Appeal Case No: QB/2015/0247
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM THE SENIOR COURTS COSTS OFFICE
MASTER SIMONS
Royal Courts of Justice
Strand, London, WC2A 2LL
Before:
THE HON. MRS JUSTICE PATTERSON DBE
Sitting with Assessor Master O’Hare
Between :
ROSHAN GHISING | Claimant/ Appellant |
- and - | |
SECRETARY OF STATE FOR THE HOME DEPARTMENT | Defendant/ Respondent |
David Holland QC and Christopher Jacobs (instructed by Howe & Co) for the Claimant/Appellant
Paul Joseph (instructed by Government Legal Department) for the Defendant/Respondent
Hearing date: 11 December 2015
Judgment
Mrs Justice Patterson:
This is an appeal against a decision of Master Simons, Costs Judge, on 6 May 2015. At a costs assessment on that day he determined that:
The claimant was entitled to retrospective recovery of base costs under Conditional Fee Agreements (CFAs) for both solicitors and counsel for work done before the CFAs were entered into;
The claimant was entitled to recover base costs and a success fee of 67% for work done from the date of the CFAs;
That the claimant was not allowed to recover any success fee for either solicitor or counsel for work done prior to the date of the CFAs.
This appeal is against (iii), the refusal in principle of a retrospective success fee for solicitors and counsel.
Factual Background
The appellant was one of multiple appellants involved in the case of R (Gurung & Others) v Secretary of State for the Home Department [2013] EWCA Civ 8. That appeal concerned the lawfulness of the refusal of entry clearance to dependant adult children of veterans of the Gurkha Brigade who had settled in the United Kingdom. The case was a test case heard in the Court of Appeal before the Master of the Rolls on 11 and 12 December 2012. The appellant was successful in his part of the appeal. The issue of the impact of the historic wrong on the balancing exercise to be performed under Article 8(2) European Convention on Human Rights was ordered to be remitted to the Upper Tribunal for reconsideration in accordance with the judgment of the Court of Appeal. By Order sealed on 14 February 2013 the Secretary of State was ordered to pay the appellant’s costs. The parties failed to agree on the question of quantum and the matter was eventually listed before Master Simons for assessment on 6 and 7 May 2015.
At that hearing Mr S Chaffe and Mr C Jacobs appeared on behalf of Mr Ghising and Mr Joseph appeared on behalf of the defendant. The costs claimed were from July 2012. Having exercised their devolved powers under their legal aid contract on 9 July 2012, on 12 July 2012 Mr Ghising’s solicitors made a full application to the Legal Services Commission for legal aid to cover Mr Ghising’s appeal. At the time Mr Ghising had no income and was entirely reliant upon his father who was then living in Nepal. Because of relevant time limits the application for legal aid had to be submitted within five days of 9 July 2012 which the solicitors did, with an explanatory letter explaining the position with regard to Mr Ghising’s father being his source of income. The application was refused on 2 August 2012 when the Legal Services Commission requested a resubmission with further documentation. That was done on 28 August 2012. After that the claimant’s solicitors chased the application by letter and telephone and had conversations with the Head of the National Immigration Team. The claimant’s solicitors believed that Mr Ghising qualified for legal aid.
By early October 2012 Mr Ghising’s solicitors were instructing counsel to draw up submissions to conjoin his appeal with others already listed for 11 and 12 December 2012. Mr Jacobs prepared those submissions which were then emailed to the defendant’s solicitors on 10 October 2012 for information. A formal application was made to the Court of Appeal shortly thereafter to link Mr Ghising’s appeal with those already listed.
On 26 November 2012 Mr Ghising’s solicitors were informed that their case had been linked with the others that were due to be heard in December 2012. By that time there had still been no decision from the Legal Services Commission.
A telephone call was then made by the claimant’s solicitors to the Legal Services Commission still in the hope of obtaining legal aid. A letter was written to Mr Ghising on 28 November 2012 which broached for the first time the prospect of a CFA if legal aid was not forthcoming or if no decision had been made on the pending application.
