Case No: HC 95 1843
Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
THE HONOURABLE MR JUSTICE PATTEN
Sitting with Costs Judge Seager Berry
and Mr Michael S Howells as Assessors
Between :
| Boyd & Hutchinson | Appellant/ Defendant |
| - and - |
|
| Jennifer Joseph | Respondent/Claimant |
Mr Jeremy Morgan for the Appellant/Defendant
Mr Jeffrey Littman for the Respondent/Claimant
Hearing dates : 9 th -10 th December 2002
Approved Judgment
Mr Justice Patten :
Introduction and Statement of Issues
This is an appeal by the Defendants against various rulings made by Costs Judge Wright in relation to the detailed assessment of the Claimant’s costs of a taxation hearing which took place before Master Rogers on 31 st May 1996 and 19 th February 1997. For ease of identification I shall refer to this hearing as the Original Taxation. On 16 th January 2001 Jacob J conducted a review of that taxation with assessors and ordered that the costs of that review and of the Original Taxation should be paid by the Defendants to the Claimant on the indemnity basis.
There is a protracted history to this matter which does neither party very much credit. The Claimant, Miss Joseph, is a qualified solicitor who also, until July 1999, practised as a costs draftsman. In August 1989 she and her sister were involved in a motor accident in which they were injured. They commenced proceedings against the other driver involved (a Mr Perkins) in the Wandsworth County Court. In May 1992 the Defendants, who are a firm of solicitors, were instructed to conduct the litigation on their behalf. In March 1993 liability for negligence was admitted by Mr Perkins and orders were made by consent for damages to be assessed. The assessment of damages took place on 21 st December 1993, when Miss Joseph obtained judgment for the sum of £11,868.85 and interest, and an order in her favour for the payment of her costs on County Court Scale 2. In about March 1994 various monies were paid into Court by Mr Perkins and subsequently paid out to the Defendants. Miss Joseph asked for an account and payment of these monies, but the Defendants apparently wished to retain the sum of £5,000 on account of their costs. It is not clear to me (and it is not strictly relevant to what I have to decide) how these monies were ultimately utilised, but one can trace the dispute between Miss Joseph and the Defendants back to this time. In April 1994 the Defendants also received from Mr Perkins’ solicitors the sum of £6,250 on account of Miss Joseph’s costs, pending the taxation. The taxation of the County Court costs took place on 25 th August 1994 and in October Mr Perkins’ solicitors paid to the Defendants the balance owing under the County Court order.
In February 1995 the Defendants wrote to Miss Joseph asking for payment of the sum of £1,029.37 in respect of their costs. This was the excess over the amount recovered from Mr Perkins following the August hearing. Miss Joseph exercised her right under s70 of the Solicitors Act 1974 to have the Defendants’ bill taxed, and there has been an almost continuous dispute about these costs from that time until now. The fact that a dispute between solicitors about relatively small sums of costs has extended over a period of 7 years at enormous expense, both financial and in terms of Court time, is in my judgment quite lamentable, regardless of the merits of that dispute.
On 29 th September 1995 directions were given for the detailed assessment of the Defendants’ bill of costs. The taxation hearing took place before Master Rogers on 31 st May 1996. This resulted in the reduction of the bill by £173.02. The hearing was attended by Miss Joseph and Mr Hutchinson in person and was evidently extremely acrimonious. Subsequently Miss Joseph instructed Mr Littman, and he has conducted most, if not all, of the subsequent hearings on her behalf. Miss Joseph then sought and obtained a review of the taxation under RSC Ord 62, r 33, which was held before Master Rogers on 19 th February 1997. The Defendants’ bill was reduced by a further £294.05, leaving a balance of £8,879.70 to be paid. The taxation process had failed to achieve a reduction in the bill of one-fifth, with the consequence that Miss Joseph was required under s70(9) of the 1974 Act to pay the costs of the Original Taxation. The Taxing Master gave leave to the Defendants to bring in a costs of reference bill in relation to the Original Taxation and reserved the taxation of those costs to himself.
