Dranez & Ors v Hayek & Ors

The issue in this reserved judgment relates to the appropriate hourly rates recoverable by the receiving parties. In fact there are two quite distinct parts to this issue, namely (a) is there a “cap” on the hourly rates recoverable? and (b) the actual hourly rates themselves.

Logically it would be appropriate to consider the second point first but most of the argument, which took 2.5 days spread over three days, was devoted to the first aspect as set out above and accordingly this judgment will deal with the matters in that order.

This is set out in some detail in paragraphs 3 to 19 of my reserved judgment handed down on 2 April 2008 in relation to an earlier preliminary issue in the same case.

This, coupled with the fact that the background is well known to all concerned and is also dealt with in three reserved judgments of Master Seager-Berry when he was dealing with an earlier aspect of the case, make it both unnecessary to go into any greater detail in this judgment, since it is certain that, if this matter goes further, those other judgments, and in particular my first reserved judgment, will undoubtedly be referred to.

For convenience, the receiving parties’ solicitors, Messrs Denton Wilde Sapte, will hereafter be referred to as DWS, while for the paying parties the solicitors, Messrs Mischon de Reya will be referred to as MDR.

The starting point for the submissions made to me in this case, which is common ground, is that the original retainer between the receiving parties and DWS is contained in an exchange of letters starting with DWS’s letter to Dr Zamir Hayek dated 10 May 2000 (6 in the agreed bundle of documents) and the short reply thereto from Medivent Limited to DWS dated 25 May 2000 (7 in the agreed bundle).

The relevant parts of the letter by DWS to Dr Hayek read as follows:

“1.

The work we will be carrying out for you

The particular matters on which you have instructed us involve the preparation of an application for strike out in the Injunction Proceedings and advice on and, if necessary, the preparation of a defence to the claims made in the patent infringement action.

2.

Denton Wilde Sapte partner(s) and staff

I am the partner who will be in charge of, and have ultimate responsibility for, these matters. In addition, my assistant Louise Fowler to be working on the day-to-day conduct of the matter under overall supervision.

From time to time, it may be appropriate to use trainees and other non-qualified assistants. It may also be necessary to make a change or addition to the team. If this occurs, we will of course let you know consulting with you as appropriate.

3.

Our contacts with you

I understand that you will be our first point of contact throughout the matter and in your absence or in an emergency we should contact Kay De Bernardo. No doubt you will let us know if the position changes.

As this matter is contentious and Court proceedings are already on foot, it is essential that you take primary responsibility for the litigation. The Court requires various documents to be verified by a Statement of Truth. You will also need to be able to set aside the time to deal with matters such as setting up a search for discloseable (sic) documents and attending any hearings at which the Court may require you to attend.

In relation to the injunction proceedings, clearly we will take instructions from you on behalf of yourself and Medivent Limited. Kay is also a defendant along with Andrew Higgs. So far as they are concerned, do we take instructions on their behalf from you, or do we take instructions from them separately? Have you indemnified them for the costs of the action? We may need to get letters from Kay and Andrew confirming that we look to you both for instructions on their behalf and also costs.

4 …

5.

The basis of our charges

Given the nature of the matter, it is not possible to give you an accurate estimate of our fees and disbursements at this time. As the matter proceeds and the extent of work required by us becomes clearer I should be able to do so. In the meantime, however, I confirm that our fees will be based on time spent and we will be able to provide a breakdown if this is required. Our charge out rates applicable to this matter, exclusive of VAT, are as follows. My rate is £350 per hour and Louise Fowler’s is £150 per hour.

It is particularly important that we do not allow costs to build up. We will bill you each calendar month. You have paid £5,000 on account of costs and I will divide that equally between each matter. I intend to keep that amount on account for each file just to give us a “cushion” if anything untoward happens. I may ask you to pay Counsel’s fees upfront for specific events, e.g. a hearing or strike out application.

6.

Specific points as to costs

Since these matters are contentious, I should point out that the parties to litigation are now required to assist the Court in achieving its “overriding objective” of dealing with costs justly. This includes ensuring that the parties are on an equal footing and saving expense so far as possible. Cases must also be dealt with in a way which is proportionate to the amount of money at stake, the importance and complexity of the case and the parties’ financial positions. These factors will therefore affect the proportion of your costs you are likely to recover from other parties, even if successful.

I am also required by the Law Society to inform you in relation to this matter.

(i)

that in any event, you will be personally responsible for payment of your own solicitor’s bill of costs in full regardless of any order for costs made against opponents;

(ii)

of the probability that if you lose you will have to pay your opponent’s costs as well as your own;

(iii)

that even if you win, your opponent may not be ordered to pay the full amount of your own costs.

As indicated above, the Court will consider (among other things) the conduct of the parties both before and after litigation is commenced when assessing costs. Moreover, your opponent may in any event not be capable of paying what they have been ordered to pay; and

(iv)

that if your opponent is legally aided you may not recover your costs even if successful in civil proceedings.

Further, detailed rules of Court limit the costs that may be recovered in relation to particular types of proceedings or specific applications.

In the event that the Court makes any costs order against the Firm as a result of the manner in which you have instructed us to conduct the litigation (or due to the failure to provide us with adequate instructions on a timely basis), we reserve the right to add such items to the bill we subsequently render to you.

7.

Billing and payment arrangements

As I explained above, we shall invoice you monthly. Our bills are payable within 30 days. If payment is not made in that period, we may charge interest at the rate applicable to judgment debts from time to time. All arrangements between us relating to the provision of legal services shall be governed by and construed in all respects in accordance with English law and the parties agree to submit to the exclusive jurisdiction of the English Courts as regards any claim or matter arising in relation to such arrangements.”

The reply dated 25 May 2000 from Medivent Ltd, signed by Dr Zamir Hayek in his capacity as managing director of that company reads as follows:

“I refer to your letter of 10^th May, 2000.

I confirm that both Andrew Higgs and Kay De Bernardo wish you to act on their behalf.

Andrew Higgs is based in Japan, and he has therefore asked me to give you instructions and liaise with you on his behalf. Kay De Bernardo can, of course, be contacted here in London at Medivent.

Costs for all three individual defendants (myself, Kay and Andrew) are to be billed to Medivent Limited.”

The argument for the Paying Parties is that the wording of the first paragraph of paragraph 5 of the letter of 10 May 2000 restricts the Receiving Party to a maximum of £350 per hour for work done by any partner and to £150 per hour for work done not only by Louise Fowler but by other assistants who replaced her as the litigation developed.

The argument by Mr Fairbairn however is that whilst that was undoubtedly the original retainer, and as such amounted to a contentious business agreement as defined by s.59 Solicitors Act 1974, it has been varied by reference to other documents and/or conduct by Dr Hayek.

