakdown, the Claimant has already tried and failed to elevate that pragmatic commercial understanding into a binding arrangement to the effect that he would never have to pay anything he did not recover. The Letter of Claim reads to me as an attempt to revive that unsuccessful case by putting it in a different way, which for the reasons I have given I do not regard as viable.
102. I have also rejected the Claimant’s claim to have been inadequately advised on the terms of the CFAs and the proposition that PSB’s ceasing to practice, or Ms Basha’s move to the Defendant from PSB, had any material effect upon the relationship between the Claimant and his solicitors. The Letter of Claim seems to me to have nothing new to say either respect. Following the refusal of permission to appeal on the Claimant’s challenge to the validity of the assignment of the CFAs, his complaints about the “Safeguard CFA”, which is of no effect, fall away.
103. As far as I can see this leaves as the only live issue the Defendant’s alleged failure to provide adequate information on costs, a matter eminently suitable for determination in the course of a solicitor/client assessment and not in itself an obstacle to an interim costs certificate in a sum which takes adequate account of the issue.
104. It is difficult to identify any real case in that respect from the Letter of Claim. Applying Mastercigars principles to identify the amount that it is reasonable for a client to pay, one considers, for example, the extent to which a client relied upon advice given by the solicitor as to costs, and the extent to which the inadequacy of advice given deprived the client of an opportunity of acting differently or otherwise had a detrimental effect.
105. To my mind the Letter of Claim says nothing of substance about the degree of financial risk the Claimant was really willing to undertake to protect his business. That would include the risk of exposure to his opponent’s costs in the event of failure, as well as exposure to his own costs in the event of success without recovery. Evidently he was willing to undertake a degree of risk in both respects, because for example (on his own evidence) he was warned within days of signing the relevant CFA that an ATE insurer would be unlikely to support his claim against Mr Burns unless Mr Burns had more than the modest assets that Ms Basha knew of.
106. When considering what if any amount should be awarded by way of an Interim Costs Certificate one normally takes a broad view (without coming to any final conclusion) of the likely outcome based upon the Points of Dispute. In so far as they do not repeat the allegations and assertions made in the Letter of Claim, the Claimant’s Points of Dispute do give me more to work with. I will refer to the key points.
The Amount (if any) to be Paid: The Points of Dispute
107. In relation to costs information, the Points of Dispute seem to me to suffer from the same weakness as does the Letter of Claim in failing to address what must, in the circumstances, have been the real risks to be assessed by or behalf of the Claimant. They do, however, raise real issues which I will address below, in my summary of conclusions.
108. The Claimant’s complaint about the Defendant’s level of service, made in relation to both actions, is too broadly put to carry much weight and the evidence I have already seen indicates that the Claimant, who worked closely with Ms Ba[s]ha for years, received the level of service he required.
109. As for success fees, in signing the CFAs the Claimant authorised his solicitors’ success fees. He received a copy of the CFA of the only counsel for whom a success fee is sought, Adrienne Page QC (and was specifically advised that her fees, in common with his solicitors’, would be payable whether he recovered it from his opponent or not: paragraphs 28 and 89-91 of my judgment of 26 March 2018 refer).
110. Under CPR 46.9, it is still open to the Claimant to challenge the success fees he evidently approved on the basis that they are of an unusual nature or amount, and as such potentially irrecoverable. The Points of Dispute do not however raise that challenge and (Mr Lawrence’s submissions notwithstanding) the Claimant is, in accordance with Practice Direction 46 paragraph 6.14, bound by them. In short, I can find no effective challenge in the Points of Dispute to any of the success fees sought by the Claimant.
111. As against Mr Burns, the suggestion that the Defendant is responsible for the Claimant’s part-recovery of costs is not supported by any particulars of their alleged failures. In any case, I have read the relevant judgment and the Claimant’s chief difficulty seems to have been that Knowles J found his disclosure in support of the larger part of this claim to be inadequate and his evidence on the relevant issues unreliable. For present purposes I can attach no weight to this allegation.
112. As regards the fact that the CFA against Mr Burns does not cover his counterclaim, the Defendant’s position may well be consistent with the authorities in relation to the treatment of the costs of a counterclaim, but I do not have enough information to take a firm view. For present purposes it seems to me that I should bear in mind at least the possibility of a significant reduction to the costs claimed by the Defendant.
Conclusions on the Amount to be Paid
113. I am not convinced by the Defendant’s submission that the sum of £636,583.83 (the amount of the Default Costs Certificate obtained against Mr Burns and Mr Morrison) is the right figure to incorporate into an Interim Costs Certificate. Whilst the evidence indicates that the Claimant authorised the steps taken by the Defendant to recover as much as possible by way of costs and damages from Mr Burns and Mr Morrison respectively, I have not identified any evidence that any specific sum was discussed with him or authorised by him.
114. The Claimant pursued Mr Burns for sums of over £2 million to a four-day trial with leading counsel on both sides. He says that he relied upon an estimate of £110,000, excluding VAT and 100% success fee, for the total cost of the action. In the circumstances, it seems to me to be difficult for the Claimant to resist the payment of at least that amount. Further, he appears to have accepted much higher estimates at a later stage with equanimity. His stated reasons for doing so are not convincing.
115. The position in relation to Mr Morrison is less clear. His defence effectively collapsed at a relatively early stage: he seems to have run out of money. I have found it difficult, from the information presently before me, to identify the costs information supplied by the Defendant from time to time. I do not however lose sight of the fact that the Claimant was, again, determined to protect both his reputation and his business.
116. On the limited information I have to date, it seems to me right to order the issue of an interim costs certificate in the sum of £350,000. It seems to me highly unlikely that the amount ultimately due to the Defendant would be any less than that.