The Defendants lodged a bill for their costs of the Original Taxation in the sum of £22,230.66. Miss Joseph lodged points of dispute and the taxation began before Master Rogers on 27 th August 1997. It was then adjourned to, and concluded on, 3 rd December 1997. A review was requested and this took place on 5 th June 1998. As a result the Defendants’ bill was taxed down to £10,093.16. The Taxing Master made no order in respect of the costs of the review, but this left Miss Joseph liable for the costs of the August and December 1997 hearings. On 23 rd December 1997 she had issued a summons seeking to challenge her liability to pay these costs. She alleged that the Defendants had behaved improperly in a number of respects in their conduct of the proceedings and that they should be required to pay part of her costs. The Taxing Master dismissed this summons with indemnity costs, but on appeal, Park J varied Master Rogers’ order by directing that the Claimant should pay 90% of the costs of the two 1997 taxation hearings and should pay the costs of her summons on the standard rather than the indemnity basis.
On 17 th April 2000, more than 3 years after the review hearing before Master Rogers, the final costs certificate in respect of the Original Taxation was issued. Miss Joseph then applied under RSC Ord 62, r 35 for a review by the Judge of the Taxing Master’s decision. This was heard by Jacob J on 16 th January 2001, when he set the certificate aside, reduced the bill, principally by allowing a reduction in the Defendants’ hourly charging rates, and ordered the Defendants to pay Miss Joseph’s costs of the Original Taxation on the indemnity basis. The bill of costs prepared by Miss Joseph to cover the period from 11 th July 1995 to 31 st March 2001 estimated her profit costs in the sum of £107,415.67.
The hearing of the detailed assessment proceedings pursuant to the order of 16 th January 2001 was fixed for 10 th , 11 th and 12 th December 2001 before Costs Judge Wright. The Defendants applied for and obtained directions for the hearing of two preliminary issues, which were whether Miss Joseph was a litigant in person for the purposes of the assessment and, if so, whether she could prove financial loss, so as to entitle her to charge for her time in excess of the fixed hourly rate of £9.25. At the hearing on 10 th December Costs Judge Wright quite sensibly raised the question whether the taxation was being conducted under RSC Ord 62 or under the CPR, which had come into force on 26 th April 1999. He decided that the detailed assessment was governed by RSC Ord 62 and that Miss Joseph was a practising solicitor within the meaning of RSC Ord 62, r 18(6). She did not therefore fall to be treated as a litigant in person and was entitled to charge for her time as a solicitor.
The Costs Judge’s decision on the application of RSC Ord 62 and the status of Miss Joseph as a practising solicitor were confirmed by him on a review held on 13 th May 2002. As part of that review he confirmed his earlier decision about a number of detailed items in the assessment, but only four of these are the subject matter of this appeal. They are the hourly rate allowed for the Claimant of £120 and three items relating to work on documents. The Defendants contend that the allowance made for these items and the hourly rate were excessive and cannot be justified on the material before the Costs Judge. But I turn first to the principal issues on this appeal, which concern the correct regime to be applied to the assessment of Miss Joseph’s costs.
Issue One: RSC or CPR?
The parties had approached the hearings before Costs Judge Wright on the assumption that the costs claimed in respect of work carried out by Miss Joseph prior to 26 th April 1999 (when the CPR came into force) would be governed by RSC Ord 62, and that thereafter the CPR would apply. However, the Costs Judge (in reliance on the decision of Roderick Evans J in Morris v. Wiltshire [2002] 1 Costs LR 167) ruled that where (as in this case) a bill had been taxed before 26 th April 1999, RSC Ord 62 continued to govern the whole of the assessment proceedings, including the assessment of the costs of the taxation.
I am unable to accept that. CPR Part 51.1 provides that:
"51.1 A practice direction shall make provision for the extent to which these Rules shall apply to proceedings issued before 26 April 1999."
The relevant part of the Practice Direction is 51PD.18, which provides as follows:
" 18 Costs
(1) Any assessment of costs that takes place on or after 26 April 1999 will be in accordance with CPR Parts 43 to 48.
(2) However, the general presumption is that no costs for work undertaken before 26 April 1999 will be disallowed if those costs would have been allowed in a costs taxation before 26 April 1999.
(3) The decision as to whether to allow costs for work undertaken on or after 26 April will generally be taken in accordance with CPR Parts 43 to 48.
(The costs practice direction contains more information on the operation of the transitional arrangements in relation to costs.)"
The principle set out in 51PD.18(1) is confirmed by paragraph 57 of the Costs Practice Direction. CPR 48PD.57.6 and 57.7, so far as material, states:
" Bills taxed before 26 th April 1999
57.6 Where a bill of costs was taxed before 26 th April 1999, the previous rules govern the steps which can be taken to challenge that taxation.