First and foremost the Receiving Parties rely on a witness statement made by Dr Hayek on 10 November 2004 and which was numbered 38 in the agreed bundle of documents.

In view of its fundamental importance to this issue I think it necessary to set it out in full in this judgment. Omitting the heading, it reads as follows:

“I, ZAMIR HAYEK of Maryland House, 10 Downage, London NW4 1AA WILL SAY as follows:-

1.

I am the First Defendant in this matter.

2.

I am also the sole director of the Second Defendant, Medivent Limited (‘Medivent’) and have been at all material times since this action commenced. My family has always held a significant quantity of the shares in Medivent and they currently hold around 85% of the shareholding in the company.

3.

After these proceedings were commenced, Medivent agreed to pay the costs of all of the Defendants and informed the Defendants’ solicitors (initially Jaque Simmons and latterly Denton Wilde Sapte) accordingly. To the extent that the fees have been settled, they have been paid by Medivent.

4.

I am aware of the fact that the personnel dealing with this matter on behalf of Medivent changed from those originally notified to me in Denton Wilde Sapte’s retainer. Where there were changes of personnel, I am not able to say whether there were any discussions or not about hourly charge out rates but if there were any I cannot recall them).

5.

I did expect Denton Wilde Sapte to invoice for their solicitor’s time fairly and in accordance with the hourly rates specified at the outset and I anticipated that those hourly rates may increase from time to time during the conduct of the matter were it to become protracted. Where there were changes in staff, I would expect the charge out rates for the new staff to be within the ranges defined by the partner rate and the junior solicitor rate as prescribed in the original retainer letter. I believe that Denton Wilde Sapte invoiced on this basis. The hourly rates were apparent from the invoices. The invoices were all accepted by Medivent and at no time did I ever query those hourly rates with Denton Wilde Sapte; I regarded these hourly rates as the agreed rates from time to time. I had many discussions with the partner responsible for the matter, John Hull. We often discussed costs with him. I did not query with him the basis on which Denton Wilde Sapte billed Medivent.

6.

With regard to Neville Cordell, I was also aware of his hourly rate because he had been acting for me on another matter (a patent action) where the invoices were prepared on the same basis (i.e. showing the hourly rate from time to time). I would have been aware, therefore, of his hourly rate from the bills in the patent action and expected the rate to be the same in this action.

7.

My understanding was that the letter from Jaque Simmons dated 8^th April 1999 and headed ‘Various Matters’ was intended by them as dealing with their terms of business of all of the matters that they were handling for Medivent or myself (in the possession proceedings) including the present action.

I believe that the facts stated in this Witness Statement are true.”

As was recorded in my earlier reserved judgment, Dr Hayek died in 2005 and accordingly could not of course be tendered for cross-examination, which is something which would certainly have been necessary had he still been alive.

At that time the lead partner on behalf of DWS was a Mr John Kenneth Hull who has since left DWS but who made a witness statement on 8 November 2008.

Again, this document is an important one in the submissions made to me by Mr Fairbairn and accordingly I set it out in full, again minus the heading, below:

“JOHN KENNETH HULL will say as follows:

1.

I am a Partner in Denton Wilde Sapte and I had conduct of this action on behalf of the four defendants. I make this witness statement from my own knowledge of the facts and matters to which I refer.

2.

I wish to explain why, in 2000, I did not separately send client care letters to Dr Hayek and to Medivent Limited. The answer is that, for all practical purposes, Dr Hayek was Medivent Limited. He was its principal director and its principal shareholder. Medivent was a one man company and that one man was Dr Hayek. Nothing would have been served by my sending a separate client care letter to Medivent since, as its director and main shareholder, it would have come to Dr Hayek’s attention and he would have dealt with it. Given the reality of the position, which was that Medivent Limited was Dr Hayek in a corporate form, I looked at the reality of the position.

3.

In this respect I was doing no more than the principal claimant in this action. Dranez Anstalt, a Liechtenstein company, did in a separate action which has been called the Patent Action. I give more details of this below. In the Patent Action Particulars of Claim, it was alleged that Medivent had infringed a patent and that Dr Hayek had induced it to do so. The Particulars of Claim asserted that, as Medivent’s main director and shareholder and hence its directing mind and will, Dr Hayek’s knowledge became that of his company. They were, in effect, one and the same. That was an argument adopted by Dranez Anstalt in the Patent Action and I am content to rely on it also for these purposes.

4.

The Patent Action was commenced in April 2000. The claimant was Dranez Anstalt and the defendants were Dr Hayek and Medivent Limited. The action alleged infringement of a UK patent for respiratory technology, the inventor of which was Dr Hayek himself. He had assigned the patent several years previously to Dranez Anstalt. In fact, Dranez Anstalt was not the owner of the patent since it had assigned it to another Liechtenstein company called Dranez Holdings. Dranez Anstalt’s then solicitors, Mischon de Reya, either did not know about this, or did not consider it particularly important. The result however was that the action was struck out and recommenced in the name of the correct claimant, i.e. the owner of the patent concerned, Dranez Holdings.

5.

The Patent Action was treated separately by Denton Wilde Sapte. It had a separate matter number, separate physical files, separate Counsel (a specialist patent barrister was instructed) and the action was separately billed. Time on the Patent Action was recorded by myself or my assistants on its separate file number.

6.

Similarly, Dr Hayek was also involved in a third action, this time as defendant in an action brought by his brother Samuel Hayek. That has been called the Possession Action. Samuel Hayek had loaned Dr Hayek some money to help him buy his house. Dr Hayek claimed that he was entitled to the money in any event. The Possession Action was a claim that Dr Hayek held his house in trust for Samuel Hayek. Relatively little was done on that case. Again however it had a separate matter number, separate physical files and time was recorded separately on it. It was billed separately to Dr Hayek.

7.

I can also confirm that no attempt was made to apportion costs between Dr Hayek and Medivent Limited, and no attempt was made, during the course of the action, to apportion side-letter and non-side letter costs.”

Mr Hull has now left DWS and was not tendered for cross-examination, nor indeed was any application made that he should be cross-examined.

However, Mr Fairbairn, who himself made a witness statement, was probably the draftsperson of both Mr Hull’s and Dr Hayek’s witness statements which were made in connection with a similar, if not identical issue, raised in the earlier assessment proceedings heard by Master Seager-Berry.

This is the so-called Berber assessment and the relevant judgment which although not in the agreed bundle, was subsequently handed up to me. It was handed down on 21 November 2005 following a hearing which took place before Master Seager-Berry on 17 August that year.

