Smith & Ors, Re

These appeals arise from decisions of Costs Officers in respect of work undertaken by Court of Protection Appointed Receivers (and his/her assistants) in relation to the general management of patients’ affairs.

The first three appeals, Louise Smith, Craig Albert Umney and Donna Marie Owen, are representative of a much larger pool of cases handled day in and day out by Irwin Mitchell’s Court of Protection Department.

The fourth to sixth appeals, James Crosland, Darren Elmore and Steven Hawkins all relate to patients who have suffered brain injury as a consequence of personal injury. In each of these cases Jocelyn Fox, a partner in Taylor Vinter, has been appointed by the Court of Protection as their Receiver. It was agreed by both Messrs Irwin Mitchell and Messrs Taylor Vinter that I should consolidate and hear all these appeals at one hearing on the basis that the only item being appealed are the hourly rates allowed by the Costs Officers in these cases.

In relation to appeals 1-3 the Grounds of Appeal state:

“1.

The Costs Officer’s allowance of the hourly rates was wrong. The hourly rates claimed were reasonable and should have been allowed: CPR 44.4.

2.

The rates claimed were in line with the guideline rates for summary assessment and there was no good reason to depart from them.

3.

The decision to reduce the rates from the amounts claimed appears to have been entirely driven by the decision in the case of Ashton. Ashton is not binding and was wrongly decided.

4.

The nature of the work undertaken in the case justified the hourly rates claimed.

5.

The hourly rates allowed are less than what the court in the same case has historically allowed. This demonstrates the rates allowed are too low given that the rates historically allowed were allowed because they were reasonable.

6.

The reductions to the hourly rates are inconsistent and arbitrary.”

The Grounds of Appeal in relation to appeals 4-6 are:

“Costs Officer Colin Baker was wrong to reduce the grade A hourly rate from £184 to £170 (and from £195 to £180 in relation to the review hearing). He should have allowed the full rate claimed to reflect the seniority, experience and expertise of the fee earner in question and to reflect the specialised, responsible and stressful nature of the work.”

The rates allowed by the Costs Officer were:

Rates were also claimed in Part 2 of the bill in respect of Sheffield fee earners as follows:

The Costs Officer noted the bill as follows:

“It was decided in the recent case of Ashton that hourly rates in most COP matters for Receivers and their staff should be lower than for other types of work. Rates reduced as shown (having considered the individual merits of this case) in line with the decision in Ashton.”

The Costs Officer allowed the following hourly rates:

Part 2 of the bill was conducted by a grade C fee earner:

The Costs Officer noted the bill as follows:

“It was decided in the recent case of Ashton that hourly rates in most COP matters for Receivers and their staff should be lower than for other types of work. Rates reduced as shown (having considered the individual merits of the case) in line with the decision in Ashton.”

The bill also notes that on 22 May 2007 a re-assessment took place, and the Costs Officer recorded:

“Upon careful consideration of solicitor’s letter dated 5 February 2007 and in the absence of solicitors filing further details in respect of the decision of Master O’Hare in 2001 as requested by this office I am still of the opinion that the decision in Ashton should be applied to this bill. However where I have considered it appropriate the requested rate has been allowed and the bill has been amended accordingly.”

In relation to this matter the Costs Officer allowed the following hourly rates:

Part 2 of the bill was conducted by Sheffield Grade C fee earners:

In relation to this appeal the Costs Officer noted on the bill the following:

“Having considered the individual merits of this case with a view to deciding whether it can be distinguished from Ashton I have concluded that there were no significant features in this case which attract the guideline rate. I am however prepared in view of the complications surrounding the care package to allow rates above Ashton. Rates adjusted as above.”

The Costs Officer allowed the following hourly rates of charge:

The Costs Officer noted on the bill of costs the following:

“It was decided in the recent case of Ashton that hourly rates in most COP matters for Receivers and their staff should be lower than for other types of work. Rates reduced as shown (having considered the individual merits of the case) in line with the decision in Ashton.”

The Costs Officer carried out a review of detailed assessment and recorded the following:

“12.

