Jemma Trust Company Ltd v Liptrott & Ors

This is an appeal by the claimants (“Jemma”) against three decisions made by Costs Judge Rogers in a judgment made in the course of a detailed assessment of costs dated 2nd February 2004. That detailed assessment had taken place following the reversal of an earlier decision by the Costs Judge on a preliminary issue by the Court of Appeal on 24^th October 2003 ([2003] EWCA Civ 1476, now reported at [2004] 1 All ER 510).

Sir Geoffrey Hulton died on 20 November 1993. His estate was worth a little less than £10m. The first and second defendants are the executors of the estate. The first defendant, Mr Liptrott, is a former partner in Kippax Beaumont Lewis, solicitors (“KBL”). The second defendant was Sir Geoffrey’s land agent. The executors instructed KBL to undertake the administration of the estate. No express agreement was made as to the terms on which KBL would act or, in particular, as to the basis on which they would charge the estate for their work. Jemma is the trustee of the Igloo Trust of Jersey to whom the residuary beneficiary (“Mr Butterfield”) has assigned his interest.

The detailed assessment (which had been ordered by Master Moncaster in administration proceedings by an order dated 26^th February 2002) was of 79 bills rendered by the third defendants (KBL). Exclusive of disbursements the total sum claimed by KBL amounted to £592,983.40. Of that sum £216,043.10 had been charged by certain of the bills as a 1.5% charge on the value of the assets being administered (at the date of death some £9.5m) (“the value charge”). The balance (of £376,940.30) was ascribed to charges made for time spent (“the time charge”) by KBL’s fee earners, namely Mr Liptrott as partner in the firm and Mr Marriott an employed barrister. In his ruling on the preliminary issues, handed down on 16^th September 2002, Master Rogers had held that KBL were not entitled to make the value charge. He had also held that the hourly rates on the basis of which the time charge had been calculated were reasonable ones for KBL to claim.

The Court of Appeal addressed itself to three issues: (a) Are solicitors engaged in relation to the administration of an estate entitled, in the absence of any agreement with interested parties, to charge not only for the time they spend on the administration of the estate, but also a scale fee based on the value of the estate? (b) If a solicitor is entitled to charge in this way, how should that value element fee be calculated? In particular should it be based on the reducing scale proposed in Maltby v DJ Freeman & Co (a firm) [1978] 2 All ER 913, [1978] 1 WLR 431? (c) Did the judge assess an appropriate hourly rate, if he was right that no separate charge based on value should be made?

On the first issue the Court of Appeal held that it was open to such solicitors “to make a separate charge based on value, provided always that one remembers that the solicitor is entitled only to what is fair and reasonable remuneration taking all relevant factors into account”: see per Peter Gibson and Longmore LLJ at paragraph 23. Mance LJ agreed with this conclusion (see paragraph 48) while expressing reservations as to the merits and utility of charging on the dual basis (see paragraphs 39-47).

On the second issue the Court of Appeal held that “it will usually be right to reduce the value element percentage by reference to a regressive scale” (see paragraph 29); and that the appropriate bands in 1993 values, and percentages, would be (1) up to £750,000 at 1.5% (2) £750,000-£3m at 0.5% (3) £3m-£6m at 0.1666% and (4) above £6m at 0.08333% (see paragraph 31). They seem to have been of the view that a regressive scale would be right in the present case (“…if a regressive scale was right at all (as we think it is)…[emphasis supplied]) but emphasised:

“the importance of looking at the final figure in the round in order to ensure that the appropriate factors are taken into account in every individual case to arrive at no more than a fair and reasonable remuneration overall”

On the third issue, Peter Gibson and Longmore LJJ said this at paragraph 32:

“We have already made clear our view that the judge has assessed too low an hourly rate, if he was right to conclude that a valuation element should not appear separately in the bills. If the value element is addressed separately, the Law Society guidance contemplates an uplift factor of 25% to 33% over the expense rate. By adopting KBL’s skeleton argument, the judge gave KBL that rate but no more, at any rate for the years 1994–1996. The last years seem to be assessed at slightly more, but only minimally so. In these circumstances we are not satisfied that the judge has given any sufficient allowance for the value of the estate at all. The parties agreed that, in the event of this conclusion being reached, the matter would have to be remitted to the costs judge. He will be able to consider our judgment, as a whole, and make his final assessment in the light of it. ”

The matter was thus referred back to the Costs Judge to proceed with the detailed assessment in the light of the guidance given by the Court of Appeal. The detailed assessment then took the procedural course which I examine in more detail below. Of the various decisions which he made in the course of the judgment dated 2^nd February 2004, the three against which Jemma appeals are:

For the purposes of this appeal an order had been made for the judge hearing it to sit with assessors, Costs Judge Wright and Mr Tony Girling being appointed for that purpose. Unfortunately, owing to some mistake in diarisation, Mr Girling was unable to be present when the appeal came on for hearing. The parties invited me (and I agreed) to sit solely with the assistance of Master Wright.