However, I was initially simply shown a page which contained paragraph 51 of Master Seager-Berry’s draft judgment, the relevant part of which Mr Bowden suggested was the following:

“He also raised the issue of the increased hourly rate (for which there was no provision in the retainer letter) and succeeded on that point. Mr Bowden made the valid point that it had not been possible to settle the costs until a decision had been made on the indemnity principle, the side letter costs issue and the Court of Appeal retainer (paragraph 35).”

However, Mr Fairbairn, over one of the adjournments, produced the full judgment which confirmed his recollection that that part of the draft judgment of Master Seager-Berry had been amended as a result of representations made by him, Mr Fairbairn.

He noted from the relevant paragraph of the final version of the judgment that the words “and succeeded on that point” were deleted therefrom because the sentences now read:

“He also raised the issue of the increased hourly rate (for which there was no provision in the retainer letter). Mr Bowden made the valid point that it had not been possible to settle the costs until a decision had been made on the indemnity principle, the side letter costs issue and the Court of Appeal retainer (paragraph 35).”

Contained in tab 68 of the agreed bundle of documents (unhappily not numbered or lettered individually) are redacted copies of the bills DWS sent to their clients and the accompanying detailed time ledgers.

It is unnecessary to set these out in this judgment because it is accepted on behalf of the Paying Parties by Mr Bowden that, with the help of a calculator, it would have been possible for Dr Hayek to ascertain that the rates which were quoted in the letter of 10 May 2000 had been increased, but there is no evidence from Dr Hayek that he had actually done that.

This very issue arose in the Berber assessment which was conducted by Master Seager-Berry and he deals with it in paragraphs 31 and 32 of his reserved judgment on 5 November 2004, which read as follows:

“31.

The terms of retainer with Denton Wilde Sapte in relation to the two actions was set out in their letter dated 10 May 2000 and the reply by the First Defendant dated 25 May 2000 establish a joint and several retainer with the costs of the three individuals to be billed to Medivent Ltd. The letter provided for monthly billing and to bills to be paid within 30 days and cautioned against allowing costs to build up. It set out the hourly rate for the partner (£350) and the assistant solicitor (£150). In the event of a change in or addition to the team the First Defendant would be informed. There was no indication that hourly rates would be reviewed and increased. Mr Grant explained that errors had crept into the original bill in that Mr Hull had agreed to continue work at the existing rate of £350 until the end of November 2000 instead of the increase taking effect on 1 September 2000. The necessary amendments had been made and an amended bill had been served. That explanation did not cover a subsequent period identified by Mr Bowden. It was conceded by Mr Grant and Mr Hull that the increase was deferred from 1 September to 31 November 2000.

32.

Apart from the two letters referred to no other documents had been disclosed in relation to paragraph 1.3 of the order (see second paragraph of Denton Wilde Sapte’s letter to Solnick& Co dated 27 September 2004). As I have explained the retainer letter did not make any reference to increasing rates. Mr Bowden has identified errors in the hourly charging rates only some of which have been rectified. I consider it is inherently unlikely that no record apparently exists about the increase in hourly rates either in a letter or in a file attendance note or in a computer recorded attendance note. In the circumstances where:

(a)

the increase was deferred for three months;

(b)

the last increase was by £50 per hour for a partner and £30 per hour for an assistant solicitor; and

(c)

the absence of profit costs billing between 1 August 2001 and 16 January 2002;

sufficient doubt must arise requiring evidence to support the increase in the absence of contemporaneous written records and potential breach of the indemnity principle.”

Finally, in this connection, I need to refer to the witness statement made by Mr Fairbairn on 19 November 2004, which is referred to in paragraph 17 above. That witness statement was sworn in connection with the Berber assessment but Master Seager-Berry refused to read it or take it into account because he said it had been filed too late. However it is now an agreed document in this assessment and I think it is important that the relevant paragraphs of it are set out in this judgment.

It was made in connection with a submission being made in the Berber assessment by Mr Bowden who was instructed (though not by MDR but by Solnick & Co) that the relationship between DWS and Dr Hayek had irreparably broken down and that DWS required Dr Hayek to appeal against the judgment of Evans-Lombe J simply in order to finance the sums which he owed to DWS in respect of bills rendered prior to that date.

Paragraphs 6 to 11 of that witness statement read as follows:

“6.

This firm’s debt recovery department only gets involved in recovering costs from clients very much as a last resort. Our approach to try and persuade clients who have not paid to settle matters by negotiation and this is usually done best by the partner responsible for the clients’ individual matter or matters. This matter was first reported to me after John Hull, in conjunction with another partner, Simon Levine (John Hull’s head of department) had attempted to recover costs from Dr Hayek. They had a meeting with Dr Hayek in April 2003. I have spoken to John Hull about that meeting and have also seen correspondence relating to it. The thrust of that meeting was that John Hull was expecting Dr Hayek to make substantial payments on account of costs in consideration of which we would proceed further with recovery of costs from Mr Berber who was thought to be (as appears to be the case) the only one of the Claimants who is in a position to settle the costs ordered. At about that time, Dr Hayek told my firm that he expected to obtain substantial funding from external investors to his company. Further, he represented that his company was in the process of obtaining substantial orders for his RTX machine.

7.

Unfortunately, the meeting with Dr Hayek and the representations he made prompted a bad tempered letter from Dr Hayek’s daughter which made a number of allegations against Denton Wilde Sapte and John Hull personally regarding the way in which the injunction action had been conducted. I do not think it is helpful to go into those allegations. Suffice it to say that in my opinion and on the basis of what I have seen of this matter, the allegations are unwarranted and ill considered. Particularly so since Dr Hayek had been wholly successful in the action.

8.

This exchange of correspondence led to a complete breakdown in the relationship between John Hull and Dr Hayek which, in part, explains the inactivity in this matter from that date on.

9.

The papers were referred to me and I was asked to take steps to recover costs from Dr Hayek. I was, and am, optimistic about the chances of being able to recover costs from Dr Hayek. I know very little about his income position but he does appear to have substantial assets. He is the sole proprietor of a substantial house in Hendon (10 Downage, London NW4) which, I am told by John Hull, was purchased by Dr Hayek in April 1992 for around £500,000. No professional valuation of this property has been undertaken and John Hull believes it is probably worth in excess of £1m and I note that Dr Hayek completed a witness statement in the action (in March 2002) in which he said the same thing.

10.

I am also told that, as a result of a decision of the Court in Israel, involving Dr Hayek’s sister and his brother Samuel, a declaration has been made to the effect that Dr Hayek has an interest in other substantial capital assets in the United Kingdom. That property is an office building at 9 Borroughs Gardens, Hendon, London NW4 4AU. I understand that the effect of the Israeli judgment is that Dr Hayek is entitled not only to 40% of Boroughts Gardens itself, but also 40% of the rental income from that property earned in recent years by his sister.