The matter of Crosland was the first year’s general management involving a minor in a clinical negligence matter (with potentially substantial damages) in which a trust property was purchased, the patient’s parents being the trustees. The parents were both professional people and not unduly difficult or demanding. Architects were instructed to draw plans for adaptations to the property and to obtain planning permission. There was also work relating to the purchase or hire of a suitable vehicle for the patient, the purchase of a stair climber, and issues as to the care and mobility elements of the disability living allowance. It should be noted that the bill includes work of a routine nature such as crediting cheques to the bank, settling case manager’ invoices, paying the receiver’s bond and payment for garden services for which a fair proportion had been undertaken and allowed at the Receiver’s rate. In my view this case bears distinct similarities to Ashton the facts of which I have already set out at paragraph 10 above and I can see no reason to distinguish it from Ashton (save that the majority of the work was done by the grade C in Ashton). In all the circumstances I am not prepared to make any increases to the rates allowed (other than in respect of the grades B and C as indicted at paragraph 8 above).”

The Costs Officer’s note on the bill is in similar terms to that referred to above in the case of Crosland. The assessment was reviewed by the Costs Officer who made the following comments:

“13.

The matter of Elmore related to one year’s general management during which a liability settlement in a personal injury action was approved by the Court of Protection on Leading Counsel’s advice, on an 80% - 20% split in the Claimant’s favour. Solicitors arranged for the patient’s existing mortgage to be discharged and took steps towards purchasing the patient’s brother’s property for the patient. There was also work relating to the purchase of a new car, a gift of £10,000 to the patient’s parents and instructing brokers to give investment advice. Furthermore there was a significant element of routine work such as paying care and gym invoices and the Receiver’s bond some of which had been dealt with and remunerated at Receiver’s rates. The patient did not appear to be exceptionally demanding and had some insight into his perceived level of care and expressed the desire for greater independence. I find nothing in this case which lifts it above Ashton and make no increase to the rates other than in respect of the grades B and C fee earners as stated at paragraph 8 above.”

The rates claimed in this bill of costs were the same as the rates referred to in the previous two appeals of Crosland and Elmore. The rates allowed were the same and increased on review in line with the decision in Elmore. The bill was noted by the Costs Officer as follows:

“Rates reduced having considered the merits of the case and in line with the decision in Ashton. Nothing in the bill or papers justify allowing the top of the guideline rate.”

On review the Costs Officer recorded the following:

“14.

The matter of Hawkins also concerned one year’s general management arising from a road traffic accident and substantial damages. The patient was a doctor who was resident in Scotland and appears relatively coherent and keen to take greater responsibility. The work included the purchase of a new property but this was done through Scottish solicitors rather than by Taylor Vintners and the release of £10,000 for new furnishings. A new car was purchased and brokers instructed to give advice on investment strategy. There were also a large amount of routine communications such as arranging for utilities to be supplied to the patient’s new house, payment of the television license and the Receiver’s bond, the majority of which were undertaken by and remunerated at Receivers rates. In all the circumstances I see no reason to increase the rates other than in respect of the grades B and C as indicated in paragraph 8 above.”

As all of the cases were decided at first instance by a Costs Officer the appeals come within the meaning of CPR 47.23 which allow me to:

Both counsel for Irwin Mitchell and for Taylor Vintner submitted that these appeals raised an important issue of principle. So far as the Irwin Mitchell’s appeals were concerned (appeals 1-3) they solely relate to the hourly rates allowed for Sheffield and Newcastle. The reduction of London rates from City to Holborn is not being appealed. This was made plain to me during the course of the appeal because of the decision in nine cases heard in the SCCO in January 2001 under the name Diggines & Ors. In those appeals Master O’Hare applied the guideline hourly rates then applicable and noted the location of Irwin Mitchell’s offices in the City. It was nevertheless accepted that the size of the office justified something less than City rates. The hourly rates allowed in the cases under appeal are in accordance with that decision and no appeal arises in respect of them.

In was argued that the hourly rates allowed in the cases being appealed, and the hourly rates allowed in the case of Ashton, are inconsistent with previous approved Supreme Court Costs Office decisions and guidance. In essence the decision in Ashton as applied to these cases creates a unique category of cases which fall outside the “Guideline figures for summary assessment of costs” when historically and customarily the practice has been to apply guideline rates. Furthermore the decision in Ashton and its application to these cases has created intolerable inconsistency in the allowance of hourly rates, not only in the cases under appeal but across the assessment of all general management work in Court of Protection cases.