The legislative background is described in paragraph 8 of the Court of Appeal’s judgment. Subject to the qualifications there mentioned (and which are not material) the relevant provisions are to be found in the Solicitors’ (Non-Contentious Business) Remuneration Order 1994, SI 1994/2616 which was made pursuant to s 56 of the Solicitors Act 1974 and came into force on 1 November 1994 which (so far as material) provides as follows:

“2.

In this Order … “entitled person” means a client or an entitled third party; “entitled third party” means a residuary beneficiary absolutely and immediately (and not contingently) entitled to an inheritance, where a solicitor has charged the estate for his professional costs for acting in the administration of the estate, and either (a) the only personal representatives are solicitors (whether or not acting in a professional capacity); or (b) the only personal representatives are solicitors acting jointly with partners or employees in a professional capacity …

3.

A solicitor’s costs shall be such sum as may be fair and reasonable to both solicitor and entitled person, having regard to all the circumstances of the case and in particular to:—

(a)

the complexity of the matter or the difficulty or novelty of the questions raised;

(b)

the skill, labour, specialised knowledge and responsibility involved;

(c)

the time spent on the business;

(d)

the number and importance of the documents prepared or perused, without regard to length;

(e)

the place where and the circumstances in which the business or any part thereof is transacted;

(f)

the amount or value of any money or property involved;

(g)

whether any land involved is registered land;

(h)

the importance of the matter to the client; and

(i)

the approval (express or implied) of the entitled person or the express approval of the testator to:—

(i)

the solicitor undertaking all or any part of the work giving rise to the costs or

(ii)

the amount of the costs.”

For ease of exposition I will refer to each of those lettered sub-paragraphs as factors (thus “factor (a)” means the content of that sub-paragraph and so forth).

The process by which Master Rogers arrived at his final assessment (which resulted in his allowing a value charge of £141,906.71) was as follows. He decided that it was unnecessary for him to revisit the hourly rates which he had fixed by his original decision on the preliminary issue “because I can, and am now going to, determine the final amount of the bills on the basis of what is fair and just to both parties” (see paragraph 86 of his judgment). He next proceeded to reduce the time charge claimed by 5% on account of duplication: this reduced the time charge to £358,093.29 (see paragraph 89). He then considered “the question of value” and did so by reference to each of the factors (a)-(i) inclusive, describing (a) as “important in this case”, (b) as “high”, (d) as meriting a “high value” and (h) as relevant. He concluded:

“I have come to the conclusion after taking into account all the factors laid down by the remuneration order, all the submissions made to me by the advocates, and on my perusal of the documents, consideration of the transcripts and evidence given by the witnesses, that the fair and reasonable charge for these bills, which is both fair and reasonable to the solicitors, as well as to Jemma Trust, is the total sum of £500,000. This of course equates to a value element of £141,906.71, which is considerably in excess of the £30,300 which the application of an updated regressive Maltby v D J Freeman scale would suggest, but I do not think that the application of such a scale would produce the right result in this case.”

On behalf of Jemma it was submitted that this approach necessarily produces an incorrect result since it involves taking into account in the assessment of the value charge not merely factor (f) but also all the other factors. These other factors will necessarily have been taken into account in the setting of the hourly rate. Further, it was submitted that he was wrong not to have assessed the value charge by reference to a regressive rate as indicated as usually appropriate by the Court of Appeal. It was also submitted that no sufficient reasons were given for the overall assessment of £500,000 or for the value charge of £141,906.71. Two further criticisms were made under this head which I will consider separately below.