11.

Finally, Dr Hayek also has an interest in Medivent Limited (and particularly in its intellectual property rights) which is a trading company dealing in medical equipment. The fact that Dr Hayek has these various property and business interests led me to conclude that there was a very good chance that if we took steps to recover costs, and obtained judgment against Dr Hayek, that we would be able to enforce that judgment. There are, of course, no guarantees but I am of the view that proceeding to recover costs from Dr Hayek would be anything but a lost cause.”

Mr Bowden’s starting point, and indeed finishing point, was that the relevant paragraph in the letter of 10 May 2000 concluded the contract between the parties and prevents the Receiving Parties from recovering a higher sum by way of higher rates than those specified in paragraph 5, that is to say £350 for Mr Hull and £150 for Miss Fowler and any of the other assistant solicitors who replaced her.

He rightly points out that the words that one would expect to find in a retainer letter of this sort reserving the right to increase rates either at regular intervals or on notification to the client, are significantly missing from the document.

He took me to dicta from a number of reported cases which in his view supported his submission that for there to be an increase or increases such as are sought in this case there has to be on the part of the client “informed consent” and such “informed consent” cannot be found in any document, nor should it be inferred from any document that I was referred to, many of which I have quoted earlier in this judgment.

Mr Bowden derives the phrase “informed consent” from the case of MacDougall v Boote Edgar Esterkin (a firm) [2001] 1 Costs LR 118.

He first referred to the headnote to that case in the Costs Law Reports which reads:

“This is another in an increasingly lengthy list of cases in which solicitors had been unable to recover increases in their charging rates to their clients, because of a failure to give the clients sufficient information upon which he can make informed decisions. Although the case was decided under RSC order 62, it is thought that the principles enunciated would be equally applicable to a case under CPR.”

At that point I thought it appropriate to “declare an interest” in that I am one of the two joint editors of Costs Law Reports and although I cannot precisely recollect it, it is probable that I am the author of that particular headnote.

However, like all headnotes in Costs Law Reports, it is simply a short summary of what I or my co-editor considered to be the point decided in the case justifying its inclusion in the Reports and quite clearly it is to the judgment itself one has to go to find out whether or not it is authority for the proposition stated in the headnote.

After setting out the background to the dispute the Judge in that case, Holland J, who was sitting with Master Wright and Mr Cowan as assessors, on an appeal from the late Master Pollard, said this in paragraph 8:

“8.

Turning to my own role I have had initially to define the nature of my review, aided by helpful submissions of Mr Mark Turner QC for the Applicants and Mr Brian Leveson QC for the solicitors. My first conclusion is that what I am concerned with is not just the charging rate sought by the solicitors, but that charging rate as applied uniformly to the hours of Mr Barron: 806 as claimed, some 700 as taxed, with some 596 having accrued by the meeting of the 4^th August 1992. As it seems to me, if there was client approval of that rate as uniformly applied to those hours then a presumption is raised for the purposes of r.15(2) sufficient to displace indemnity taxation of that item – whether that is a presumption under 15(2)(a) or (b) may be difficult to say but matters not. My further conclusion is that the quality of the approval has to be such as to raise a presumption. In the course of argument I talked of ‘informed’ approval and even with reflection I adhere to that concept. To rely on the Applicants’ approval the solicitor must satisfy me that it was secured following a full and fair exposition of the factors relevant to it so that the Applicants, lay persons as they are, can reasonably be bound by it. What if I uphold Master Pollard’s finding in favour of a presumption? I have no doubt but that then his taxation of this item has to be upheld. True, I accept the submission that the 1986 change from the terms of Order 62 r.29 to the already cited Order 62 r.15(2) served to leave any such presumption rebuttable, but I can conceive of no basis for rebuttal when and if I am satisfied of informed approval. What if I reject the finding of Master Pollard? The answer has to be taxation of this item on an indemnity basis as assisted by my assessors. Finally, before turning to the facts, I remind myself that I am bound by the findings of primary fact made by Master Pollard, all as set out earlier in this judgment; the inferences to be drawn from such as susceptible to my review. I should add that at the outset of the hearing Mr Turner indicated that there was no appeal against those findings of fact.”

After enunciating that principle, Holland J went on to consider the evidence which Master Pollard had considered in paragraphs 11 to 15 of his judgment and then concluded in paragraph 10:

“10.

On behalf of the Applicants, Mr Turner submits that foregoing was inadequate to make the approval relied upon “informed”; Mr Leveson makes a contrary submission, praying additionally in aid Master Pollard’s findings that Mr MacDougall was a businessman of some experience and that there was available to him independent advice from an accountant, Mr Morris – albeit that the latter was not at the crucial meeting. For my part I am entirely satisfied that that which was imparted to the Applicants was inadequate to make their approval ‘informed’...”

Mr Bowden also relied on the Court of Appeal decision in General of Berne Insurance Co v Jardine Re-insurance Management Ltd reported at [1998] 2 All ER 301. That of course is the so-called “global cap” case and laid down the principle that in deciding if there has been a breach of the indemnity principle each individual section of the Receiving Parties’ bill has to be scrutinised to see if there is a breach rather than taking the whole bill as a whole.

This was based on the court’s interpretation of s.60 Solicitors Act 1974. The headnote reads in part:

“Thus 60(3) has to be applied, where appropriate, on an item by item basis and does not provide a global cap. Thus where the agreement provides for a solicitor to be remunerated by reference to an hourly rate s.60(3) precludes the recovery of uplifted hourly rates which exceed those agreed.”

It was further submitted by Mr Bowden that the more recent Court of Appeal decision in Garrett v Halton Borough Council [2006] 5 Costs LR 798; [2006] EWCA Civ 1017, and, in particular, paragraphs 35 and 36 support that contention.

That case of course dealt with a CFA but the Court referred in paragraph 35 with apparent approval to a submission made by Mr Morgan QC on behalf of the Respondent Garrett when he said:

“35.

As Mr Morgan points out, the enforceability of a CFA (like any other contract) should, as a matter of principle, be capable of being determined as at the date that it is made. Otherwise, its enforceability may change during the lifetime of the contract, thus making the contractual position between solicitor and client uncertain from day to day, according to whether, at the point in time when the issue is being considered, it can be shown that the client has or has not suffered detriment as a result of the breach.”

Mr Drabble QC on behalf of the Law Society seemed to accept that principle but said that the CFA was a recognised exception thereto:

“36.