The duties and obligations of a Receiver in the Court of Protection are set out in a handbook published by the Public Guardianship Office. The handbook is particularly intended for non professional receivers but its guidance as to the office of Receiver is equally applicable to solicitors. I was provided with a copy of the handbook by counsel for Taylor Vintner. The role of the Receiver is fully set out at pages 4 and 5 together with a list of the duties imposed upon a Receiver, which are:

“● act in the best interests of the client at all times.

● look after the client’s property.

● open a Receivership account.

● claim all benefits that are due to the client.

● make sure that the client’s savings are properly invested to earn the maximum amount of interest possible.

● prepare accounts every year or whenever the court needs you to.

● make sure the client’s money is being used to give him or her the best possible quality of life.

● make sure all income is collected and all bills paid on time.”

It was submitted by Mr Post for Taylor Vinter that a glance at this list makes clear the extent, importance and responsibility of a Receiver in these cases (appeals 4-6) where the brain damaged patient has received or will shortly receive large sums of compensation which require proper investment and use. Mr Post went on to elaborate one of the duties enumerated, to:

“make sure that the client’s money is being used to give him or her the best possible quality of life.”

Self evidently this is a weighty duty, and not merely a matter of mere administration or book-keeping. A Receiver must exercise skill and judgment in controlling a patient’s financial affairs and must apply his or her own expertise and experience to achieve the end laid down in the handbook. Whilst administrative tasks can be delegated to more junior fee earners the Receiver herself takes responsibility for the decision making, planning and the strategic approach.

I was provided with a note from Ms Fox dated 15 February 2007 which sets out the skills required by a solicitor receiver for Court of Protection work and outlined some of the problems which commonly arise. The note explained the effect head injuries have upon the patient, the problems this creates for the professionals who deal with such patients and the characteristics that a fee earner requires to work in this field. A key passage that was brought to my attention is the following:

“A lawyer who has contact on a regular basis with head injury clients and their families must be patient, sensitive, firm, clear and level headed – every day without exception.”

Mr Post went on to submit that a Receiver dealing with Court of Protection work is involved in crisis management in respect of many of a patients affairs “crisis is common place”. It was made plain to me by counsel for both Irwin Mitchell and Taylor Vinter that all the appeals related to accident/negligence acquired brain injury cases and were not in relation to any elderly care home cases. It was also made plain to me that the cases under appeal were simply a sample of the cases routinely undertaken by both firms of solicitors.

Irwin Mitchell is a national law firm whose head office is in Sheffield. The Court of Protection Department deals with the financial affairs of approximately 600 Court of Protection patients with units at their Sheffield and London offices. The Sheffield Department usually services the offices in Manchester, Newcastle, Leeds and Sheffield, whilst the London Department covers the London and Birmingham offices. Generally the Court of Protection Department’s clients are referred from personal injury litigation conducted by the IM Personal Injury Department. The work is specialised, with many referrals made from firms of solicitors other than Irwin Mitchell, from brain injury case managers, from family members and directly from the Court of Protection. I was told that it is the policy of Irwin Mitchell in line with the preference of the Court of Protection to only appoint a partner to act as receiver. This preference by the court restricts the candidates to either Niall David Baker, who is Head of the Court of Protection Department in Sheffield, or Julia Carole Lomas who covers London and Birmingham. Both are equity partners and are experienced receivers and are on the court’s panel of court appointed receivers. I was told that the structure of the COP team is important. Day to day management of receivership affairs is delegated to a grade C fee earner. Incoming telephone calls, correspondence and the bulk of the work is dealt with at that level. Matters are referred to the receiver where necessary. It was submitted that this structure ensures that:

Guideline hourly rates for different grades of fee earner are set out in the “Guide to the Summary Assessment of Costs” published by the SCCO, the latest version being the 2005 edition albeit that the rates referred to in Appendix 2 were revised in 2007. As the foreword to the Guide makes clear it is for use by Judges who are required to assess costs summarily at the end of a trial on the fast track or on the conclusion of any other hearing which has lasted not more than one day. As for the status of the Guide it is, as it makes clear, no more than a guide and a starting point for Judges carrying out summary assessment. The figures set out in Appendix 2 to the Guide are broad approximations only. The Guide is intended to be of help and assistance to Judges but is not intended as a substitute for the proper exercise of discretion having heard argument on the issues to be decided.