In support of these submissions Mr Morgan, on behalf of Jemma, relied on the qualified approval given by the Court of Appeal to two Law Society Publications, “An Approach to Non-Contentious Costs” (1995) and “Practice Advice Service – Non-Contentious Costs” (1999)”. He summarised the traditional approach to charging in the absence of a relevant and ascertainable value factor as being one based on the application of hourly rates to the time reasonably spent on the case. The hourly rates comprised two elements, conventionally called the “A” element and the “B” element. The “A” element represented the expense to the firm of each hour of the relevant fee earner’s time (based on an appropriate apportionment of salaries and all other overheads of the firm to the chargeable time of the fee-earner in question). The “A” element is also conventionally referred to as either “the expense rate” or the Broad Average Direct Cost (BADC), and contains no element of profit. The “B” element, conventionally upwards of 50%, is that which is added to the “A” element by way of mark-up to reflect all the factors other than factor (c). Where there is a relevant and ascertainable value factor, which can be (and is) charged for separately from the combined hourly rate, the “B” element which would apply in the absence of a separate charge has to be adjusted accordingly.

That description was, submitted Mr Morgan, supported by the passages from the 1995 publication which were quoted by the Court of Appeal at paragraph 17 of its judgment, and in particular the passage at paragraph 13.2 of the booklet which states:

“13.2

The mark-up is a method of expressing the weight to be attached to the factors in the Order, apart from value and time, and of other relevant circumstances in the general run of work. It is not the only method, nor is it always the most suitable, but it has become widely accepted and it has this merit; it enables you to distinguish degrees of skill etc. between one file and another in work of similar type and thereby establish a reference point to take into account when finally deciding what the charge should be. It does not represent an addition to expense to which you are automatically entitled…”

The booklet then goes on to distinguish the case where there is no ascertainable value factor (paragraph 13.4) and that where there is (paragraph 13.5) concluding that in the latter case the mark-up will commonly be in the region of 25-33%.

Mr Morgan submitted that in the present case the hourly rates, determined by the Costs Judge at the preliminary issue stage, reflected all the factors other than time and value. It was, therefore, impermissible to take account of those factors again when assessing what he described as the “C” element of value.

On behalf of the respondent, Mr Fenwick submitted that the hourly rates did not reflect all the factors other than time and value; that, even if they did, that did not exclude the possibility of having regard to them when assessing the value charge; that the aim of the assessment at the end of the day was to arrive at a figure which was fair and reasonable both to the solicitor and the entitled person; and that the Cost Judge’s overall assessment, made after a most detailed consideration over a considerable period of time and with the benefit of sustained argument on either side, should not be interfered with by the appeal court. In addition, he submitted that if one were, as a cross-check, to divide the £500,000 by the number of allowed hours, the resulting hourly rate would be seen to fall within the range of what might have been a reasonable mark-up had the bills in fact been rendered on that basis.

In approaching those rival submissions the first task must be to see what the Costs Judge did decide in relation to the hourly rates. This involves a consideration of his first judgment. From that (see paragraph 29) it can be seen that he adopted the submissions then made to him by Mr Robbins, KBL’s costs draftsman, who had sought to justify the rates claimed by reference to a conventional A + B equation, the comparator for the purposes of A being those allowed in the Bolton area by the district judges. I do not think that there is any doubt that the figure which he was allowing was an A + B figure. Such doubt if any as exists on the point arises from a reference by him in paragraph 30 of his judgment to his being prepared if necessary to justify any increase above the “basic” rates agreed by the Bolton district judges by reference to Jones v. Secretary for State for Wales [1997] 1 WLR 1008. That is a puzzling reference since that case was concerned with an increase in the expense rate (i.e. the A element) rather than (as the context suggests) the mark-up. But the reference is not, in my judgment, so puzzling as to cast any real doubt on what went before. I would add that the Court of Appeal itself appears to have proceeded upon the basis that the hourly rates allowed did include a mark up which took account of all factors other than time and value: see paragraphs 18 and 38 of the judgments.

If the factors other than time and value have already been reflected in the hourly rates claimed and allowed, can they be taken into account again in the assessment of the separate value factor? Mr Morgan’s submission that they cannot has an attractive simplicity about it but merits further analysis. In the first place, the Court of Appeal itself suggested (see paragraph 33, sub-paragraph (3) of the lead judgment) that value might be taken into account partly by a separate value charge and partly within the hourly rate. Parity of reasoning might suggest therefore that other factors might similarly be reflected in both aspects of a bill calculated on a dual charge basis. Secondly, the various factors are not all mutually exclusive, but to some extent overlap. Thus, for example, there is an obvious overlap between “responsibility” in factor (b) and “value” in factor (f). Thirdly, in the present case it is difficult to see how the Costs Judge could have been satisfied that all factors other than value and time had been fully reflected in the hourly rate fixed by the preliminary decision when that decision had been rendered before he had had the opportunity to consider, after the detailed investigation which he was subsequently to carry out, the true weight to be attached to those factors. In that connection, the very summary account which I have given of his reasoning omits the lengthy explanations he gave of his overall findings in the light of the various generic heads of complaint made by Jemma and which plainly informed his conclusions on the overall fairness and reasonableness of what was being claimed. Fourthly, it seems to me important to bear in mind the distinction between the way in which the bill has been calculated and the way in which it may subsequently be sought to justify it, in the assessment process, as being fair and reasonable. That distinction is most obvious in the case where a bill has been rendered solely on the basis of a value charge, of which the bill in Property and Reversionary Investment Corporation v. Secretary of State for the Environment [1975] 1 WLR 1504 provides an illustration: a bill calculated solely by reference to a percentage of value has still to be justified, if challenged, by reference to all the relevant factors.