Mr Drabble acknowledges that the enforceability of a contract is usually determinable as at the date of the making of the contract. But he submits that the unusual features of this statutory scheme are such that this general rule does not apply here. In particular, he relies on the fact that a CFA is not a typical bi-partite agreement …”

Mr Bowden then contended that the case of Wong v Vizzards (a firm) [1997] 2 Costs LR 46 confirmed that this was the recommended Law Society Practice, namely that the client should be given advice as to increases before they take effect.

Finally, by reference to the authorities Mr Bowden took me to the case of Cox v MGN Ltd [2006] 5 Costs LR 764; [2006] EWHC 1235 (QB) which was authority 23 in the bundle of authorities.

That case too, concerned disputes arising out of a CFA and dealt with a number of issues. The relevant issue so far as its applicability to this case is the last issue, namely the increases in hourly rates which were claimed by Schillings on behalf of the claimant under the CFA.

The relevant paragraphs are 73, 74 and 77 to 83, which I set out below:

“73.

Finally, I must consider whether Schillings are entitled to claim for the periodic increases in hourly rates. This is essentially a matter of construing the contractual obligations as between Schillings and their clients. Was there a right under the original retainer, or under some subsequent contractual arrangement, to impose liability to pay increased hourly rates?

74.

In the letter notifying the clients, it was described as “a procedural formality for your records”. This is a curious, if disarming, form of words. The relevant clause in the CFA states “[Basic charges] are calculated for each hour engaged on your matter from now until the review date of which we shall notify you.”

…

77.

The Master was prepared to allow for a degree of flexibility in Schillings’ favour. For this reason, it is argued, they are not on strong ground in seeking to overturn the Master’s ruling so as to claim the right to more than one increase in hourly rates (and indeed percentages said to range from 11% to 23%). It would be necessary to show that such significant, unheralded and retrospective changes were consistent with the relevant Regulation.

78.

The ‘procedural formality’ formulation rather suggests that it is permissible in a CFA case effectively to by-pass the contractual process of agreeing fees between solicitor and client for the reason that the other side is likely to be paying. On the present law, however, that would clearly not be correct. The fees are required to be agreed with the client in the conventional way. What that involves is a need for the client’s informed approval: see e.g. MacDougall v Boote Edgar Esterkin [2001] 1 Costs LR 118.

79.

What was said on Schillings’ behalf was broadly as follows. The contract conferred on them an express right to review their charges. Moreover, that right extends to multiple reviews and the revised rates, following each and every such review, would be binding on the client even when notified after the event. The words ‘review date’ should not be construed as signifying only one date, but are sufficiently broad to embrace periodic reviews. It would be up to the solicitor to decide how many reviews there should be and at what intervals. The natural reading of the words (it is said) would be that notification to the clients ‘must inevitably be retrospective because the solicitor has to make the decision before there is anything to tell the client’. There would be no need for a ‘discursive exchange between solicitor and client’, and it would not be unusual for a solicitor to be entitled to make a unilateral decision about rates.

80.

In other words, the clients must pay what they are told without any chance to be consulted or to object. It thus appears to be the Schillings stance that the unilateral decision by the solicitor to charge the clients what he likes, and to keep them in the dark for months about what they are being charged, should be regarded as a ‘procedural formality’. So much for transparency. I do not see how this could be consistent with the wording of the regulation cited above.

81.

It is conceded, on the other hand, that there would be, by implication in the contract, a term that frequency of reviews and any increases should be subject to a ‘reasonableness’ test. The absence of an express ‘reasonableness’ test would only be critical if the clients were materially prejudiced by its omission: Hollins v Russell [2003] EWCA Civ 718, [2003] 4 All ER 590. In the case of a CFA, it is said, there would be no detriment because the clients would not have to pay.

82.

This argument again brings into play the public policy concerns expressed by Lord Bingham in the House of Lords in Callery v Gray at 5:

‘One possible abuse was that lawyers would be willing to act for Claimants on a conditional fee basis but would charge excessive fees for their basic costs, knowing that their own client would not have to pay them and that the burden would in all probability fall on the defendant or his liability insurers. With this expectation the Claimant’s lawyers would have no incentive to moderate their charges.’”

83.

It can thus be seen that Schillings’ line of reasoning is to an extent flawed. Much of their argument, which I have attempted to summarise above, is predicated upon the proposition that charges in a CFA case are arrived at on a contractual basis like in any other case, but this is shown to be something of a fiction at the final hurdle because the analogy breaks down. An extraneous element is introduced in judging ‘prejudice’ or ‘detriment’ to the client; namely, that some third party is going to pay – not the client.”

Having referred me to what he considered to be the relevant authorities Mr Bowden then took me to some of the bills, and in particular that of 31 July 2000, which was billed at the contractually agreed rates of £350 and £150 per hour. His analysis of subsequent bills is that Mr Hull’s rate did not go up until 1 September 2001 but that the fee earners who took over from Miss Fowler were introduced at a higher rate than she was charging.

In particular, he pointed out that the increased rate for Neville Cordell was only notified to the client after the Court of Appeal hearing when the Receiving Parties were successful.

Finally, in his submissions Mr Bowden submitted that the three witness statements of Dr Hayek, Mr Hull and Mr Fairbairn did not lie particularly well together and certainly did not support the submissions made in the Receiving Parties’ skeleton that Dr Hayek had inferentially agreed to an increase in the rates.

In particular he referred to paragraph 5 of Dr Hayek’s statement and commented that there was no reference at all to any specific meeting or any document at which increases in the rate were put to him. It is all vague and inferential.

Similarly, with regard to Mr Hull’s witness statement, he said that if there were any documents or attendance notes, or indeed any other material upon which Mr Hull could have relied, surely he would have done so, but there is no such reference in the witness statement.

He considered this particularly strange because either Mr Hull or Mr Fairbairn would have drafted the witness statements of Dr Hayek and of Mr Hull at the same time, as is clear from their dates, and it would have been so easy for either of the makers of those witness statements to have been much more specific and positive than they actually were.

In conclusion, Mr Bowden submitted that the contractual position was as set out in the 10 May 2000 letter as accepted by Dr Hayek on behalf of Medivent shortly afterwards and that there was nothing in the disclosed material from which I could reasonably infer that Dr Hayek had accepted by inference the increased rates which undoubtedly were charged to him in the bills sent, and which could only be deduced by going through the relevant printouts with a calculator.

Mr Fairbairn opened his submissions by suggesting that the point which had taken so long to argue was not actually covered by the points of dispute put in on behalf of the Paying Party but I think that he ultimately accepted that the matter was fully canvassed in Mr Bowden’s skeleton argument at paragraphs 3.9 to 3.22 and so I need not take that point any further.