Appendix 2 provides guideline rates in four bands depending on the locality of the solicitors in question. There are four grades of fee earner depending upon their experience:

Appendix 2 also makes it clear that:

“An hourly rate in excess of the guideline figures may be appropriate for grade A fee earners in substantial and complex litigation where other factors including the value of the litigation, the level of complexity, the urgency or importance of the matter as well as any international element would justify a significantly higher rate to reflect higher average costs.”

The Guide also makes reference to other fee earners:

“Unqualified clerks who are fee earners of equivalent experience may be entitled to similar rates … Clerks without the equivalent experience of a legal executive will be treated as being in the bottom grade of fee earner i.e., trainee solicitors and fee earners of equivalent experience. Whether or not a fee earner has equivalent experience is ultimately a matter for the discretion of the court.”

In deciding the level of remuneration appropriate for a receiver I must have regard to the factors set out in CPR 44.5(3) which is applied to Court of Protection matters by rule 86 of the Court of Protection Rules 2001. The following factors listed in CPR 44.5(3) are relevant:

“(b)

The amount or value of any money or property involved;

(c)

the importance of the matter to all the parties;

(d)

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

(e)

the skill, effort, specialised knowledge and responsibility involved.”

It was submitted that the work of a solicitor receiver administering the financial affairs of a patient who has suffered an acquired brain injury should be considered against those criteria. It was submitted that it can be seen that this work more clearly satisfies these criteria and therefore justifies a higher hourly rate than does much run of the mill small scale litigation work which is usually the subject of summary assessment.

It was further submitted the responsibility undertaken by a solicitor receiver is different to the responsibility undertaken by a litigation solicitor. It was argued that the responsibility undertaken by the solicitor or the importance to the patient is greater because of the particular problems which each brain injured patient causes in all the circumstances.

In January 2001 Irwin Mitchell appealed the decisions of various Costs Officers in nine appeal cases involving general management work. Each case raised the same issues, namely the hourly rate and the appropriate level of fee earner for the work claimed. The result of the appeals and subsequent guidance given was set out in a memorandum dated 25 January 2001. I was provided with a copy of the memorandum prepared by Master O’Hare, who allowed the then prevailing guideline hourly rates. In that memorandum he described the guideline rates in this way:

“(4)

Although, technically the place at which the work was done in these bills was EC1 it was accepted that the firms with which I should make comparison were firms in the Holborn area.

(5)

The guideline rate published by the SCCO for grade 2 fee earners is £215 per hour. The rate is not conclusive. It is just a starting point. However it is fair to accept this as the reasonable rate unless there is good reason to depart from it.”

This was a decision of Master O’Hare where judgment was handed down on 31 July 2006. In that case Master O’Hare was asked to determine the appropriate hourly rate to allow for work done by a member of the receiver’s staff whose job description was “specialist support services manager” (SSSM). The costs in question in Ashton related to general management work in the year ending 5 September 2005, the relevant locality being inner Cardiff. In the Ashton bill a large part of the costs related to work done by the SSSM because of the need to supervise the refurbishment and adaptation of the patient’s new house during the period of charge.

The bill of costs was filed in the SCCO in December 2005. The hourly rates claimed were as follows:

In January 2006 the bill was provisionally assessed by Costs Officer Myers who reduced the hourly rate for SSSM from £125 to £100, but allowed the other hourly rates as claimed. A number of other reductions were made to individual items in the appeal but no appeal was brought against those reductions. Subsequently the solicitors requested a review of the Costs Officer’s decision without a hearing. This was carried out in January 2006 and the provisional assessment was confirmed. The Costs Officer adhered to the view that she should:

“Exceptionally allow the grade D rate of £100 for the SSSM noting that in another case the grade D rate was all that had been requested for this fee earner.”

