Halborg v EMW Law LLP

This appeal raises a short but important issue, namely whether a Limited Liability Partnership (“LLP”) of solicitors, which is a party to litigation and acts as its own legal representative in the proceedings, is a litigant in person within CPR 46 and so can only recover the level of costs allowed to litigants in person under CPR 46.5(2) and PD46 para. 3.4.

The appellant, Mr Scott Halborg, then carrying on practice as a solicitor in sole practice, was the solicitor on the record in proceedings against an architect for professional negligence, breach of contract, misrepresentation and fraud (“the main proceedings”).

The respondent, EMW Law LLP (“EMW”), was retained by Mr Halborg to act as his agent in the main proceedings pursuant to a conditional fee agreement.

The main proceedings were compromised by a substantial payment to Mr Halborg’s clients. The factual position as to how the costs liability (or part of that liability) in the main proceedings has been dealt with, as between Mr Halborg and the losing party, is not before the Court. Nothing has been paid to EMW in respect of its costs.

On 22 October 2013 EMW issued these proceedings against Mr Halborg (and others) in the Senior Courts Costs Office for, among other things, a detailed assessment of EMW’s costs (“the SCCO proceedings”).

On 6 February 2014 Mr Halborg (and others) issued an application in the SCCO proceedings for summary judgment against EMW or for the claim to be struck out.

That application came before costs judge Master Campbell. On 24 October 2014 he dismissed the application insofar as it related to the claim by EMW against Mr Halborg. Master Campbell also ordered that Mr Halborg pay EMW’s costs of the application, such costs to be summarily assessed.

On 24 November 2014 Master Campbell summarily assessed EMW’s costs in the sum of £17,600.

Mr Halborg appealed against Master Campbell’s orders of 24 October 2014 and 24 November 2014 on several grounds. The only ground relevant to this appeal is that, in assessing EMW’s costs of the summary judgment and strike out application, Master Campbell had wrongly refused to treat EMW as a litigant in person and to limit its recoverable costs accordingly.

The appeal on that ground was dismissed by His Honour Judge Purle QC, sitting as High Court Judge of the Chancery Division, in a judgment handed down on 22 May 2015 and an order of the same date.

Mr Halborg relies on CPR 46.5, the terms of which are as follows, so far as relevant.

Paragraph 3.4 of PD46 provides that the amount allowed to a self represented litigant under CPR 46.5(4)(b) is £19 per hour.

I agree with Judge Purle, for the reasons which he gave and for the additional reasons in EMW’s respondent’s notice, that EMW was not a litigant in person within CPR 46.5 when opposing Mr Halborg’s summary judgment and strike out application.

It is necessary to place CPR 46.5 (6) in its historical context.

In The London Scottish Benefit Society v Chorley, Crawford and Chester(1884) 13 QBD 872 (“the Chorley case”) the Court of Appeal held that solicitors who successfully defended proceedings in person were entitled on taxation to the same costs as if they had employed a solicitor and were not restricted to out of pocket expenses or such other costs as would be allowed to non-solicitors. The principle was expressed as follows by Brett MR (at p. 875):

Brett MR went on to say, by way of qualification of that rule, that the successful solicitor could not recover for anything which the fact of acting for himself made unnecessary, such as consulting himself or instructing himself or attending upon himself.

Bowen LJ said the following (at p. 877):

Fry LJ, agreeing with those judgments, said as follows (at pp. 878-879):

The common law principle established by the Chorley case (“the Chorley principle”) may be summarised as being that: (1) a solicitor who acts for himself as a party to litigation can recover not only his out of pocket expenses but also his profit costs, but he cannot recover for anything which his acting in person has made unnecessary; (2) the reason is not because of some special privilege but on the purely pragmatic grounds that (a) there has actually been an expenditure of professional skill and labour by the solicitor party, (b) that expenditure is measurable, (c) the solicitor party would otherwise employ another solicitor and, if successful, would be entitled to recover the costs of that other solicitor, and (d) since he cannot recover for anything which his acting in person has made unnecessary, the unsuccessful party will have the benefit of that disallowance and so would pay less than if the solicitor party had instructed another solicitor.