Other taxation proceedings
57.7 (1) This paragraph applies to taxation proceedings which were commenced before 26 th April 1999, were assigned for taxation to a Taxing Master or District Judge, and which were still pending on 26 th April 1999.
(2) Any assessment of costs that takes place in cases to which this paragraph applies which is conducted on or after 26 th April 1999, will be conducted in accordance with the CPR.
In Morris v. Wiltshire (supra) the Court held that these rules, on their proper construction, drew a distinction between taxation proceedings which commenced before 26 th April 1999, but did not reach the stage of an assessment hearing by that date, and proceedings in which the taxation (but not any review) took place prior to that date. In the latter case RSC Ord 62 continues to govern the review. But if no assessment has taken place by 26 th April, then any subsequent assessment is to be governed by the CPR. This is made clear by 48PD.57.7(2). The critical factor is the date of commencement of the actual taxation or assessment. If this predates 26 th April 1999, then any continuation of that taxation and any review will be conducted under RSC Ord 62.
However, in the present case we are not concerned with a taxation or assessment which commenced before April 1999. Miss Joseph’s entitlement to costs stems from the order of Jacob J made on 16 th January 2001. Although the costs in question in part predate the introduction of the CPR, there was no taxation of these costs prior to that date, and any prejudice that would result from the change in the rules is avoided by 51PD.18(2), which preserves the Claimant’s right to recover any costs incurred before 26 th April 1999 if such costs would have been allowed on a taxation under RSC Ord 62. This confirms that the provisions of the Costs Practice Direction considered in Morris v. Wiltshire were primarily concerned with the procedural aspects of a taxation or assessment and not with the basis of the assessment. Costs incurred before 26 th April 1999 will always be assessed on the basis of RSC Ord 62, regardless of when the assessment begins. Conversely, an assessment of costs incurred after 26 th April 1999 could never commence before that date. In these circumstances I can see no reason why the assessment of the Claimant’s costs of the Original Taxation does not fall within CPR 51PD.18(1). I do not consider that the assessment of the Claimant’s costs constitutes "steps which can be taken to challenge that taxation" within the meaning of 48PD.57.6. For the purposes of these rules, the assessment of the Claimant’s costs of the Original Taxation constitutes a new taxation of a bill of costs. Because it affects certain aspects of the remaining issues I have to decide, I indicated my decision on this point to the parties during the hearing of this appeal. Accordingly the proceedings have been conducted as a review and not as a re-hearing.
Issue Two: Was the Claimant a Litigant in Person before 26 th April 1999?
The only practical consequence of any importance in this case which results from the introduction of the CPR concerns the special rules relating to litigants in person. RSC Ord 62, r 18 provided (so far as material) that:
"(1) Subject to the provisions of this rule, on any taxation of the costs of a litigant in person there may be allowed 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 together with any payments reasonably made by him for legal advice relating to the conduct of or the issues raised by the proceedings.
(2) The amount allowed in respect of any item shall be such sum as the taxing officer thinks fit but not exceeding, except in the case of a disbursement, two-thirds of the sum which in the opinion of the taxing officer would have been allowed in respect of that item if the litigant had been represented by a solicitor.
(3) Where it appears to the taxing office that the litigant has not suffered any pecuniary loss in doing any item of work to which the costs relate, he shall be allowed in respect of the time reasonably spent by him on that item not more than £9.25 per hour.
…………
(6) For the purposes of this rule a litigant in person does not include a litigant who is a practising solicitor."
The Defendants concede that the Claimant was a practising solicitor in the period up to 1 st April 1996, during which time she acted as a consultant to another firm, Messrs Christopher Young & Co. She is therefore entitled to recover the costs of her own time for that period in accordance with the rule of practice affirmed by the Court of Appeal in London Scottish Benefit Society v. Chorley [1884] 13 QBD 872. A litigant who is a solicitor is permitted to recover as costs compensation for his or her own time, because the solicitor would otherwise only employ another solicitor to do the same work and would be entitled (if successful) to recover those costs which are likely to exceed the cost of the solicitor’s own time. The rule is therefore beneficial to the paying party, but it does operate as a qualification to the indemnity principle that a party cannot usually recover by way of costs expenditure which he has not incurred. This was recognised by Denman J in his Judgment in the Divisional Court in the same case (12 QBD 452 at page 455) where he said this:
"The solicitor’s time is valuable: he applies his skill to a suit or action in which he is obliged to spend his time and exercise his skill in consequence of the wrongful act of his opponent; and therefore it is not an unreasonable view that the word ‘costs’, in the sense of an ‘indemnity’, should be held fairly to include a reasonable professional remuneration for that work which, if he did not do it himself, would have had to be done by another solicitor and paid for by his unsuccessful opponent."