Next, Mr Fairbairn argued that to submit. as he thought Mr Bowden had submitted, that there was some binding finding from Master Seager-Berry in the Berber assessment which bound me to find in his favour was wrong. I think the quotations from the draft and final judgment of Master Seager-Berry on this point do support Mr Fairbairn’s argument and do show that there was no concluded finding by Master Seager-Berry in that case which would be binding on me.

Accordingly, I leave for argument on another occasion (should it arise) whether, if there were such evidence, it would be strictly binding on me, since these are technically different assessment proceedings from those which were conducted by Master Seager-Berry.

However, as I have indicated, the point is academic because Mr Bowden accepted that there is no concluded finding from Master Seager-Berry. The highest he can put it is that Master Seager-Berry indicated that the Receiving Party in that case, the same as in this case, had to put in further evidence to the Master as to any variations there may have been.

Once that evidence was submitted it would be for the Master concerned to make a decision as to whether to put the Paying Party to its election under CPD 40.14.

Although in that case that did not happen, in this case Mr Fairbairn did seek to put in some additional documents which were clearly privileged. The matter arose towards the end of one day of the hearing and before the documents were produced. I therefore suggested to Mr Fairbairn that he should find out over the overnight adjournment whether his client would be willing to waive privilege in respect of those documents, as there was no point in my looking at them until I knew what the Receiving Parties’ decision would be in that respect.

Accordingly, having presumably done this, the following morning Mr Fairbairn produced a small clip of additional documents which he suggested supported his contention that Dr Hayek was aware of the increases in the hourly rates and had implicitly approved them.

The documents in question consisted primarily of correspondence in the form of faxes or e-mails between DFS and Dr Hayek, though they included a detailed attendance note of a hearing before Master Moncaster in the Chancery Division on 15 March 2002.

Having considered those documents I put Mr Fairbairn to his election, pursuat to CPD 40.14, saying that he must disclose them to Mr Bowden should he seek to rely on them and he agreed to do that. Copies were therefore given to Mr Bowden, who was given an opportunity to consider them before we proceeded, and Mr Bowden dealt with them in his submissions in reply.

I considered those documents afresh in the light of the submissions made to me but do not think that, with one exception, they take the case very much further. The exception is a schedule of costs for the hearing before Master Moncaster which disclosed an hourly rate and which it was said may have been shown or sent to Dr Hayek.

Mr Fairbairn did make two concessions. One was that the law is plain that before an increase could be enforced against a client, even if it was said that he had impliedly consented, he had to be notified and certainly in respect of one bill at least the work was down to July in one year but the bill was not delivered until September of the following year, and Mr Fairbairn accepted that he could not claim the increase other than prospectively from the date when the bill was delivered.

Secondly, Mr Fairbairn conceded that there were no documents that explicitly spelt out to Dr Hayek the fact that there was, or had been, an increase in the rates, let alone a document specifying what those increased rates were or were going to be.

Mr Fairbairn devoted a considerable time during the course of his submissions on the judgments of Master Seager-Berry and to trying to satisfy me that these were not binding, but, as I have indicated, Mr Bowden accepted that they were not binding and to that extent those submissions were unnecessary.

Mr Fairbairn then turned to the law, dealing first with the case of Wong v Vizzards. He made the point that that was a dispute between a solicitor and his client and that there was a very big distinction to be drawn between that case and this case, which relates to a between the parties assessment.

In particular, Mr Fairbairn referred to and relied on a paragraph on page 47 of the judgment under objection No.1 which reads:

“An attendance note of Vizzards dated 7 June 1991 recorded that Mr Wong had been told that he would be charged hourly rates of £110 for Mr Ryan and £125 for a partner’s time, both rates to be subject to review. The Deputy Master said that he did not find it surprising or unreasonable that the rates should have gone up in November 1993.”

It is clearly the words “ … he did not find it surprising or unreasonable that the rates should have gone up …” that Mr Fairbairn particularly relied upon.

Mr Fairbairn then turned to the case of MacDougall v Boote Edgar Esterkin and submitted that the doctrine of “informed consent” whilst it might well be applicable in the case of disputes as between solicitor and his own client, was not to be applied to the sort of situation with which this case was concerned, namely a between the parties assessment.

I was next taken by Mr Fairbairn to the case of Cox v MGM and reminded, quite properly, that this was a CFA case and it seemed to be suggested that different considerations apply to CFA cases and that the ordinary contractual principles are in some way suspended and that one should not place much, if any, weight on what Eady J said in that case.

Mr Fairbairn then referred me to a case which had not been referred to by Mr Bowden but which is in the agreed bundle of authorities, namely Hazlett v Sefton Borough Council which is reported at [2000] 4 All ER 887 and [2001] 1 Costs LR 89.

Mr Fairbairn suggested that that case showed that there had to be a “genuine issue” as otherwise the presumption that a person was liable for his solicitor’s costs would be operative and there had to be strong evidence to rebut that presumption.

I was then taken on an extended tour of s.59 and s.60 of the Solicitors Act with the wording of both sections being very carefully analysed by Mr Fairbairn to support his contention that just because a retainer was incorporated into what could be classified as a contentious business agreement did not mean that it was “set in stone”. It could be varied, and it could be varied orally or by implication as he strongly contended had happened in this case.

I was next taken by Mr Fairbairn to a careful analysis of the facts and the documents. Mr Fairbairn started by saying that if and insofar as Mr Bowden had been suggesting that the Receiving Parties were seeking to establish a right to increase rates retrospectively this was certainly not correct.

He also sought to persuade me that the relationship between Dr Hayek and DWS had not broken down. What had broken down was the relationship between Dr Hayek and Mr Hull, which was why he, Mr Fairbairn, became involved in the case and was responsible for conducting the s.51 proceedings.

Further, he submitted that it was wrong to suggest as Mr Bowden had that Dr Hayek had “run out of money” and therefore “did not have to pay”. He referred to his own witness statement (see paragraphs 24 - 26 above) which he contended made it clear that Dr Hayek remained liable to DWS for their costs even though no steps were being taken at that stage to enforce payment by him.

With regard to the retainer letter, that of 10 May 2000 and the criticisms made by Mr Bowden that DWS had not billed Dr Hayek regularly as that letter said they would, were misplaced.

He pointed out that once a bill was delivered VAT would become payable on it and there was therefore no earthly purpose in sending a bill which would immediately result in liability to VAT to the Revenue if there was no immediate prospect of the client paying that bill.

Mr Fairbairn further contended that the reason that Dr Hayek was unable to pay the bills was in large measure due to the failure by Samuel Hayek to comply with orders of the Israeli Courts, where parallel litigation was proceeding, requiring payments by Mr Samuel Hayek to him.