That formulation of the principle in the Chorley case explains why the successful solicitor litigant in person was entitled to recover his costs (other than for unnecessary work) in H Tolputt & Co Ltd v Mole[1911] 1 KB 87 (Phillimore and Avory JJ) and [1911] 1 KB 836 (CA) but the successful solicitor litigant in person in In the Matter of the Prosecution of Offences Act 1985 and the Costs in Criminal Cases (General) Regulations 1986 and In the Matter of an application of Timothy Sharpe (QBD, 20 November 1995) was not entitled to recover a fee for advocacy where he had no right of audience as a solicitor (a criminal case in which the argument proceeded on the assumption that the Chorley principle applied to a defendant’s costs in favour of a solicitor defendant who was acquitted).

The Chorley principle was applied by the Court of Appeal in Malkinson v Trim[2002] EWCA Civ 1273, [2003] 1 WLR 463, following the introduction of the Civil Procedure Rules 1998 (“the CPR”). In that case, a solicitor defendant, who was represented on the record by the firm of solicitors of which he was a partner, successfully defended the proceedings. The Court of Appeal upheld the decision of the costs judge that the solicitor defendant’s costs were recoverable under the Chorley principle even though the defendant did not personally expend his own time and skill in defending the claim, which was handled by one of his partners or others within the firm, and the claim in the action was not one which could have been brought against the firm because it related to matters that took place when the solicitor defendant was a partner in a different firm.

The lead judgment was given by Chadwick LJ, with whom the other two members of the court agreed. He observed (at [9]) that the Chorley principle was incorporated into the County Court Rules 1903-1908, as Ord. 53 r.25, and, as such, was applied by the Court of Appeal in the Tolputt case and was treated as “well settled” by the Court of Appeal in Buckland v Watts [1970] 1 QB 27, 35G-H, 37F.

Chadwick LJ said that he could see no reason why, if a solicitor can charge for his own time, and for the time of those he employs (who may include an assistant solicitor), the position should be different if some or all of the work is carried out by one of more of his partners or by employees of the firm. He said (at [14]):

Chadwick LJ said that support for that view could be found in the decision of Stirling J in Bidder v Bridges[1887] WN 208 and in obiter views expressed by Simon Brown J in R v Stafford, Stone and Eccleshall Justices, Ex p. Robinson [1988] 1 WLR 369, 372.

Turning to the question whether the Chorley principle had survived the introduction of the CPR, Chadwick LJ said (at [16]) that the harshness of the common law rule that an ordinary litigant in person could not recover, as costs, compensation for the expenditure of his own time and trouble, was alleviated by rules of court made under the Litigant in Person (Costs and Expenses) Act 1975; and he referred, in that regard, to RSC Ord. 62 r.18 as it was immediately before the introduction of the CPR. That rule provided for a litigant in person to be allowed, on taxation, such costs as would have been allowed if the work and disbursements to which the costs relate had been done or made by a solicitor on the litigant’s behalf, subject to a two-thirds ceiling in respect of non-disbursement items, and a maximum of £9.25 per hour in the absence of proof of any pecuniary loss. He said (at [17]) that, although Ord 62 r.18(6) excluded solicitor litigants from the ambit of Ord. 62 r.18, it was clear that the rule-making body intended that the position of a litigant who was a practising solicitor should remain unaffected by the rule and should continue to be governed by the Chorley principle.

Turning to the CPR, which took effect from 26 April 1999, he said (at [18]) that the position was governed (at that time) by CPR r.48.6. He observed that r.48.6(3)(a) preserved the general principle, formerly in Ord 62 r.18(1), that costs allowed to a litigant in person shall be such costs as would be allowed if the work had been done by a solicitor or legal representative; r.48.6(2) preserved “the two-thirds restriction” formerly contained in Ord 62 r.18(2); r.48.6(4), in conjunction with paragraph 52.4 of the Costs Practice Direction which supplemented Parts 43 to 48, preserved the restriction on the hourly rate which can be charged by a litigant in person who fails to prove financial loss. He then quoted CPR r.48.6(6), which, so far as relevant, was as follows:

He said (at [19]) that it was accepted that CPR 48.6(6)(b) had to be read subject to paragraph 52.5 of the Costs Practice Direction, which was as follows:

Chadwick LJ said (at [20]) that the effect of the direction was that the position of a practising solicitor who chose to represent himself in his firm’s name, or (where in partnership) to be represented by his firm, remained unaltered by the provisions of CPR r 48.6: his costs were allowed (or not, as the case may be) by virtue of, and in accordance with, the Chorley principle.