Recently, in Malkinson v. Trim [2003] 1 WLR 463, the Court of Appeal has held that the solicitor litigant’s right to charge for his own time and that of his employees extends to cases where some or all of the work is carried out by other partners in the solicitor’s firm or by the employees of such a firm.
At issue are two discrete periods of time: (i) the period from 1 st April 1996 until 26 th April 1999, when the CPR came into effect; and (ii) the period since 26 th April 1999 under the CPR. In respect of both these periods the Defendants contend that Miss Joseph did not practise as a solicitor and is therefore limited to recovering her costs as a litigant in person. In relation to the CPR this argument is fortified by a submission that the change in the rules has effectively abolished the rule in London Scottish Benefit Society v. Chorley . I turn first to the period between April 1996 and 26 th April 1999, when, because of 51PD.18(2), the position remains effectively governed by RSC Ord 62, r 18.
The Claimant’s evidence before the Costs Judge was that she was called to the Bar in 1984 but did not practise. She decided to become a solicitor and was admitted to the roll on 1 st April 1991. She then began to work as a consultant to Messrs Christopher Young & Co. She has at all times held a practising certificate. Prior to joining Christopher Young & Co, Miss Joseph had intended to develop a private practice specialising in costs, but this never materialised. She did, however, establish a costs drafting practice under the name "AAA Legal Services" which operated from 1990 and provided her with an additional income to that from her consultancy. She maintained, however, in her witness statement that during the same period she continued to practise as a solicitor under the name "Jennifer Joseph" from her home in Battersea, but she objected, on grounds of client confidentiality, to providing her fee notes for this period for the Defendants’ inspection.
By 1996 the trial of the personal injury action had taken place and Miss Joseph was heavily involved in her costs dispute with the Defendants. She says that she was forced to give this priority, with the result that her income from other sources was dramatically reduced. As a consequence she could not afford to employ others to run her private practice as a solicitor from her home, nor could she afford to pay the annual premium for compulsory professional indemnity insurance as a sole practitioner. The cost of such insurance for the year 1995/96 would have been £15,861 56 on a projected turnover of between £70,000 and £150,000. She therefore decided to operate her solicitor’s practice under what is now Rule 27 of the Solicitors’ Indemnity Rules 2001 (then Rule 29 of the 1995 Indemnity Rules) which permits solicitors to practise without indemnity cover, provided that their practice is limited to conducting professional business for personal friends, relatives and companies wholly owned by the solicitor’s family or by registered charities without remuneration. In this way it was, she says, possible to run her practice from home without having to keep an office manned and open to the public. She ceased to practise as a consultant with Christopher Young & Co in March 1996 and has practised as a solicitor under Rule 27 ever since. In August 1996 a Mr Robins and a Mrs Hipwood, who worked for AAA Legal Services, left and Miss Joseph continued the costs drafting practice alone. In 1999 the Claimant was diagnosed as having a form of repetitive strain injury caused, she said, by spending too many hours at the computer, and was advised to rest. As a result she ceased to carry out costs drafting and has been forced since then to rely on state assistance to provide her with an income. This change in her circumstances occurred in about July 1999.
Of this evidence the only matter which is really in dispute is the alleged existence of a private practice as a solicitor under the name of Jennifer Joseph after 1 st April 1996. During the course of the hearing before the Costs Judge, the Claimant lodged a bundle of fee notes and other documents to evidence this, which she was not prepared to allow the Defendants to see. However, the Defendants’ representative at that hearing consented to the Costs Judge looking at the documents, and the Judge cannot therefore be criticised for taking that course. In any event, through Mr Littman, Miss Joseph offered to produce the same material to this Court, but I was not prepared to look at it without the same material being made available to the Defendants. I therefore gave directions that the Claimant should produce a redacted version of the bundle and provide copies to the Defendants and to the Court. This was done subsequent to the hearing of the appeal and both sides have provided additional submissions in writing on the contents of the bundle. If one excludes fee notes for work carried out prior to 1 st April 1996, the documents disclose that the Claimant gave advice on a wide range of matters, including an accident claim, immigration status, the construction of a will, a share purchase agreement and an income tax appeal. But the occasions on which such advice was given were comparatively rare and, on average, there were only two or three such instances in each year between 1996 and 2001. Although the bundle of confidential material is not apparently comprehensive, I have assumed that it is at least indicative of the scale of Miss Joseph’s private practice as a solicitor under Rule 27. It seems clear that the amount of time expended on this practice was limited and infrequent, and that from 1996 the bulk of Miss Joseph’s time has been expended on the dispute with her former solicitors.
