The differences between a summary assessment on the standard basis and a solicitor/client assessment on the indemnity basis
Hughes Fowler Carruthers Ltd v Gubbay [2023] EWHC 2188 (SCCO)
Background
The Defendant, Ms Jacky Gubbay was a client of the Claimant Solicitors. There was an assessment of the bill that the Claimant had rendered to the Defendant for its services. The bill was assessed and there was no reduction to the costs. Costs Judge Leonard was now assessing the costs of the action itself, provided in an N260 filed by the Claimant’s solicitors Gibson & Co. Costs were assessed by way of summary assessment on the standard basis and whilst the Defendant did not make any submissions on the bill, elements were nonetheless reduced. The Judge referenced various differences between the assessment of the solicitor/client bill and the Claimant’s schedule of costs, most notably the differences in the standard and indemnity bases.
Differences between the types of assessment
An assessment of a solicitor’s bill to a client is to be assessed on the indemnity basis pursuant to CPR 46.9(1). The summary assessment of costs payable by the Defendant to the Claimant are to be assessed on the standard basis under CPR 44.3. Judge Leonard identified three essential differences between the assessments on the standard and indemnity basis.
Firstly, there is a difference in how the Court make findings. On the standard basis the Court does not make findings based solely on objections raised by the paying party but undertakes its own critical assessment. In this case the Defendant was given an opportunity to make submissions on the Claimants schedule of costs but declined do so. Reductions were made solely in accordance with CPR 44.3. On the indemnity basis the Court makes findings on the paying parties’ objections. When assessing the solicitor/client costs the Defendant made extensive submissions, but they were without merit and the Claimants costs were assessed as claimed.
Secondly, there is a difference to how proportionality and reasonableness of the costs is assessed. On the indemnity basis doubt as to proportionality and reasonableness is exercised in favor of the Claimant as the recovering party. On the standard basis any element of doubt as to whether the costs claimed are proportionate and reasonable are exercised in favor of the Defendant as the paying party. Substantial reductions can be made to claimed costs without any implied criticism of the party recovering the costs. Judge Leonard commented that there was no doubt that the work was undertaken conscientiously, but much was still irrecoverable on the standard basis.
Finally, the way that VAT is recoverable differs on each basis. With a solicitor/client assessment the Claimant is obliged to render a VAT invoice and VAT must be added to the costs and disbursements recoverable by the Claimant. With a summary assessment on the standard basis, the paying party is indemnifying the receiving party for costs incurred. VAT should not be included in a claim for costs if the receiving party is able to recover the VAT as input tax under Practice Direction 44, paragraph 2.3 as the VAT is not a real cost to the receiving party. In this case, VAT was included in the schedule of costs and as a VAT registered firm of solicitors, the VAT was disallowed.
The Judgment
Looking to the summary assessment itself, a number of points were made as to specific reductions. Looking at the hourly rates, the Judge referenced the guidance of the Court of Appeal in Samsung Electronics Co Ltd v LG Display Co Ltd [2022] EWCA Civ 466, that on a summary assessment, recovery in excess of the 2021 guideline rates is allowed only where there is a clear and compelling justification for doing so. In this case, National guideline 1 rates applied. Of the three Grade A
solicitors claiming time, only one was claimed above the guidelines at £325 p/h. This time was reduced to £280 p/h, which was still over the guidelines and to allow for inflation. There were no comments as to the scope for delegation.
There were also reductions for duplicated time such as two fee earners attending the same hearing. Judge Leonard commented that while not unusual this time is generally disallowed on the standard basis. Other duplications such as preparation of the statement of costs and various document time was disallowed.
There was a substantial amount of time claimed for ‘attendance on others’ which was largely disallowed on the available information and shows the reluctance to allow vague entries. Work relating to research and file reviews was also disallowed.
Looking to disbursements, the Claimant sought to recover the costs of preparing a Scott Schedule for the solicitor/client assessment, but this was disallowed as the Claimant had instructed external solicitors to act for them and thus could not recover their own costs. Office copy entries which were also disallowed.
Conclusion
Costs Judge Leonard’s judgement highlights the stark differences between the basis of the standard assessment of costs and the indemnity basis. On the standard basis, costs can be disallowed if they are deemed disproportionate, even if there is no criticism of how those costs were incurred
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