He concluded (at [24]) with the following observation:

The current CPR provision governing the assessment of costs awarded to a litigant in person is CPR 46.5, the relevant terms of which are set out above. It is not in identical terms to the former CPR 48.6 which was the subject of the Malkinson case, but its derivation from that earlier rule and paragraph 52.5 of the then Costs Practice Direction is clear, as is the intention to continue to apply the Chorley principle as applied in the Malkinson case. The latter is achieved by the exclusion of the persons mentioned in CPR 46.5(6) from the litigant in person provisions in CPR 46.5(1)-(5).

Mr Halborg does not accept that CPR 46.5(6) gives effect to the Chorley principle as originally formulated. Mr Robert Marven, Mr Halborg’s counsel, submitted that the principle has been attenuated. First, Mr Marven relied on observations of Chadwick LJ in the Malkinson case (at [22]) that the CPR provisions under consideration in that case, read in conjunction with the Costs Practice Direction, more clearly recognised a distinction between, on the one hand, the solicitor litigant who provides, in connection with his own litigation, professional skill and knowledge in the course of his practice as a solicitor, who is not to be regarded as a litigant in person, and, on the other hand, the solicitor litigant who provides skill and knowledge in his own time, that is to say outside the course of his practice as a solicitor and typically outside the office, who is to be regarded as a litigant in person and subject to the restrictions on recovery of costs applicable to litigants in person.

I do not regard that observation by Chadwick LJ as a departure from the Chorley principle. That distinction was always implicit in the principle since, as was made clear particularly by Bowen LJ in the Chorley case, it is the application of relevant professional skill and labour by the solicitor in the conduct of the litigation and in the course of his practice which is measurable; and it was the lack of the application of that expertise in the course of his practice which disentitled the successful solicitor litigant to a fee for his advocacy in the Timothy Sharpe case.

Secondly, Mr Marven submitted that a solicitor in sole practice who acts for himself in litigation is now to be treated as a litigant in person for the purposes of costs recovery, and in that regard is to be contrasted with a solicitor litigant who is represented by a firm comprising himself and one or more other partners. Mr Marven relied on the express words in parenthesis at the beginning of CPR 46.5(6)(b) for that submission: “(except where any such person is represented by a firm in which that person is a partner)”.

That is a slavishly literal interpretation which would produce an absurd and plainly unintended result. Mr Marven offered no policy rationale for such a distinction between, on the one hand, a solicitor litigant in sole practice who represents himself and, on the other hand, a solicitor litigant who is represented by the firm of which he is one of a number of partners. It is perfectly plain that Chadwick LJ in the Malkinson case did not consider that the CPR and Costs Practice Direction provisions under consideration in that case made such a distinction and attenuated the Chorley principle in that way. Indeed, he said (at [14]) that he regarded such a distinction as “absurd”. Paragraph 52.6 of the then Costs Practice Direction expressly treated the solicitor litigant in sole practice and the solicitor litigant in a multi partner firm identically. Further, so far as concerned the application of the indemnity principle, Chadwick LJ’s analysis was to acknowledge that the Chorley principle applied to the case of a solicitor litigant in a multi partner firm because there was no material distinction between such a solicitor and a solicitor in sole practice. Nothing has been shown to us to indicate that a conscious decision was taken by the Civil Procedure Rule Committee or the Government, in bringing into effect CPR 46.5, to create what, on the face of it, would be an irrational and indeed absurd distinction.

I consider, therefore, giving the words in parenthesis at the beginning of CPR 46.5(6)(b) a purposive interpretation in the light of Malkinson case and the history of the Chorley principle, that the word “firm” includes a solicitor in sole practice and “partner” includes a case where there is only one principal in the firm.