Next, I was given a detailed analysis of some of the bills. Mr Fairbairn demonstrated that in many cases there had been a substantial write-down of time against what on the face of the time sheets and DWS’s computer printout could legitimately be charged to Dr Hayek.

He submitted that was a perfectly legitimate and reasonable way for a commercial partner to deal with a valued client.

Insofar as there appeared on the face of the documents to be some confusion as to rates being charged, Mr Denis Grant, the costs draftsman who accompanied Mr Fairbairn, sought to explain to me orally what had happened.

I stopped him from doing this because it seemed to me that in a case of this nature, where no order for cross-examination of witnesses has been made or even applied for, it cannot be right to allow someone who may well have first hand knowledge, to submit that at the detailed assessment hearing without the other side having the opportunity to consider in advance in the form of a witness statement what is being said and to challenge it in cross-examination.

Mr Fairbairn suggested that perhaps on one or two occasions what Mr Hull may have done was to artificially reduce his hourly rate so as to give Dr Hayek the credit as it were against the sum which would otherwise be payable which he felt was appropriate and which he normally dealt with by way of writing off sometimes quite substantial amounts of recorded time.

Mr Fairbairn suggested that it would not need very much work for Dr Hayek to discover that in fact hourly rates had gone up between one bill and a later one.

With regard to the other fee earners who were introduced and the suggestion that their costs should be “capped” at the same level as Miss Fowler’s, Mr Fairbairn insisted that this was misplaced.

Quite apart from the fact that bills and printouts were sent indicating the names of those additional fee earners and the rates at which they were being charged, Dr Hayek would, and did, see these fee earners on numerous occasions and could readily ascertain or infer that they were more experienced, because they were clearly older than Miss Fowler.

With regard to the witness statements made by Dr Hayek and Mr Hull in the Berber assessment proceedings, he pointed out that the latter was directed to the indemnity point and not specifically to the hourly rate point, and he did not accept that there was any necessary inconsistency between the two witness statements, nor indeed between them and those of Mr Fairbairn himself.

On the third morning of the hearing, Mr Fairbairn produced a small bundle of additional documents to the court. These included a letter from DWS to Dr Hayek dated 14 May 2001, and a subsequent attendance note. The letter attached the second document at tab 10 of the agreed bundle which of course indicates on page 11 a rate for the senior assistant of £325 per hour. The attendance note suggested that Dr Hayek had considered that estimate. As indicated at the time I did not consider that DWS should be put to their election over those documents. Mr Bowden accepted that the letter passed the document at tab 10 to the client.

Finally, Mr Fairbairn dealt briefly with the possibility that Dr Hayek would be estopped from denying the increase in rates which had been applied to the later bills and in that respect referred to one case in the bundle of authorities, namely Hazell v Aktar [2001] EWCA Civ 1883. He relied on the headnote to that case, part of which reads:

“When considering the whole history of rent payments under the lease it was necessary to take into account the fact that the tenants’ conduct as regards the payment of rent was acceptable to the previous landlords and agents who had, on the evidence, assented to the practice of slightly late payments by cheque. That did not amount to a variation of the terms of the lease, but it did mean that the landlords were, in legal electable terms, estopped from insisting that the tenant should revert to strict compliance with the lease unless they gave reasonable notice to that effect. It followed that the defendants as assignees of the landlords’ interest were subject to the same restraint. The relevant enquiry was, therefore, whether the defendants through new agents had given such notice and whether the tenants’ conduct could be described as ‘persistent’ disregard of the rent obligation after that notice was given …”

Mr Bowden replied briefly to the submissions made by Mr Fairbairn emphasizing that despite the latter’s best efforts he had not been able to produce any evidence to show explicitly that Dr Zamir Hayek had agreed to the higher rates.

He pointed out that it would have been very easy for Mr Hull to have made that point if it was indeed correct, or indeed for Dr Hayek himself to have been more explicit than he was, and accordingly he asked me to draw the inevitable conclusion that there simply was no direct evidence of any increase in rates being directly communicated to Dr Hayek.

I accept Mr Bowden’s submission that at heart this is a contractual point and that the starting point of a contract clearly must be the retainer letter.

That letter clearly indicates that there is a fixed hourly rate for Mr Hull and for Miss Fowler. There is no reservation, as there should have been, to raise rates on an annual, monthly or any other periodic basis, which might well have been sufficient even if that part of the letter had not been explicitly acknowledged.

As to the other documents to which I have been referred I have come to the conclusion that none of them is conclusive in favour of the Receiving Parties’ submissions.

I accept that Dr Hayek could, with the help of a calculator, have gone through the printouts attached to the bills and ascertained that the rates had increased.

However, there is absolutely no evidence that he did do that and his witness statement, whilst it may be an exaggeration to describe it as “self serving”, certainly does not begin to fill in the gap which is necessary for the Receiving parties to get home on this point.

Also I consider that Mr Bowden’s case citations are in point and that there should have been something given to Dr Hayek upon which he could give his “informed consent” to the increase and there simply is no evidence of that at any point.

Even Mr Hull, who was the partner conducting the litigation who would have been in perhaps an even stronger position than Dr Hayek himself, was not prepared to say that there were explicit communications with Dr Hayek at which the latter agreed that there should be increases in the rates.

Accordingly I come to the conclusion that the Receiving Parties are bound by way of cap with the rates of £350 per hour for Mr Hull and £150 per hour for Miss Fowler.

Since that decision is based on the contractual position the fact that the retainer letter envisages that other fee earners might well, as indeed happened, become involved in the case is not sufficient to justify them being charged at a higher rate. There is certainly no evidence that any of the other fee earners’ rates were ever put explicitly to Dr Hayek for agreement.

Accordingly I consider that so far as those fee earners are concerned, that is all fee earners below partner level, their hourly rate must be capped at £150 per hour.

The hourly rates claimed by the Receiving Party are helpfully set out in tabular form in paragraph 3.1 of Mr Bowden’s skeleton, which I set out below:

Mr Bowden properly reminded me that where historic costs are assessed there is an inbuilt danger that knowledge of subsequently increased rates may subconsciously cause the Costs Judge to increase the rates which would have been allowed had the bills been assessed shortly after the period which they covered rather than for six or more years later, as is actually happening in this case. He reminded me of the sort of rates that were being allowed for that sort of work in cases such as in re a Company and KPG Peat Marwick in 2000 and submitted that the cap apart the rates claimed for work done by the Receiving Parties up to 2001 would not have been allowed at the rates claimed on the basis of the then accepted going rates in assessments.

Mr Bowden says in paragraph 3.2 of his skeleton:

“The time period in question for the injunction proceedings is March 2001 to March 2002 and for the Patent proceedings March 2001 to April 2002. The appeal was ongoing from April 2002 until October 2002. The hourly rates claimed are more akin to those being claimed and allowed in 2007-8 rather than 2001-2.”