It has, however, to be conceded that this distinction is less obvious where bills have been rendered on the dual charge basis. A charge rendered by reference to the value of a transaction has the merit, when agreed by both parties at the inception of a transaction, of removing the temptation of excessive diligence which a system of time charging presents and of capping the potential impact of professional services on the client. In a perfect world acceptance of such a charge is the product of a rational calculation by both parties: if the work in fact proves more time consuming than has been allowed for in the calculation the client can rejoice; if it is in fact dispatched swiftly the solicitor will be the gainer. A dual charging system on this model represents some laying off by the solicitor of the risk to which a charge solely by reference to value exposes both parties. This simple model is less easy to transplant into a case like the present where there has been no initial agreement between the solicitor and the paying party, but the solicitor has nevertheless proposed to charge (and rendered bills) on a dual charge basis. In such a case the solicitor has, it seems to me, at least provisionally committed himself to the method of charging which he has adopted, and some caution should be adopted before assessing the bills on a different basis which does not reflect the element of risk inherent in the chosen method.

I say “provisionally committed” because it seems to me to be implicit in the Court of Appeal’s decision on the third issue that, had the Costs Judge been right in saying that no separate value charge could be made, it would have been open to him to revisit the hourly rates allowed and to award KBL remuneration calculated on a time basis at rates in excess of those which had been claimed in the bills. Those hourly rates had been calculated on the basis that value could be charged for separately: if it could not, it would be obviously unfair to prevent the solicitors from claiming in respect of value on a permissible basis. It seems to me to follow from such reasoning that if, in the belief that they were entitled to the value charge at 1.5% on the whole estate (revalued from time to time), the hourly rates had been charged by the solicitors at a lower rate than might otherwise have been justifiable and if that belief proved to be unfounded because, for example, a regressive percentage should have been applied to the value charge, it would equally follow that it might be unfair to hold the solicitors to those lower hourly rates. A submission to that effect was clearly made by Mr Fenwick to Master Rogers (see Transcript 28-30^th October 2003, p. 15, lines 5-15), and was also implicit in the heavy reliance placed by KBL in its written submissions on “the ‘B’ figure uplift test” as a cross-check on the reasonableness of the final figure assessed.

If it was in theory open to the Costs Judge to proceed by reflecting value wholly in the time charge, adoption of such an approach would inevitably have led him to consider all the factors in assessing the proper amount of such charge. Once he had decided not to revisit the time charge, he was not, in my judgment, precluded from considering any of the factors other than factor (f) in assessing the amount of the value charge. Indeed, unless the particular regressive scale suggested by the Court of Appeal is regarded as mandatory rather than merely indicative, it is difficult to see how a costs judge can exercise judgment as to the appropriateness of particular percentages and scales other than by having regard to factors other than factor (f) alone. What was important was that, in assessing the amount of the value charge, he should remain conscious of the extent to which such factors were or were not already reflected in the time charge which he had fixed. It seems to me to be clear from his judgment that his reason for not re-visiting the time charge was precisely because he regarded himself as free to consider all relevant factors in coming to a conclusion on the globally considered fair and reasonable figure. Had he been persuaded that the notional value charge had to be limited to some such figure as the £30,300 suggested by the Court of Appeal, it is clear that he would have felt it necessary to re-visit the extent to which the other factors had been given inadequate weight in the time charge.

If I am right that the Costs Judge was entitled, in arriving at the overall charge, to have regard as he did to factors (a), (b), (d) and (h) in assessing the amount of the separate value charge, the question remains whether the reasoning in his judgment justifies the conclusion which he reached. It has to be acknowledged that, on the face of the judgment, there is little express reasoning in support of the final figure which has been arrived at. However, the relative paucity of reasoning has to be seen in the context of the detailed submissions which had been made to him both for and against the value charge of £216,043.10 for which KBL were contending, and indeed for and against the total charge of £592,983.40.