The Costs Judge found that, in giving the advice disclosed by the redacted material, Miss Joseph was acting on behalf of those to whom advice was given as a solicitor, and was therefore practising as a solicitor. He was not persuaded that the relatively small amount of time taken up in giving such advice, and the fact that it was provided free of charge, affected that conclusion. He based himself on the Judgment of Russell LJ in Way v. Bishop [1928] 1 Ch Div 647, where he says this:
"In my opinion, the natural meaning of the words ‘practising as a solicitor’ is acting as a solicitor in such circumstances as that the relation of solicitor and client will arise as between the covenantor and the person whose affairs he is transacting. In my opinion, the phrase ‘practising as a solicitor’ connotes the person who is a principal; it connotes a person who has clients: it connotes a person, in short, who has a practice, and the words are not apt words to describe the position of a person who is acting as the servant of another who is practising as a solicitor."
As to the qualifications necessary for practice as a solicitor, Costs Judge Wright referred to Section 1 of the Solicitors Act 1974, which provides that:
"No person shall be qualified to act as a solicitor unless:
(a) he has been admitted as a solicitor, and
(b) his name is on the roll, and
(c) he has in force a certificate issued by the Society in accordance with the provisions of this Part authorising him to practise as a solicitor (in this Act referred to as ‘a practising certificate’)."
These conditions were of course satisfied in the present case.
There is no definition of the term "practising solicitor" in RSC Ord 62, r 18, but it seems clear, and it is accepted by Mr Morgan for the Defendants, that Rule 18(6) which contains these words was designed to preserve the rule in London Scottish Benefit Society v. Chorley . One can therefore look to that decision for guidance on this matter. As already indicated, the Court of Appeal accepted in that case that a solicitor was entitled to recover costs for the use of his own time. In his Judgment at page 875, Sir William Brett MR set out the rule and practice in these terms:
"When an ordinary party to a suit appears for himself, he is not indemnified for loss of time; but when he appears by solicitor, he is entitled to recover for the time expended by the solicitor in the conduct of the suit. When an ordinary litigant appears in person, he is paid only for costs out of pocket. He cannot himself take every step, and very often employs a solicitor to assist him: the remuneration to the solicitor is money paid out of pocket. He has to pay the fees of the court, that is money paid out of pocket; but for loss of time the law will not indemnify him. When, however, we come to the case of a solicitor, the question must be viewed from a different aspect. There are things which a solicitor can do for himself, but also he can employ another solicitor to do them for him; and it would be unadvisable to lay down that he shall not be entitled to ordinary costs if he appears in person, because in that case he would always employ another solicitor. If a solicitor does by his clerk that which might be done by another solicitor, it is a loss of money, and not simply a loss of time, because it is work done by a person who is paid for doing it. It is true, however, to say that the costs of a solicitor appearing in person must be taxed differently from those of an ordinary litigant appearing by a solicitor. The unsuccessful adversary of a solicitor appearing in person cannot be charged for what does not exist, he cannot be charged for the solicitor consulting himself, or instructing himself, or attending upon himself. The true rule seems to be that when a solicitor brings or defends an action in person, he is entitled to the same costs as an ordinary litigant appearing by a solicitor, subject to this restriction, that no costs which are really unnecessary can be recovered."
The stated rationale behind this rule of practice is that a solicitor, if not able to charge for his own time, would engage another solicitor to do the work at probably greater expense. But that is likely to be the case because, by spending his own working time on the litigation, the solicitor is prevented from earning his living, and the Defendants therefore submit that the justification for the rule is that the solicitor is expending time for which he could otherwise charge. Support for this view can be found in the passage from the Judgment of Denman J quoted earlier. To the same effect Manisty J in the Divisional Court (at page 457) said this:
"Time is money to a solicitor: and why should he not be as much entitled to his proper costs, if he affords the time and skill which he brings to bear upon the business where he is a party to the action as he is where he is not a party?"