On 6 December 2012 Mr Ghising entered into a CFA with his solicitors, Howe & Co, which covered, “Work relating to the application for the High Court, Court of Appeal and/or the Supreme Court ensuing proceedings including any appeal and counter-claim.”
There was provision for a success fee in the sum equivalent to 100% of the normal rates for the time spent.
On 10 December 2012 a CFA was entered into between Howe & Co and Mr Jacobs. That included, in paragraph 2, that, “This agreement covers the costs of all work undertaken by Christopher Jacobs in respect of this matter, including all interlocutory matters from 28 August 2012.”
The agreement was to be in place until the appeal to the Court of Appeal and any appeal by the respondent had been won, lost or concluded or the agreement was terminated.
There was a further CFA with an earlier counsel, Mr O’Connor, who had been involved prior to Mr Jacobs. That is not relevant to the matters before the court.
The respondent, in accordance with the Practice Direction, was notified of the executed CFAs on the same day.
The Ruling of Master Simons
The Master began by defining the issue which he had to decide, namely, can success fees be applied in this case retrospectively. He referred to the decision of Christopher Clarke J (as he then was) in Birmingham City Council v Forde [2009] EWHC 12 (QB). He concluded that there was no reason of public policy why retrospective success fees should not be allowed but it was a matter for discretion in each and every case.
In the bill of costs before the Master all the success fess are claimed from dates before the CFAs were entered into.
The Master set out that he heard from Mr Jacobs who was representing himself and the receiving party and also Mr Enright, from Howe & Co, and that he was informed about the application made in July 2012 for public funding and only when it was apparent in December 2012 that public funding would not be forthcoming that CFAs were entered into. He recorded the submission of Mr Jacobs that there had been no prejudice to the paying party, that CFAs were entered into in December 2012 and as this case was always going to be defended it made no difference to the risk whether the CFAs were entered into in July 2012 or December 2012, the risk was still the same. The paying party would not have acted any differently had they had knowledge of the CFA earlier than December 2012 and the case went to a fundamental aspect of Government policy.
The Master determined the issue as follows:
“10. The main difficulty that I find with regard to retrospective success fees is one of risk assessment. Since the inception of CFAs, it has been a fundamental aspect of the success fee that they are assessed at the time that the CFAs were entered into without the benefit of hindsight. Mr Jacobs submits that it was the same risk in July as it was in December, but I do not accept that submission. In July 2012, Howe & Co had represented to the Legal Aid Board that the chances of success were between 60 and 80 per cent and, on 6 December 2012, Mr Jacobs had assessed the chance of winning at 65 per cent. Mr Jacobs also submitted that, following the very late service by the Secretary of State of the skeleton argument on 7 or 8 December, the issues raised therein made the case even more risky. It therefore seems to me that there was a different risk in July than there was in December.
11. It is not for this court to make its own assessment of the risks in July and December, especially in a case such as this where it seems to me that the risks were so different and this supports the view that the proper time to assess the risk is at the time of the entering into the CFA when one cannot use the benefit of hindsight and my judgment is that, in this particular case, these success fees should not be retrospective. The fact that the paying party may not have been prejudiced is not, in my judgment, a fundamental factor that has to be taken into account, it is just but one factor, but Mr Joseph makes a point that, although it is quite possible that the late service of the Notice of Funding would not have made any difference, the paying party had no opportunity to consider that position.”
Legal Background
In Birmingham City Council v Forde [2009] EWHC 12 (QB) Christopher Clarke J (as he then was) held:
“150. In respectful disagreement with Master Campbell and Master Hurst, I do not regard it as necessary to hold that a retrospective success fee is per se contrary to public policy. There is, in my view, insufficient warrant for effectively precluding solicitor and client from making such an agreement. In some, perhaps many, circumstances a retrospective success fee, or its amount, may be unreasonable, either as between the parties or as between solicitor and client. But this will not always be so. The Court has, in my opinion, enough weapons in its armoury, in the form of the criteria applicable on a detailed assessment and the provisions of the Costs Practice Direction and the Practice Direction on Protocols, to disallow or reduce retrospective fees that are unreasonable, as in this case.”