On KBL’s side, that value charge was sought to be justified primarily by reference to the basis on which it had been included in the bills, namely by reference to the 1.5% of the value of the estate indicated by the Law Society Guidelines. It was acknowledged that the bills in fact contained an arithmetical error (in KBL’s favour) of £9,848.96, but this was argued to be irrelevant having regard to the result of applying the ‘B’ factor uplift cross-check. The latter test indicated (it was submitted) that the amount of ‘B’ factor uplift implicit in the value charge was either 68.5% or 75%, depending on whether average or actual hourly rates charged are taken for the purposes of the calculation. This was submitted to be well within what would be a fair and reasonable charge as between the parties: see paragraph 70 of the judgment below.

As against that it was being submitted on behalf of Jemma that the correct approach to the value charge was to apply the regressive scale indicated by the Court of Appeal at paragraph 31 of its judgment, which the Costs Judge seems to have taken to be £30,300 (i.e. he made no allowance for the additions to value on which the actual charge had been calculated and which were not addressed by the Court of Appeal).

Faced with those competing arguments, the Costs Judge expressly rejected the submission that application of the particular regressive scale suggested by the Court of Appeal would produce an appropriate overall result, but did not explain the basis on which he considered it appropriate to take a scythe to the value charge claimed, reducing it from some £216,000 to some £140,000. Indeed, from the way in which he expressed himself, this reduction appears as a consequence of, rather than a factor contributing to, his overall assessment in the sum of £500,000. That, however, was itself a consequence of his deliberate decision not to revisit the time charge itself, but rather to aim at an overall fair and reasonable figure (which necessarily included the time charge).

I have considerable sympathy with the submission, made on behalf of Jemma, that the way in which the Costs Judge has arrived at and expressed his final conclusions lacks the transparency afforded by full supportive reasoning. However, as Donaldson J put it in Treasury Solicitor v. Regester [1978] 1 WLR 446 at 454 “in the end [there has to be] a value judgment, based upon discretion and experience..” and that “the right figure…probably does not exist”. I accept also that, as the judgment in that case (amongst others) itself illustrates, it will often be impossible, and sometimes undesirable, for the Costs Judge to spell out the exact process of reasoning which has led to the final figure. That will frequently be the result of a triangulation, based very much on expert “feel”, between a variety of relatively unfixed possible positions. In the present case the question is whether the relative absence of any identification of those possible positions renders the judgment unsustainable for want of sufficient reasons. There is, for example, no attempt to consider what percentage/s might sensibly be applied to what values in making a provisional assessment of the value charge if viewed as a free-standing charge. Nor is there any explicit attempt to justify, or test, the final conclusion by reference to the cross-check of a ‘B’ factor uplift.

In relation to the latter point, forceful submissions had been made to the Costs Judge by Mr Bacon, and were made to me by Mr Fenwick, that the overall charge contended for could be justified by reference to the ‘B’ factor uplift test. The cogency of those submissions was, however, weakened by two factors. First, the Costs Judge himself did not seek to justify his conclusion on this basis. Secondly, Mr Morgan was able to demonstrate before me that the result of the cross-check was to indicate a ‘B’ uplift of at least 86% (arguably 101% if, as Mr Morgan contended, two bills should have been excluded from the calculation).

Despite the criticisms which can be made of the judgment for its lack of reasoning at the crucial point, I have not in the end been persuaded that it would be right to interfere with the judgment on those grounds. Although the notice of appeal asks this court to rule on the correct amount of the value charge, it was correctly conceded by Mr Morgan that it was in no position to do so, not having examined, save in the most cursory manner necessary to enable the character of one particular submission to be understood, a single one of the 79 bills which were before the Costs Judge or any of the underlying documentation. Unless the amount of the value charge was something which could be fixed in an almost abstract manner, its proper assessment is, as the judgment of the Court of Appeal recognised, something which can only be done by the expert costs judge who has himself subjected the relevant material to detailed examination: deciding the appeal in Jemma’s favour on this point would therefore inevitably lead to a remission back to Master Rogers. Given however that I have decided the issue of principle under this head in favour of KBL, it is questionable whether any useful purpose would be served by such a remission back solely for the purpose of enabling a further debate to take place as to the reasoning by which the final overall sum should be assessed. Since Master Rogers demonstrated in his judgment that he had taken account of all the relevant factors in his assessment of the overall charge, and I have held that he was not wrong to do so in relation to the quantification of the value charge, and since the result at which he arrived was not in my judgment (nor in the opinion of my assessor) one at which it was impossible for him to arrive on the evidence before him, I have concluded that it would be wrong to allow the appeal on this ground.