The basis of the rule about solicitors being able to recover for their own time was considered by the Court of Appeal in Malkinson v. Trim (supra). Chadwick LJ (at page 468) analysed the reasoning of the Divisional Court and the Court of Appeal into six elements, including the ability of the law to measure the value of professional skill and labour. At page 472 he then went on to consider the impact on the rule of the introduction of the CPR. I shall come to this as a separate topic later in this Judgment, but in relation to the principle itself he said this:
"As I have sought to point out earlier in this judgment, the basis of the principle that a solicitor who acts for himself in litigation is entitled to compensation, by way of costs, for his time and trouble is a recognition that he (in common with any other litigant) ought to be indemnified against the expense to which (on the hypothesis that he has been successful in the litigation) he has been unjustly put. The special position of a solicitor is that he does not need to employ others to provide professional skill and knowledge himself. Further, there is no difficulty in measuring what it costs him to do so; and there is a potential saving in costs if he is not discouraged from doing so."
This passage forms part of the reasoning behind the decision of the Court of Appeal in Malkinson v. Trim and I regard myself as bound by it. The solicitor is to be compensated for his professional time on the basis that it is valuable to him and its use causes him expense by its loss. It is not therefore enough for the solicitor merely to establish that he or she was in practice during the relevant period. The solicitor must show that he could have charged for the time which he expended on his personal litigation. This does not, in my judgment, mean that the solicitor in that position will have to prove that for all of the time expended on the litigation he could otherwise have been engaged on other clients’ business, nor will it be necessary for the Court to examine in detail how successful or otherwise the solicitor’s practice was at the relevant time. The rule is, for purely practical reasons, more broad-brush than that. The Court will assume that it was possible for the solicitor to have hired out his services to clients during the relevant period. But for his time to be regarded as valuable, the solicitor does, I believe, have to demonstrate that he has used up time in litigation during which he would otherwise have been able to pursue his practice as a solicitor for reward. Because of her lack of indemnity insurance, Miss Joseph is not able to do this.
For these reasons the Assessors and I take a different view of this matter from the Costs Judge. He concentrated on the question whether Miss Joseph was, after 1 st April 1996, a practising solicitor. But the answer to that question depends upon the criteria used to define that term. Looked at from a regulatory point of view under the Solicitors Act and the rules of practice, Miss Joseph was undoubtedly a practising solicitor, but she was not a practising solicitor who was able to charge for her time, and for the purposes of RSC Ord 62, r 18(6) and the rule in London Scottish Benefit Society v. Chorley , this is, in my judgment, the defining criterion. She is therefore only entitled to recover costs for this period as a litigant in person.
Issue Three: Was the Claimant a Litigant in Person under the CPR?
The special rules governing the assessment of the costs of a litigant in person under the CPR are contained in CPR Part 48.6 as follows:
" Litigants in person
48.6 (1) This rule applies where the court orders (whether by summary assessment or detailed assessment) that the costs of a litigant in person are to be paid by any other person.
(2) The costs allowed under this rule must not exceed, except in the case of a disbursement, two-thirds of the amount which would have been allowed if the litigant in person had been represented by a legal representative.
(3) Costs allowed to the litigant in person shall be:
(a) such costs as would have been allowed if the work had been done or the disbursements made by a legal representative on the litigant in person’s behalf;
(b) the payments reasonably made by him for legal services relating to the conduct of the proceedings; and
(c) the costs of obtaining expert assistance in connection with assessing the claim for costs.
(The costs practice direction deals with who may be an expert for the purpose of paragraph (3)(c).)
(4) Subject to paragraph (2), the amount of costs to be allowed to the litigant in person for any item of work to which the costs relate shall, if he fails to prove financial loss, be an amount in respect of the time spent reasonably doing the work at the rate specified in the costs practice direction.
(5) A litigant who is allowed costs for attending at court to conduct his case is not entitled to a witness allowance in respect of such attendance in addition to those costs.
(6) For the purposes of this rule. A litigant in person includes:
(a) a company or other corporation which is acting without a legal representative; and
(b) a barrister, solicitor, solicitor’s employee or other authorised litigator (as defined in the Courts and Legal Services Act 1990) who is acting for himself."