That then leaves the issue whether a solicitors LLP within the Limited Liability Partnerships Act 2000, and the members of it, are to be treated differently, for the purposes of CPR 46.5(6), to an ordinary partnership firm of solicitors within the Partnership Act 1890 and the partners of such a firm. No sensible policy reason has been given on behalf of Mr Halborg for such a distinction. There is no discernible reason why the Chorley principle, and the rationale underlying it, should be applicable to a traditional partnership but inapplicable to an LLP.

The fact that former has no separate legal personality and the partners have unlimited liability whereas the latter is a body corporate (pursuant to section 1(2) of the 2000 Act) and its members enjoy limited liability (pursuant to section 1(4)) does not bear on the rationale for the Chorley principle.

In Mr Marven’s written skeleton argument, but not repeated in his oral submissions, it is said that one reason for making a distinction is that, as observed by Chadwick LJ in the Malkinson case, a partner of a firm governed by the 1890 Act cannot contract with his or her partnership, and that is not the case with an LLP. That observation was made, however, in the context of an explanation by Chadwick LJ that, even though a partner who is represented by his firm in legal proceedings incurs no liability to his firm, that does not preclude him relying on the Chorley principle by virtue of the indemnity principle since the rationale for the principle is that he suffers loss because the firm of which he is a member expends time and resources which would otherwise be devoted to, and earning profit costs from, other clients. That rationale applies equally to a solicitor member of an LLP.

Mr Marven submitted that, even if that is true, Chadwick LJ’s explanation of the application of the indemnity principle in the case of a partner represented by his firm is unconvincing and unsound, and so the anomalous position of a solicitor litigant represented by his firm should not be extended further. We are bound, however, by the Malkinson case, and indeed by the Chorley case, as to the application of the indemnity principle in the case of solicitor litigants represented by themselves or their partners. In any event, I do not regard the application of the indemnity principle as anomalous or unconvincing in circumstances where (as has repeatedly been stated in the cases) the expenditure of professional skill and labour by the litigant solicitor or his partners can be measured and it is a fair starting assumption that, if not working on the litigation for the solicitor litigant, they would be earning profit undertaking work for other clients.

Mr Marven also submitted that the Chorley principle should not be extended further because the principle gives an unfair advantage to solicitors and is a dated anachronism. The judgments in Chorley, however, explain why the principle is not a “privilege” but is explicable on pragmatic grounds, which include the advantage conferred on the paying party. Furthermore, it is clear that neither the Civil Procedure Rule Committee nor the Government, when bringing CPR 46.5 into effect, regarded the Chorley principle as an anachronism since it is expressly preserved in the words in parenthesis at the beginning of CPR 46.5(6)(b).

Finally, by way of general policy justification for a distinction between the partners in a firm governed by the 1890 Act and the members of an LLP, Mr Marven relied on his submission that CPR 46.5(6) constitutes a narrowing or an attenuation of the Chorley principle, and so it would be inconsistent and wrong to extend it beyond its common law limits. I have, however, already rejected the submission that there has been any narrowing of the application of the principle either by the Court of Appeal in the Malkinson case or in CPR 46.5.

It is against that background and those policy considerations that I now turn to the wording of CPR 46.5(6).

The Judge’s analysis was that EMW is excluded from being a litigant in person for the purposes of CPR 46.5 because (1) it is a corporation, (2) corporations are governed exclusively by CPR 46.5(6)(a), as (3) CPR 46.5(6)(b) applies only to individuals, and (4) EMW falls outside CPR 46.5(6)(a) as it is to be regarded as having been acting with a legal representative for the purposes of that provision.

I agree with the Judge that EMW falls outside CPR 46.5(6)(a) because it is a corporation which is to be treated as having been acting with a legal representative for the purposes of that provision.

I do not accept Mr Marven’s submission that, because EMW has not been acting through any form of legal representative (as defined in CPR 2.3(1)) other than itself, it has been “acting without a legal representative” for the purposes of CPR 46.5(6)(a). That interpretation would produce an anomalous and indeed absurd result. Mr Marven accepted the correctness of the commentary in the 2017 White Book at 46.5.1 that a company acting through an in house legal representative who is in possession of a practising certificate or equivalent authorisation will not be treated as a litigant in person and the legal representative will be able to recover costs in the normal way on behalf of the company. There is no coherent reason for permitting the recovery of legal costs in such a situation and denying them where the corporate entity is a solicitors LLP, which acts by its members or their employees.