I now turn to the two additional criticisms mentioned in paragraph 12 above, and which form the subject matter of Grounds 5 and 6 of Jemma’s grounds of appeal.

Ground 5 complains that

“In determining the overall sum to be allowed the learned Costs Judge was wrong to leave wholly out of account the very considerable sums charged by counsel, accountants and the subsequent firm of solicitors in addition to the bills before him. He ought to have taken account of the existence of these further charges whilst reminding himself that they might be reduced on assessment.”

The submission which had been made to Master Rogers was that in considering the final figure arrived at it was proper to have regard to £140,000 odd charged by counsel, £134,000 charged by accountants and the sum of £196,000 charged by Messrs. Brabners, the firm to which Mr Marriott had moved, the effect of which was that the estate had been exposed to professional charges of some £1.1m. At paragraph 69 of the judgment Master Rogers observed that this submission ran counter to Jemma’s stance (adopted in the face of an attempt by KBL to postpone the whole detailed assessment until the conclusion of the administration) that the bills should be assessed at this stage, notwithstanding that the estate had not been finally wound up.

I do not myself think that there was anything inconsistent in the position being adopted by Jemma. The fact that it was insisting that the bills be subject to a detailed assessment was not inconsistent with the submission that in assessing the overall charge incurred in the partial administration of the estate regard should be had, particularly in relation to the value charge, to the fact that the administration was incomplete. That was the approach taken by Walton J in Maltby and Another v. D.J. Freeman & Co [1978] 1 WLR 431 at 437 where he said:

“However - and both sides agreed with this view of the matter - in view of the termination of instructions before the solicitors had completed their normal work, the sum under this head falls to be reduced by 50 per cent. It is obviously right that an allowance should be made for the premature termination of the work, and it is, I think, consistently with the heads of the rules, the only suitable head under which to effect such reduction, illogical though it may strictly be to utilise it in this manner. The more logical alternative would, of course, be to apply a suitable percentage reduction to the totality of heads (1), (2), (6) and (7). In view of the agreement of the parties, I do not pursue this alternative further in this case. The precise amount of the reduction must, in every case, be a matter of extreme difficulty, and it is complicated by the freely acknowledged fact that in the present case, by reason of his professional status, the first plaintiff was able to afford the defendant firm a great deal of assistance in relation to values. As I have indicated, both sides agreed that a 50 per cent. reduction was a fair figure to take care of both these factors, and I entirely agree with their judgment.”

The bill in that case appears to have been constructed so as to propose a sum under each of factors, so that the value charge proposed excluded all the other factors as a matter of self-definition. Both sides agreed that the figure put forward assumed that the administration was complete, and therefore fell to be reduced because of the premature termination of instructions. The position here is somewhat different, since in the event KBL did not, in seeking to justify the overall sum claimed, put their claim to the value charge in the same way. If the Costs Judge was (as I have held) right to accept their submission that the amount recoverable under the head of the value charge could reflect all the factors, and was simply a step on the way to his assessment of the overall fair and reasonable sum for the work actually done by KBL, the significance of the fact that the administration of the estate was not in fact complete is considerably lessened. The charges certainly do not lend themselves on that approach to the kind of percentage reduction applied by Walton J to that element of the bill in Maltby, nor, so far as I can see, did the Costs Judge have evidence before him of what work remained to be done (see paragraph 6 of his judgment). I do not think that there is anything in his judgment which shows that he ignored (if it was relevant) the fact that there did remain some work to be done: what he did was to focus on what it was fair and reasonable for KBL to be paid for the work which they had done. Further, it does not appear to me that the submission being made to this court, based on Walton J’s reasoning in Maltby, was the same as the submission being made below, which was based not so much on the fact that further work remained to be done as on the fact that, in relation to the work which had been done by KBL, account should be taken of the fact that very large charges had also been incurred for other professional fees. I do not think that the Costs Judge can be taken to have rejected the proposition that this expenditure should be borne in mind: what he appears to have found was that it did not detract from the value of the work which he found KBL had in fact performed. Accordingly I see no error of principle in his approach under this head.

Ground 6 complains that:

“In determining the value element the learned Costs Judge was wrong to take account of the interventions of Major Reynolds and Mr Butterfield: these interventions increased the work done, but [KBL] were adequately remunerated for that extra work in the allowance of time spent and no further allowance ought to have been made in the determination of the value element”.