These provisions are supplemented by paragraph 52.5 of the Costs Practice Direction in the following terms:
" 52.5 Attention is drawn to rule 48.6(6)(b). A solicitor who, instead of acting for himself, is represented in the proceedings by his firm or by himself in his firm name, is not, for the purpose of the Civil Procedure Rules, a litigant in person."
It is clear from CPR Part 48.6(6) that a solicitor who acts for himself is a litigant in person for the purposes of the detailed assessment of his costs and is therefore subject to the restrictions of the two-thirds rule or the hourly rate of £9.25 where no financial loss can be proved. If one were to stop there, the effect of the new rules would be to abolish the rule of practice laid down in London Scottish Benefit Society v. Chorley . This was also the conclusion of Chadwick LJ in Malkinson v. Trim (see at page 472B). But paragraph 52.5 of the Practice Direction seems to preserve the old rule, at least in relation to cases in which the solicitor is represented by his firm or by himself in his firm name. The inclusion of solicitors in CPR 48.6(6) has therefore created a distinction between a solicitor who acts as a litigant in person (within CPR r 48.6(6)) and one who acts for himself in his firm name. The meaning of these provisions was considered by the Court of Appeal in Malkinson v. Trim . At page 473B Chadwick LJ said this:
"One effect of CPR r 48.6(6)(b), read in conjunction with section 52.5 of the Practice Direction, is that there is now more clearly recognised a distinction between the solicitor litigant who provides, in connection with his own litigation, professional skill and knowledge in the course of his practice as a solicitor - that is to say, who ‘is represented . . . by himself in his firm name’ - and the solicitor litigant who provides skill and knowledge in what might be described as ‘his own time’ - that is to say, outside the course of his practice as a solicitor and (typically) outside the office. The latter is treated as a litigant in person for the purposes of CPR r 48.6, and so is subject to the restrictions imposed by that rule, including the two-thirds restriction imposed by paragraph (2). The former is not. Nor is there any reason, consistent with the need to provide an indemnity, why he should be. Further, there is no reason, consistent with the need to provide an indemnity, why he should not recover the cost of providing professional skill and knowledge through employees of his practice."
Although Section 52.5 of the Practice Direction does not refer in terms to the solicitor as a practising solicitor, Miss Joseph concedes that it must be given that meaning, and this was recognised by Chadwick LJ in the passage from his Judgment quoted above. It was accepted by Mr Littman in argument that if I took the view that Miss Joseph was not a practising solicitor for the purposes of RSC Ord 62, r 18, then she is unable to take advantage of Section 52.5. The concession was, in my judgment, rightly made. That provision cannot have been designed to do more than to preserve the rule in the London Scottish Benefit Society case in relation to solicitors who use office hours to conduct personal litigation. The criteria remain the same. It is not therefore necessary to rule on Mr Morgan’s alternative submission, which was that Section 52.5 of the Practice Direction is ultra vires , and I prefer to express no view about that.
It follows from my decision on these issues (in which my assessors concur) that the Costs Judge will have to determine whether the Claimant has suffered financial loss so as to enable her to recover costs at up to two-thirds of the solicitor’s rate for the items of work which were carried out. Although it is difficult to see what significant loss in terms of earnings can have been suffered by the Claimant since July 1999. it would not be right on this appeal to seek to determine that issue without giving Miss Joseph an opportunity to adduce evidence on the point. That issue will therefore be remitted to the Costs Judge.
Issue Four: The Hourly Rate
Insofar as the Claimant’s costs fall to be assessed as those of a litigant in person after March 1996, then this point falls away. Miss Joseph will either be entitled to charge up to two-thirds of what a solicitor could recover for doing the items of work claimed for or be limited to the fixed rate of £9.25 per hour. Either way, a calculation based on her own expenses as a solicitor will be irrelevant. However, for the period up to 1 st April 1996 the point is still live.
The Costs Judge allowed an hourly rate of £120 over the whole period of the claim. This was based on a charging rate for a solicitor of more than 4 years in a firm in Outer London of £160 per hour, discounted by his estimate of the Claimant’s own lack of overheads, particularly in relation to professional indemnity insurance. By contrast, the Defendants contend for an hourly charging rate of £45. This is based on the notional salary of a partner in an area outside London, using an average of the figures of £28,400 and £31,500 for May 1995 to June 1998 and from 1 st July 1998 onwards respectively, which are taken from the published figures for solicitors’ remuneration in the Law Society’s Gazette. The average figure was then uplifted by the addition of £5,000 for expenses and divided by 1200 to reflect the number of hours worked in a year. This produced a rate of £29.13 per hour, which was increased by 50% for notional uplift and rounded up to £45.