In his decision at paragraph 16 Master O’Hare said:

“I consider that in the earlier proceedings in this case and in the arguments on appeal there has been too great a reliance upon the guideline figures set out in “the Guide to the Summary Assessment of Costs” … The different grades of fee earner described are provided by way of general guidance only as to the different levels of seniority and responsibility in a solicitors office. In fact the levels at least those above grade D are almost indefinite in number. Similarly the figures for each grade are broad approximations provided as no more than a starting point for the task of assessment. As might be expected in the Guide for use in summary assessments the figures deal with the generality of litigation cases not cases such as this.

17.

As the solicitors in this case recognise there are several reasons why hourly rates which are appropriate for receivers and their staff in most Court of Protection matters will be lower than the rates for other work. General management work of a receiver usually has lower levels of urgency and adrenaline than compared with other work. Although the decisions which have to be made can sometimes be of the greatest importance and can merit the most anxious consideration a solicitor receiver and his staff have greater autonomy than their equivalents in other work. There is also the fact that especially in a larger estate such as this the receiver will produce a steady stream of work. In this case the hourly rate claimed for the receiver is 92% of the relevant grade A rate and the hourly rate claimed for the SSSM is 91% of the relevant grade C rate and the hourly rate claimed for the receivership assistant is 85% of the relevant grade D rate.

22.

I consider that a rate of £118 more accurately takes account of the relevant factors of this case. The factors which weigh most heavy with me in this decision are as follows:

(i)

the age and experience of SSSM;

(ii)

the rate appropriate for brain injury case managers generally;

(iii)

the rate appropriate for the receivership assistants in this case and the SSSM’s seniority to the receivership assistant;

(iv)

the degree of responsibility shown by the SSSM in this period. To the great extent this is indicated in her favour by the comparatively low amounts of time incurred by the receiver in this matter.”

Mr Post submitted that Ashton was not a persuasive authority which should be followed for a number of reasons:

Mr Post argued that the decision in Diggines was manifestly inconsistent with that of Master O’Hare in Ashton. Insofar as the factors identified by Master O’Hare in paragraph 17 of his judgment Mr Post dealt with each in turn.

Receivership work will often, though not always, be less urgent than other work. It is however work where “crisis is commonplace” and the receiver must achieve high standards even though dealing with patients whose brain injury may make the task of managing their affairs stressful and difficult. Consequently he argued that the stresses of court deadlines are replaced by the responsibility of achieving high standards throughout the years of receivership.

Receivers do have greater autonomy in the sense that the patient will, by definition, not be capable of giving clear and reliable instructions. The receiver must act more on her own initiative rather than taking and putting into effect her client’s instructions. It was submitted that the receiver therefore takes on a greater, not a lesser level of responsibility and the receiver must apply her own judgment to matters which would in other fields be decided by the client. The receiver will in any event have to deal with the patient and to take into account his express wishes even though these will not be binding as instructions would be. Greater autonomy results in greater responsibility and the need for greater skill and expertise, not less.

Receiverships last for many years. This however it was argued does not justify an inadequate hourly rate. In view of the fact that it is desirable for there not to be a change of receiver an inadequate hourly rate penalises the solicitor who may have to continue for insufficient remuneration as receiver for many years.

It was submitted that there were other factors I should take into account in arriving at an appropriate hourly rate for the work carried out by receivers and their staff. High value injury claims tend to be conducted by larger and more eminent firms of solicitors, for example those dealing with these appeals. Since the partners in the Personal Injury Department are conducting large scale litigation they tend to be able to recover their fees at rates higher than the summary assessment guideline rates. A mis-match develops within a firm if partners of one department are unable to recover the same level of fees as their colleagues. Allowing the summary assessment rate in full would not wholly remove this difficulty but it would ameliorate it. Furthermore unless receivers are adequately remunerated there is a risk that over time firms such as those representing the appellants will withdraw from receivership work. Furthermore there is a risk that if realistic hourly rates are not recoverable experienced receivers will cease to undertake receivership work and instead undertake private client work for which they will receive higher hourly rates.