In Motto v Trafigura [2011] EWCA Civ 1150, when considering a detailed assessment of claimant’s costs under CPR Part 44, Lord Neuberger said at [133]:
“The role of this court, on an appeal from that assessment, is not whether we would have decided that a reasonable success fee was between 100% and 47%, averaging around 58%, but whether the Senior Costs Judge, when assessing that figure as a reasonable success fee, ignored or misunderstood relevant evidence, took irrelevant evidence into account, went wrong on any point of law, arithmetic or principle, or reached a conclusion which was plainly wrong.”
Section 11 of the Costs Practice Direction provided:
“11.4. Where a party has entered into a funding arrangement the costs claimed may, subject to rule 44.3B include an additional liability.
11.5. In deciding whether the costs claimed are reasonable and (on a standard basis assessment) proportionate, the court will consider the amount of any additional liability separately from the base costs.
…
11.7. When the court is considering the factors to be taken into account in assessing an additional liability, it will have regard to the facts and circumstances as they reasonably appeared to the solicitor or counsel when the funding arrangement was entered into and at the time of any variation of the arrangement.
11.8. (1) In deciding whether a percentage increase is reasonable relevant factors to be taken into account may include:
(a) the risk that the circumstances in which the costs, fees or expenses would be payable might or might not occur;
(b) the legal representative’s liability for any disbursements;
(c) what other methods of financing the costs were available to the receiving party.
(2) Omitted.”
The Parties’ Submissions
The Appellant
The appellant submits that it was reasonable for his legal advisers to enter into the CFAs when they did and for those CFAs to be retrospective in effect. They had been working in their client’s best interest from 6 July 2012 on an important test case on the assumption that legal aid would be forthcoming. The application made on 12 July 2012 was rejected because only copy documents had been supplied. It was resubmitted on 28 August 2012 since when the Legal Services Commission had been dilatory in its processes.
An application was made to conjoin Mr Ghising’s appeal with other test cases in October 2012 the outcome of which was not known until 26 November 2012. At that time there was a short preparation period until the substantive hearing listed to commence on 11 December 2012. It was only at the beginning of the substantive hearing that permission to appeal was granted to Mr Ghising. The situation here is a world away from cases where concern has been expressed about the risk of abuse flowing from the use of CFAs. The success fee element is to encourage solicitors to take such cases.
There is no dispute that after U v Liverpool City Council [2005] EWCA Civ 475 when a court has to assess the reasonableness of a success fee it must have regard to the facts and circumstances as they reasonably appear to the solicitor at the time when the CFA was entered into. Hindsight is not permitted.
When legal aid was applied for a legal opinion was provided in which the box indicating the chance of success as between 60 to 80% was ticked. When Mr Jacobs took over in late summer he wrote an opinion which estimated the chances of success at 65%. The only change that occurred was in late November 2012 when the hearing date was made known which did not effect the assessment of risk.
What the Master had to determine was whether to award a success fee as a matter of principle. His reasoning for that is contained in paragraphs 10 and 11 of his judgment. The wording, in particular of paragraph 11 and the first sentence, is not clear. If the Master is saying that he could not look back to July 2012 the Master was wrong. There was no basis for saying that there was a risk in July 2012 which was different to that which existed in December 2012.
There was no breach of the Costs Practice Direction. Had the appellant’s lawyers entered into CFAs at the outset of the appeal in July 2012 but failed to notify the respondent until just before the appeal hearing in December 2012 then they could have applied for relief from sanction. In those circumstances a major factor is the degree of prejudice that the paying party would have suffered. Here, the respondent suffered no prejudice. Although the Master referred to the paying party having no opportunity to consider his position, had the paying party done so that would have made no difference.