The Costs Judge preferred the Claimant’s methodology to the figures based on expense of time calculations. He refers in his ruling to the decision of Evans J in Johnson v. Reed Corrugated Cases Ltd [1992] 1 AER 169. That was a case in which the Court warned of the dangers of placing too much weight on the expense of time calculations in respect of a particular firm, in preference to average costs for an average solicitor in the relevant area, based on the general knowledge and experience of the Costs Judge. There is no difficulty about that approach in a case in which it can safely be assumed that the costs of the solicitor in question are in line with those of other solicitors. The requirements of practicality justify the adoption of average rates. But in a case where that is demonstrably not so, the Court cannot, in my judgment, ignore reality. Whether the costs are assessed on the standard or the indemnity basis, the Court still has to be satisfied that they have been reasonably incurred and are reasonable in amount: see CPR r 44.4(1). It must therefore attempt to arrive at an hourly rate which accurately reflects the costs to the solicitor of carrying out the work. An example of that approach in practice can be found in the decision of this Court in Stubblefield v. Kemp [2001] 1 Costs LR 30. There is evidence that until at least 1995 Miss Joseph charged out her time as a consultant at £150 per hour. But both before and after 1996 there is no real evidence of her overheads and none was before the Costs Judge. She produced a schedule of income and expenditure showing annual expenses of £12,886 in the year 1996/1997, reducing to £5,005 in the year 2000/2001. But these are composite figures which do not distinguish between her work as a solicitor and her practice as a costs draftsman. Although on the indemnity basis the Court will ultimately resolve any doubts it may have about the reasonableness of the costs in favour of the Claimant, that does not remove from Miss Joseph the evidential burden of justifying the hourly rate claimed, when the evidence before the Costs Judge indicates that her costs and expenses were considerably less than those of the average solicitor in her area. Therefore, although the Costs Judge was entitled to take the average charging rate in the Feltham area as a starting point, he had (by his own admission) no evidence on which to base the discount necessary to reflect the Claimant’s actual level of costs, and his estimate was little more than guesswork. That was not, in my judgment, a safe way in which to proceed. In calculating the discount to be made, the Costs Judge should have checked his provisional estimate against the Defendants’ calculation, based on what the average solicitor practising in the Claimant’s locality would have earned at the relevant time, plus an allowance for expenses. This is because the approach suggested by the Defendants was based on the best evidence available as to what figure would provide reasonable remuneration for the Claimant as a solicitor in the Feltham area, in the absence of any direct evidence from the Claimant herself of her own expenses as a solicitor and of how such expenses compared with those of other solicitors in the locality.
My assessors and I believe that an hourly rate of £50 would have been both reasonable and appropriate. This would represent a notional salary of £29,950 plus annual expenses of £10,000, divided by 1200 chargeable hours and then uplifted by 50%. On the information available to the Costs Judge, such a rate would have been generous to the Claimant. By contrast, the assessment made by the Costs Judge bore no relation to her actual expenses and, for the reasons given, was both unreasonable and wrong.
Issue Five: Documents
The Defendants challenged three items in the Claimant’s bill for work done in relation to documents. They are items 104, 114 and 140. The basic complaint is that the time claimed for these items was excessive and that the Costs Judge gave no reasons for the allowances he made.
I do not accept these criticisms. The Defendants were represented at the hearing by an experienced costs draftsman who took the opportunity of explaining their objections on each of the items to the Costs Judge. He looked at the documents and considered the submissions put to him. It is also clear from his Judgment that he did take into account and accepted the Defendants’ argument that, had Miss Joseph been acting for a client and not for herself, she would not have gone into matters in such detail and for so long. He reduced the number of allowable hours accordingly.
It is true that the reduction he made was on a global basis, but this broad-brush approach was acquiesced in by both parties and cannot, I believe, be criticised now. The question of allowable hours is pre-eminently a matter of judgment for the Costs Judge, and I can see nothing in his approach or in the result that he reached which indicates any error in principle. The challenge on these items therefore fails.
Conclusions
The appeal will therefore be allowed in respect of issues 1 to 3. I will remit to the Costs Judge the issue of financial loss and the determination of the appropriate hourly rate for the period from 1 st April 1996. I will hear Counsel on the form of order which should be made and as to costs.