Mr Marven appeared to submit that a justification for the difference might be that the in house legal representative would be paid. I find it difficult to understand the relevance of that point since both the company, in that example, and the solicitors LLP on the record would be acting through one or more human agents, whose time and expertise would be deployed in the litigation when they would or might have been deployed on other profitable matters. Moreover, the Chorley principle proceeds on the basis that the solicitor litigant or his partners who act in the litigation are expending labour and expertise which can be measured and so is equivalent to cost or loss. That is equally true of the members and employees of a solicitors LLP acting for the LLP in litigation to which it is a party.

For those reasons, consistently with the Chorley principle and its continued application to solicitors’ partnerships governed by 1890 Act by virtue of the words in parenthesis in CPR 46.5(6)(b), and giving CPR 46.5(6)(a) a purposive interpretation, EMW should be regarded as acting with a legal representative for the purpose of CPR 46.5(6)(a).

Mr Vikram Sachdeva QC, for EMW, referred to, and so far as necessary, relied on Quader v Esure Services Ltd[2016] EWCA Civ 1109. In that case, the Court of Appeal, contrary to the clear and unequivocal wording of the provisions of the CPR relating to the fixed costs regime for claims started under the RTA Protocol, treated those provisions as limiting the fixed costs regime to the period before any claim was moved from the fast track to the multi-track. It did so on the basis that, even though such an interpretation was inconsistent with any ordinary process of construction or interpretation of the wording of the relevant rules, and giving the express words their ordinary meaning would not produce an irrational outcome or, on the face of it, one which could not possibly have been intended, it was clear, having regard to the history, that those legislating for the RTA regime never intended that it should apply to a case allocated to the multi-track. The Court of Appeal made its decision on the basis of the following jurisdiction of the court described by Lord Nicholls in Inco Europe Ltd v First Choice Distribution[2001] 1 WLR 586 at 592C-H:

I do not regard it as necessary to resort to the Inco Europe jurisdiction to achieve the interpretation of CPR 46.5(6)(a) which I have decided. The absurdity of the result for which Mr Halborg contends on the facts of the present case, the language of CPR 46.5(6)(a), the background of the Chorley principle and its continued application to solicitors in sole practice and in partnership with others enable the purposive interpretation to be given for which EMW contends and the Judge found. If, however, it were necessary to do so, I would have reached the same result on the basis of the Inco Europe jurisdiction.

That then leaves the application of CPR 46.5(6)(b) to the present facts. I also agree with the Judge that EMW falls outside CPR 46.5(6)(b) even though it is an authorised person in relation to an activity which constitutes the conduct of litigation (within the meaning of the Legal Services Act 2007 (“the 2007 Act”) and so, on the face of it, falls within CPR 46.5(6)(b)(v). I agree with the Judge that, on its proper interpretation, CPR 46.5(6)(b) is to be interpreted as applying only to individuals.

I accept Mr Marven’s submission that (1) this gives the phrase “authorised person” in CPR 46.5(6)(b)(v) a meaning different from its meaning in the 2007 Act”) where (as is common ground) it includes corporations; and (2) the persons mentioned in CPR 46.5(6) (b) (i) to (v) mirror the persons included in the definition of “legal representative” in CPR 2.3(1) and (as again is common ground) those persons include a corporate entity, in particular a corporate entity authorised pursuant to the 2007 Act in relation to an activity which constitutes the conduct of litigation. I do not accept, however, as was submitted in Mr Marven’s skeleton argument (but not pursued in his oral submissions), that the Judge’s interpretation is a remarkable one and it would render CPR 46.5(6)(b)(v) otiose because an individual who is an “authorised person” would already fall within CPR 46.5(6)(b)(i) to (iv).