This is a reference to paragraphs 75-84 of the judgment where the Costs Judge explained the degree to which the administration of an inherently complex estate had been made more complex by the energetic and contradictory interventions of the life tenant’s receiver (Major Reynolds) and the contingent remainderman (Mr Butterfield), and endorsed Master Moncaster’s characterisation of the executors’ conduct as “not unreasonable…doing their best to deal with a very difficult beneficiary..[whose] intervention has only made matters far worse and has not made them better and has caused quite disproportionate amounts in costs to be run up..”. It does not appear to me that Master Rogers was doing more in these passages than to rebut the general criticism made that the administration had taken far longer than it should have done. It seems to me that he was perfectly entitled to have regard to these matters in assessing the overall remuneration which it was fair and reasonable for KBL to receive. As I read his judgment he does not specifically allude to these matters in his assessment of the value charge in paragraphs 90-99 of the judgment but, if I am right in the conclusion expressed in paragraph 21 above, there was no reason why he should not have done.

Three days in April 2003 were devoted by the Costs Judge to hearing the parties in relation to various bills in relation to property transactions. The detailed assessment was then stood over to await the Court of Appeal’s decision on the preliminary issue, and resumed on 28^th October 2003, with eight days being allocated for the purposes of the assessment. With the Costs Judge’s approval the parties agreed (on KBL’s initiative) to a procedure in which five sample bills relating to pure administration would be considered in detail with cross-examination of the fee earner being permitted. It became apparent, however, on the first day that adoption of this procedure would, as the judgment records at paragraph 13, “inevitably cause an overrun in the eight day estimate, and was not necessarily the most productive or sensible way of approaching the assessment of these bills”. The Costs Judge went on to explain:

“14.

Accordingly, it was agreed that I should read the numerous files which had been left with me, during the ensuing seven days, and, at appropriate times, should hear from the three principals concerned: Mr Kippax, Mr Liptrott and Mr Marriott, so that they could be asked questions in light of my reading.

15.

In fact Mr Liptrott gave evidence at the beginning of that period, and Mr Kippax and Mr Marriott towards the end. I did have a number of questions for all three witnesses, but obviously I also allowed Mr Kenny, and his costs draftsman Mr Hiesman, to put questions to the witnesses.

16.

As I made clear when the closing submissions were made to me on 26 November, I was, and remain, somewhat concerned at the way this particular aspect of the matter was conducted. It seemed to me that all three witnesses, one of whom was sworn, were asked questions which were perfectly legitimate questions, because they arose out of matters which appeared on their respective files, but of which they had little, or no advance notice, and, more importantly, had not previously been given the opportunity to deal with in the form of a witness statement.

17.

As I explained, and as I think all parties are well aware, cross examination of witnesses in the course of detailed assessment proceedings, is unusual, though it is by no means unprecedented. It is the practice within the Supreme Court Costs Office to seek to contain such cross examination to the absolute minimum necessary to decide disputed issues. The necessity for such evidence will normally arise in connection with the question of whether there is a retainer, and if so what that retainer is, in disputes between a solicitor and his client. I normally insist that such disputes are put into written form, in the form of a witness statement, and that the witness concerned is tendered for cross examination. In that way both the witness, and the cross examiner, know what to expect.

18.

In this case, as already indicated, there were no such witness statements, and some of the questions clearly took the witnesses by surprise, and were, if I may use the expression, somewhat combatative. Most of these questions were put by Mr Hiesman, and were based upon his very careful perusal of the files of Kippax Beaumont Lewis, which he had spent many days going through. My concern was that Mr Hiesman might have selected, from the many examples which were open to him, those which he thought were most damaging to the Defendant and most helpful to the Claimant, and put those to the witness.

19.

When I put this to the advocates on 26 November, they both seemed to suggest that it was a matter for me to decide the weight to place on the individual answers given to those questions.”

The Costs Judge later recorded (at paragraph 43) that amongst Jemma’s objections there were three specific bills, 2687, 1174 and 2411, where specific deductions ought to be made. In paragraph 45 he then explained why he was not acceding to that submission in the following terms:

“Objection 1 – Individual bill points

45.