The Respondent
The respondent submits that it is common ground that the Master was involved in the exercise of his discretion, in an exercise that was fact sensitive and that there should be appropriate respect for the specialist jurisdiction of a Senior Costs Master. It was a standard basis assessment so that the burden initially was on the receiving party. If there was any doubt then the burden should be resolved in favour of the paying party.
It was for the appellant to put before the Master such evidence as he wanted to rely upon to enable the Master to make an informed decision.
It is clear from the transcript that matters were not as simple as the appellant submits. The appellant’s solicitors knew about the December date of a substantive hearing in October 2012 because they had instructed Mr Jacobs to prepare submissions for why their case should be conjoined with those already listed. It is not adequate, therefore, to say that the first the appellant knew was the notification from the court on 26 November 2012.
The test for the Master was whether it was reasonable for the appellant to enter into a retrospective success fee agreement. He had to work on the information before him. At the beginning of the hearing he had no CFA documents. If the appellant had chosen not to submit that evidence he could not now complain about the decision against him. The decision that the Master reached was well within the reasonable parameters open to him.
The originally submitted bill was massively reduced.
The respondent concedes that there was no full breach of the Costs Practice Direction. However, the service of the document the day before the hearing date was a factor that the Master was entitled to take into account as part of all of the circumstances.
The issue of prejudice was not relevant as no relief from sanctions had been applied for.
The Master had to grapple with whether the retrospective element of the CFA was reasonably incurred. He decided that it was not. The complaint about the weight to be attached to various factors was misconceived as matters of weight are entirely a matter for him. He took into account all relevant matters as part of all of the circumstances. It was not open to the appellant to say that the Master went wrong.
The Master had disallowed various items such as correspondence with the Legal Aid Agency, correspondence with Temple Legal and costs of attending various media on the basis that they were unreasonably incurred. That was a decision which was separate from an assessment as to whether the amounts claimed were unreasonable in the amount. The Master followed the same approach in determining the principle of whether a retrospective success fee was appropriate. In addition, it is artificial and potentially misleading simply to consider and focus on the specific judgment given by the learned Master to ascertain his reasoning. Critical assistance can be gleaned as to the Costs Master’s reasoning for particular decisions from comments by him during the course of the hearing itself. That is the case here.
Discussion and Conclusions
It is the Master’s ruling of 6 May 2015 which sets out his reasons for the decision which is under challenge. The transcript of the hearing may well be relevant as to what was discussed during the hearing and may, but not necessarily, show the development of the reasoning on the part of the Master but it is the ruling which is the decision. It is the decision, and the decision alone, which is the subject of challenge.
The decision that the Master was making here was one of principle i.e. was a retrospective success fee allowable in all the circumstances of the case before him. I entirely accept that due deference should be given to a decision on the part of a Costs Judge in carrying out a costs assessment but here Master Simons was deciding a point of principle.
The test on an appeal in the circumstances is, in my judgment, to be drawn from Lord Neuberger’s judgment in Motto v Trafigura (supra) so that the issue for the court is whether the Costs Judge went wrong on a point of law or principle, reached a conclusion which was plainly wrong, or took into account irrelevant evidence or misunderstood relevant evidence.
Paragraphs 10 and 11 of the ruling are key. It is right to say that they are not as pellucid as they might be. Certainly the Master appeared to approach the issue of risk assessment correctly in paragraph 10. He said clearly that it was a fundamental aspect of a success fee claimed in the CFA that it was to be assessed at the time that the CFA was entered into without the benefit of hindsight. So far so good.
