Counsel’s fees in a costs budget may be considered ‘aspirational’ if not explained (Various Claimants v Scott Fowler Solicitors (a firm) & Ors)

Counsel’s fees in a costs budget may be considered ‘aspirational’ if not explained (Various Claimants v Scott Fowler Solicitors (a firm) & Ors)

In Various Claimants v Scott Fowler Solicitors (a firm) & Ors [2018] EWHC 1891 (Ch) (27 July 2018), Chief Master was required to make a costs management order in a multi-claimant case which was not the subject of a Group Litigation Order. He reiterated previous guidance that the court is concerned primarily with whether the costs claimed in each phase fall within a range of reasonable and proportionate costs. The Chief Master stressed that the court should not be a slave to comparisons between the parties’ budgets. He also declined to record any comments regarding incurred costs.

The Chief Master gave further guidance, including that there cannot be a specified arithmetical relationship between budgeted costs and the value of a claim. He stressed that it is ‘essential’ for the manner in which counsel’s fees have been calculated to be explained where such fees are significant. Written by Alex Bagnall, senior associate at Just Costs Solicitors

What are the practical implications of this case?

This judgment provides further guidance as to the approach to costs management adopted by the High Court.

Some of what is said in the judgment will be instantly familiar to practitioners involved in costs management work. For instance, the Chief Master emphasised again that the court is concerned with what the range of reasonable and proportionate costs is rather than attempting to establish what the budget figure should be objectively ascertained to be.

Perhaps the most noteworthy aspect of the judgment is the Chief Master’s indication that it is ‘essential’ for there to be an explanation as to the way in which counsel’s fees have been calculated within the assumptions box or in a covering letter.

What was the background?

The 222 claimants sought to make investment purchases of long-leasehold interests in units of hotel accommodation and/or student accommodation which were to have been built at seven different locations in the UK. Substantial deposits of between 30% and 50% of the purchase price were paid, but the developments were not built and the developers became insolvent. The deposits should have been protected, but the insurance company which provided such protection did not pay out and entered insolvent liquidation.

The claimants allege that Scott Fowler Solicitors and Wilsons Solicitors—who acted for the claimants—acted in breach of their duties and are liable for the claimants’ losses.

The claimants bring their claims through four separate actions which are being case managed together. There are 22 lead claims to be tried.

The matter was listed for a Costs Case Management Conference (CCMC). The budgets of the defendants were largely agreed; and the budget of one of the claimant firms was agreed. There was some disagreement in relation to the budget of another claimant firm. The third claimant firm’s budget was the subject of significant challenges.

What did the court decide?

The Chief Master reiterated his now-familiar approach to costs management, which included that:

  • the court is not required to have regard to the constituent elements of each budget phase (although it may do so) and the court's task is to decide whether the total for each phase falls within a range of reasonable and proportionate costs
  • some comparison between budgets may be informative, but the court is not a slave to comparison. There can be good reasons why similar work in the hands of different legal teams will result in a higher or lower budget
  • at a CCMC the court has very limited information about the work that was undertaken and there is real difficulty in making a comment on incurred costs that is of value. Merely to say that the figure appears to be too large and/or disproportionate serves little purpose. A costs judge on a detailed assessment will have all the material that is required to make a full analysis

Insofar as the proportionality of the budgets is concerned, the Chief Master suggested that it was not possible to conclude that there should be any specified arithmetical relationship between budgeted costs and the value of a claim. The requirement under CPR 44.5(3) for the relationship to be ‘reasonable’ would normally exclude the application of arithmetic.

The Chief Master held that the Hourly Guideline Rates for the summary assessment of costs are of some assistance when determining whether a budget phase is reasonable and proportionate. However, such guidelines do not fix the rates that will be allowed on detailed assessment and so play a part, but no more than that, in forming a view about whether the total figure for a budget phase falls within a range of reasonable and proportionate costs.

It was observed that one of the defendant’s leading counsel sought fees of £500,000 without any explanation for how such fees had been arrived at. The Chief Master considered that, in the absence of a cogent explanation for a substantial brief fee, the court is likely to conclude that the estimate is aspirational. It was said to be ‘essential’ for either the assumptions in a budget or a covering letter to explain how counsel's fees for the trial have been estimated.

Case details

  • Court: High Court of Justice, Business and Property Courts, Business List (Chd)
  • Judge: Chief Master Marsh
  • Date of judgment: 27 July 2018

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