I have decided to make no reductions in respect of any of these bills for the following reason. They were taken somewhat at random by Mr Hiesman, and examined as such, but, although I can see the force of the arguments put forward in respect of each of the individual bills, it seems to me that it would be wrong to make deductions for these specific bills when many other bills were not considered at all. Originally, as indicated in paragraph 13 above, the detailed assessment proceeded on the basis that each bill was going to be considered in turn, but that approach was discarded as soon as it became apparent how long this exercise would take. The attempt to persuade me in the skeleton to disallow certain items from individual bills based on points put (without advance warning) to witnesses seems to me wrong, and I therefore do not think it is appropriate so to do.”

On behalf of Jemma this passage has been interpreted as indicating that the Costs Judge had “formed the prima facie view that there was something in [Jemma’s] objections” but had decided to ignore them partly on the ground that many other bills had not been considered (which is submitted to be a non sequitur) and partly on the ground that the objections depended on answers given by the fee earners to questions of which they had not had advance warning (which is submitted to have been an unfair approach since KBL had themselves agreed to the procedure adopted).

I do not consider that that is a fair interpretation of these passages in the judgment. Plainly the Costs Judge had come to the conclusion, partly as a result of the course the questioning had taken on the first day, and partly on the basis of his own detailed consideration over the succeeding seven days of the bills and all the underlying files, that the product of the oral part of the procedure simply did not enable satisfactory conclusions to be drawn in relation to the specific areas on which challenges had been made. I do not read the expression “I can see the force of the arguments put forward…” as equivalent to a finding that there was a prima facie case for disallowance of the particular item. In context it seems to me no more than a polite signal of respect for the way in which the particular argument had been put. Moreover I doubt whether the procedure adopted, either as initially conceived, or as subsequently adapted, really lent itself to the kind of analysis of individual items to which it is now said it should have been devoted. It was really only helpful as a sampling exercise enabling the Master to obtain an overall sense of what Jemma’s costs draftsman at one point described as the “tone” of the bills, and thus informing his general assessment at the end of the day of the fairness and reasonableness of the sums charged. Moreover, it should be appreciated that in relation to two of the three specific bills in question (1174 and 2687) the specific criticism advanced was in relation to the value element charged. This was a question to which the judge necessarily had to return later in his judgment. In relation to the third (2411) the complaint was of overlap with another bill which had been the subject of detailed assessment at the hearing in April 2003: that was therefore a matter well within the Costs Judge’s direct experience of the “other” bill in question.

I would accordingly not uphold this ground of appeal.

In paragraphs 46-56 of his judgment Master Rogers rejected the submission that he should make a deduction from the costs by reason of the inadequacy or non-existence of attendance notes justifying the time recorded as having been spent by the time sheets which were kept. The submission, which the Master described as a bold one, was that all the time which was unsupported by attendance notes should be disallowed.

In support of his conclusion the Master relied, essentially, on two considerations. First, he commented that the practice of keeping attendance notes differed as between contentious and non-contentious work; in the latter case, for a variety of reasons the practice had been less strict than in the former. Secondly, he observed that, even in contentious work, the solicitor can establish his entitlement to payment otherwise than by means of an attendance note.

The criticism that is made is, that there is no distinction to be drawn between contentious and non-contentious work so far as the obligation to keep attendance notes is concerned. As to this, while I agree that the function of attendance notes is precisely the same in both kinds of work so far as assessment is concerned, it seems to me wrong to speak of an “obligation” to keep attendance notes. That language suggests that failure to keep attendance notes is a duty, breach of which will be visited by the sanction of total or partial disallowance. The true position is that in both kinds of work the burden is on the solicitor not only to show that the time claimed has been spent but that it has been reasonable to spend that time. The keeping of an attendance note is one way, but not the only way, in which this can be demonstrated. Failure to keep such notes exposes the solicitor to the risk of being unable to prove the reasonableness of the time spent. As Ferris J pointed out in Mirror Group Newspapers plc v Maxwell [1998] BCLC 324 at pp 333-334 fiduciaries (in that case insolvency practitioners) bear the onus of showing that they are entitled to retain sums out of the trust property and that those

“whose records are inadequate are liable to find that doubts are resolved against them because they are unable to fulfil their duty to account for what they have received and to justify their claim to retain part of it for themselves by way of remuneration.” (ibid 334 D)

In the present case the Costs Judge was in a position to judge from his extensive examination of the files the nature of the work with which the relevant fee earners were faced, and had the advantage of being able to question them (and see them cross-examined) in relation to certain of the bills. His conclusion that that he was satisfied that the time recorded as spent had been reasonably spent does not seem to me to have been the result of any misdirection in point of law, was one which was open to him on the evidence, and is accordingly one with which this court will not interfere.

For those reasons I would dismiss the appeal.