The learned Master then went on to reject the submissions of Mr Jacobs that the risk was the same in July 2012 as it was in December 2012. That was something that the Master was quite entitled to do provided he had good reasons on the evidence for so doing. However, chances of success had been assessed at 60 to 80% in the application for legal aid in July and then at 65% by Mr Jacobs in his later opinion. Although the Master refers to that as of 6 December 2012 I have not had any document of that date placed before me. But, even if there was something of that date, 65% is self evidently within the bracket of success originally estimated by Howe & Co. The Master then refers to Mr Jacobs submitting that the case was even more risky after the very late service of the Secretary of State’s skeleton argument on 7 or 8 December 2012. In the hearing before me it was common ground that the respondent’s skeleton argument was received on 10 December 2012. That is consistent with submissions made to the Costs Judge: see internal page 10 of the transcript line 17 and internal page 17 of the transcript line 14. I do not understand, therefore, the reference to the date of receipt of the respondent’s skeleton argument in the Master’s ruling. My understanding, which was based upon what was said in the hearing before me, was that the skeleton argument was received after Mr Jacobs had signed the CFA agreement with Howe & Co on 10 December 2012. What is not disputed is that the CFA signed by Howe & Co was prior to receipt of the respondent’s skeleton argument. It cannot be said in relation to that document that anything had changed in terms of the risk assessment. I do not therefore understand what evidential basis the Master had for saying that there was a different risk in July 2012 to that which there was in December 2012.
In the opening sentence of paragraph 11 the learned Master indicates that it is not for the court to make its assessment of the risks in July 2012 and December 2012 especially where it seemed to him that the risks were so different. One has, of course, to be careful not to take a sentence out of context but it does seem to contradict paragraph 10 and indeed the latter part of the same opening sentence. In short, it is confusing. Second, although there is reference to the risks being so different that implies that the learned Master has carried out an assessment. In fact he makes no evaluation as to whether the risk is materially different and, if so, the reason for that. If it is a reference back to the respondent’s skeleton argument that post-dated the CFA signed by Howe & Co on any approach then it is mistaken. But without taking the respondent’s skeleton argument into account there is no basis for any conclusion that the risk was different.
I conclude, therefore, that the learned Master was wrong in his conclusion that the risk was “so different” in December 2012 to that which existed in July.
The remaining ground is that the respondent suffered no prejudice as a result of the notification on 10 December 2012 of the existence of the CFAs. It was submitted that this was a fundamental factor to which the learned Master should have had regard.
The presence or absence of prejudice is not necessarily fundamental to the assessment done by the learned Master. It is one factor. In some cases it may be highly material and fundamental but in others it will not be. Provided regard is had to it, the weight to be attached is entirely for the decision maker. Here the Master clearly did have regard to the issue of prejudice and attached such weight as he thought appropriate. It may well be that other decision makers would have taken a different view but that does not mean that the Master was not entitled to take the approach that he did.
The cases that were cited for application by analogy were those which dealt with relief from sanctions. They were The Commissioners for Her Majesty's Revenue and Customs v Blue Sphere Global Limited [2011] EWHC 90217 (Costs), Mishcon de Reya v Caliendo [2015] EWCA Civ 1029 and O’Brien v Shorrock [2015] EWHC 1630 (QB). They all concern a breach of the rules where a critical factor was whether the delay or breach had caused prejudice. That is not the position here. I do not, therefore, find the cases of any assistance.
The Master referred to the submission made by the respondent that there was no opportunity to consider their position because of the late notification of the CFA. Whilst that is factually correct there was no evidence before the court that earlier notification would have made any difference to the way in which the respondent ran its case. It was not, therefore, a point that was material to the determination of the issue before the Master.
As to the remainder of the judgment, paragraph 12 deals with the position of Mr O’Connor, which is not before me. Paragraph 13 deals with Mr Jacobs’ CFA but does not add to the point of principle that I have to determine. Paragraph 14 deals with the CFA entered into by Howe & Co. The Master regarded the wording of that as ambiguous as to whether it was retrospective at all. I have set out above what was covered under clause 2 of the CFA. I do not regard that wording as ambiguous. It is clearly capable of covering a retrospective position.
I record my gratitude to Master O’Hare who has sat with me as an assessor in this matter.
For the reasons that I have set out I allow this appeal on the point of principle which it has been brought.
In those circumstances it was agreed at the hearing that there may need to be a further detailed assessment but that that could be done on the papers. I invite the parties to agree an Order and timescale for submission of written representations on the outstanding matter.