Mr Bacon (for Appellants 1 – 3) adopted Mr Post’s submissions and contended that in the general run of Court of Protection work the guideline rates should apply. He argued that Ashton had been wrongly decided and was based on a telephone appeal where the comments of Master O’Hare regarding hourly rates were obiter, the issue in connection with that appeal being one relating to status. The approach in Ashton was wrong. It was submitted that applying guideline rates creates consistency. He argued that one answer to resolving the difficulties surrounding hourly rates for Court of Protection work would be removed were fee earners to be re-categorised or there was a reduction in their status. Furthermore the strict application of Ashton principles, which appears to have been the case in a number of Costs Officer decisions post Ashton, has ignored what had been allowed in respect of Court of Protection work in previous years.

Having reviewed the bills of costs and the decisions of the Costs Officers in the cases under appeal it is evident that in the light of the Ashton decision Costs Officers in assessing Court of Protection bills of costs relating to general management work have consistently applied hourly rates that approximate very broadly to 90% of the summary guideline rates. In my judgment there now appears to be two sets of guidelines, one contained within Appendix 2 to the Guide to the Summary Assessment of Costs and one used in respect of Court of Protection general management costs which are broadly at 90% of the relevant Appendix 2 figures.

I accept the submissions made to me by both Mr Post and Mr Bacon with regard to the fact that there should be both consistency and certainty in relation to the costs which those lawyers and their clerks who act as receivers in Court of Protection work are to be remunerated. Court of Protection work in many respects is no different from modern litigation where it is incumbent upon a solicitor receiver to act with economy in relation to the work to be done, to plan in advance that work, the appropriate level of person to carry out that work, the overall time which will be necessary and appropriate to spend on the various stages of that work in dealing with a patient’s affairs.

I accept the evidence of Ms Fox with regard to the work of a professional receiver set out in her note of 15 February 2007, that by the very nature of the patient the work can be stressful, relentless and that crisis are commonplace. The receiver is not dealing with a client who can give instructions but must act on his or her own initiative. In that respect I accept that the receiver takes on a greater not a lesser level of responsibility and must apply his or her own judgment to matters which in other fields the lawyer would seek specific instructions from his or her client. I accept that greater autonomy in fact results in greater responsibility and the need for greater skill and expertise not less.

I also find that substantial elements of day to day general management work are mundane and routine, once the receiver has provided overall direction as to the issues which are to be dealt with. In that respect it is incumbent on the receiver to pass that work down to a lower but relevant level or grade of fee earner to be implemented. In relation to that work the receiver cannot expect to be remunerated at anything like the level of his or her own expertise. Mr Bacon accepted and I find that it is entirely possible for a receiver to reclassify and downgrade (where appropriate) his or her own staff within the bands provided in Appendix 2 to the Guide to Summary Assessment in order that general management work is dealt with with the utmost economy and expedition by the appropriate level of fee earner in individual cases. The issue as to the appropriate status or grade of fee earner for the work in question will always be a matter for discretion when Costs Officers and/or Costs Judges are assessing a receivers general management costs.

For my part I accept the submission of Mr Post that the comments of Master O’Hare in Ashton were obiter. The real issue in Ashton was the status of the fee earner and the issue of hourly rates was not fully argued. In my judgment having heard all the arguments concerning hourly rates I am satisfied that there is no justification in the use of an artificial or secondary set of guideline rates for Court of Protection general management work. For my part I am not satisfied that the three specific factors justifying lower hourly rates found by Master O’Hare, namely:

Guideline rates are broad approximations only and are broad average rates within the localities to which they relate. The fact that general management charges are a “steady stream of work” which should in some way affect the recoverable hourly rate is in my judgment wrong. In the memorandum relating to the Diggines decision of Master O’Hare dated 25 January 2001 it was said:

“5.

The guideline rate published by the SCCO … The rate is not conclusive. It is just a starting point. However it is fair to accept this as the reasonable rate unless there is good reason to depart from it.”

I agree with those sentiments. For the reasons set out above I do not propose to follow the case of Ashton and in respect of each of the cases appealed intend to apply the relevant guideline rate for the appropriate locality where the work was done for the grade of fee earner who carried out that work.

Liberty to apply as to the implementation of this Order and in respect of the costs of the appeal.