The Judge’s analysis is not remarkable in the light of the express provision addressing the position of companies and corporations in CPR 46.5(6)(a). Mr Marven submitted that CPR 46.5(6)(a) is merely stating, for the avoidance of doubt, that a litigant in person can include a corporate person and that CPR 46.5(6)(b) addresses the specific position in respect of lawyers generally. That submission would have greater force if CPR 46.5(6)(a) had stopped after the words “a company or other corporation” but it goes on specifically to provide an exclusion where the company or other corporation “is acting without a legal representative”. On Mr Marven’s approach, that exclusion ought properly to have been placed somewhere in CPR 46.5(6)(b) (presumably in the context of an authorised person in (6)(b)(v)). The wording of CPR 46.5(6)(a) is more consistent with the Judge’s approach that it is that sub-rule which is dealing exclusively with companies and corporations. Some further slight support for that conclusion may be seen in the difference between the words “acting without a legal representative in” CPR 46.5(6)(a) and “acts in person” in CPR 46.5(6)(b).

It is the fact that CPR 46.5(6) addresses distinctly and separately those legal representatives within CPR 2.3(1) which are corporations and those who are individuals that explains why there is no inconsistency between the two provisions. As Mr Sachdeva observed, it would be illogical for a corporation to be excluded from being a litigant in person under CPR 46.5(6)(a) but to be re-cast as a litigant in person under CPR 46.5(6)(b). There are numerous other references in the CPR to “legal representatives” where no such distinction is expressly made between corporations and individuals, and in those cases it is perfectly natural to read the references as including an authorised corporate legal representative within the definition in CPR 2.3(1).

Furthermore, the submission that Judge’s interpretation would render CPR 46.5(6)(b)(v) otiose because an individual who is an “authorised person” would already fall within (6)(b)(i) to (iv) is plainly wrong, and that was conceded by Mr Marven in the course of his oral submissions. Such persons potentially include legal executives, patent attorneys, trade mark attorneys and legal costs draftsmen: see Schedule 2 para. 4, Schedule 4 Part 1, and Schedule 5 Part 2 of the 2007 Act.

Finally, even if my interpretation of CPR 46.5(6)(a) and CPR 46.5(6)(b)(v) was incorrect, I would have concluded that EMW nevertheless falls outside CPR 46.5(6)(b) because, giving the words in parenthesis at the beginning of CPR 46.5(6)(b) a purposive interpretation, they include the situation where a solicitor member of a solicitors LLP is a litigant and the LLP is on the record as his or her legal representative as well as the situation where the solicitors LLP is both the litigant and acting as its own legal representative.

Any other interpretation would produce an illogical and indeed absurd contrast between the application of the Chorley principle to a solicitor partner of a partnership governed by the 1890 Act and to a solicitors LLP and its members. The Judge rejected that interpretation but I consider he was wrong on that point.

As Cranston J observed in R (Sword Services Ltd) v HMRC[2016] EWHC 1473 (Admin), [2016] 4 WLR 113 at [60], in ordinary parlance the terms “partnership” and “partners” cover both general and limited liability partnerships and their members. There is, as I have said earlier, no coherent policy reason for distinguishing between the application of the Chorley principle to partnerships governed by the 1890 Act and to LLPs. Accordingly, were I wrong in my interpretation of CR 46.5(6)(b) as confined to individuals, I would have held either by way of ordinary purposive interpretation or in exercise of the Inco Europe jurisdiction that the words in parenthesis at the beginning of CPR 46.5(6)(b) include the situation where a member of a solicitors LLP is represented by the LLP as well as where a solicitors LLP is both the litigant and the legal representative on the record.

In a final throw of the dice, Mr Marven submitted that, since the provisions of CPR 46.5(6) are expressed to be inclusionary and not exclusionary, a solicitors LLP which is a party to litigation and acts as its own legal representative is litigant in person even if it does not fall within those express provisions. It seems obvious, however, that if, as I have held, such an LLP is expressly excluded from the provisions of CPR 46.5(6) by virtue of being treated as acting with a legal representative within 46.5(6)(a) and (if wrong on that point) by virtue of falling with the words in parenthesis at the beginning of 46.5(6)(b), there is simply no scope left for arguing that the LLP is a litigant in person for the purposes of CPR 46.5 as a matter of ordinary language.

For all those reasons I would dismiss this appeal.

I agree.

I also agree.