Mr Bowden then sets out the guideline hourly rates for 2000 to 2001 and makes the point at paragraph 3.4 of his skeleton that the hourly rates claimed are significantly in excess of those agreed and charged by MDR, which were £265 for the partner, £160 for the solicitor, and £85 for a trainee.

Accordingly, Mr Bowden submitted that the appropriate hourly rates to be allowed should be £250 for a partner, £150 for a solicitor and £100 for a trainee for those proceedings.

With regard to the S.51 proceedings, these were conducted by Mr Fairbairn from the Milton Keynes office of DWS and he therefore suggested that Milton Keynes’ rates should be applicable.

He also submitted that the rates claimed were too high because there was nothing complicated about the S.51 proceedings.

Accordingly he offered £165 for the partner, £115 for the assistant with the trainee rates agreed, for the s.51 proceedings.

Under questioning from me Mr Bowden said that he did not suggest any increases to any of these rates because the cases were ongoing, but accepted that my decision as to increases might well be coloured by my decision on the “cap” point.

In his submissions Mr Fairbairn drew my attention to the case of Higgs v Camden & Islington Health Authority [2003] 2 Costs LR 211, [2003]EWHC 15 (QB). I am fairly familiar with that case because it was an appeal from a decision of mine to Fulford J. In that case I had decided that for a very difficult clinical negligence case a senior partner in a firm in Central London was entitled to charge at the rate of £350 per hour work done at approximately the same period as the work done in this case. I also, by way of check only, applied the old A + B test and came to the conclusion that my initial feeling that the rate was appropriate was confirmed.

In his judgment, Fulford J carefully analysed the conflicting arguments and came to the conclusion that I was “not wrong”.

I was then taken by Mr Fairbairn to the so-called “seven pillars of wisdom” (though there are now only six), set out in paragraph CPR 45.5, and sought to establish that on all, or at any rate, most of those heads, this was indeed a very serious and important case from the point of view of Dr Hayek, perhaps more serious and important than it was to the claimants and therefore that had to be put into the balance and was very much in his favour for allowing higher rates.

Finally, Mr Fairbairn sought to deploy an argument which involved producing some very detailed figures in respect of his firm’s overheads and profitability, both in the London office and in the Milton Keynes office. It appears that this was an attempt to come within the parameters of the decision of Buckley J in Jones v Secretary of State for Wales [1997] 2 All ER 507, which coincidentally is another case in which I was involved because I was sitting as the Master Assessor with the Judge on that occasion.

It would be quite improper for me to set out any of these figures in this judgment in any event because they are to an extent confidential. Although apparently previously disclosed to Mr Bowden (but not to the court) they were updated during the course of the hearing and an explanation of the figures was only given on the second day of the hearing. I had much sympathy with Mr Bowden’s submission that these figures and calculations raised as many questions as answers.

However, so far as reliance on that case is concerned, Mr Bowden relied on the headnote to the All England Report of Jones which starts:

“HELD. WHERE A PROVINCIAL FIRM OF SOLICITORS carried out specialised work which could not reasonably have been handled by local firms, a taxation of costs made in relation to its work could be calculated at a higher hourly rate than the local average and in such circumstances costs would be reasonably incurred and therefore allowable under RSC Order 62 Rule 12. Moreover, where a solicitor wished to challenge the fixed rate applied in any area, or to make it a special case for a higher rate he should be required to produce evidence of overheads incurred and matters relating to his solicitor’s skill and expertise could properly be considered in the percentage mark up and not in the hourly rate.”

(The bold capitalisation is mine and not in the original.)

Mr Bowden’s simple point was that DWS never has been, nor claimed to be, a provincial firm and therefore the figures which Mr Fairbairn deployed on their behalf are irrelevant.

As to the suggestion that the S.51 proceedings should be allowed at Milton Keynes rates, (a) because the work was carried out in Milton Keynes, but (b) because it was straightforward and simple, Mr Fairbairn suggested that neither proposition should be accepted. Although he was based in Milton Keynes the work which he was doing in connection with the S.51 proceedings was highly complex and would easily have justified a Central London firm dealing with it, as indeed happened with Messrs MDR on behalf of his opponents.

I was also referred to the attendance note of the hearing before Master Moncaster in March 2002 when deciding the security of costs application. He suggested that this judgment indicated that someone experienced in these matters at the relevant time (March 2002) had as it were set a figure which he considered to be a reasonable figure for MDR’s costs and there was no reason why DWS should not be awarded similar rates.

Mr Fairbairn also submitted that the guide line rates offered by Mr Bowden were hopelessly inadequate for litigation of this nature.

I consider that the hourly rates offered by Mr Bowden are far too low. The cases were very important to Dr Hayek and were conducted appropriately. Nor do I consider that the S.51 proceedings were as simple and straightforward as has been suggested by Mr Bowden, nor that much discount should be made for the fact that those proceedings were actually conducted from the Milton Keynes office.

Were it not for the “cap” decision which I have reached and set out earlier in this judgment, I would have allowed the injunction proceedings for the partner in London £350 for the period up to 31 August 2001 and £375 for the period from 1 September 2001. I would have allowed £375 for the partner in the Patent proceedings from 1 June 2001 – 31 August 2001. For the appeal proceedings I would have allowed £375 for a partner throughout.

Similarly, for the S.51 proceedings I would have allowed £375 for the partner in London and up to £350 for the partner at Milton Keynes, although of course lower rates were quoted in the client care letter of 10 March 2005, and correctly recited in the table in paragraph 103.

The assistant solicitor rates seem to me to be in all cases about 10 per cent higher than would be reasonable but for the cap and the trainee rates seem to be properly charged at the claimed figures, because these are not expressly dealt with in the retainer letter.

However, my decision on the operation of the cap means that the Receiving Party is restricted to £350 for all work done by the partners in the matter and to £150 to all work done by other fee earners.

The only exception to that of course is the work claimed at £312.50 in the Patent action to 31 May 2001 which is allowed at the rate claimed, even though that figure may well be a mistake. That mistake will have been caused by Mr Hull deciding to reduce the liability of the client, not by reference to writing off time, but by reducing the hourly rate. However, whatever the reason that is the rate claimed and the receiving parties are bound by it.

This deals with all the points raised under the preliminary issue “hourly rates”. Although when this judgment is formally handed down I will obviously hear any submissions that may be made as to costs, my present feeling is that this is only one of a number of preliminary issues that needs to be resolved before the detailed assessment can take place, and that it would be wrong to make a discrete order in respect of costs of this particular issue, even though it did occupy the best part of three days, at this stage.