Special Circumstances found following increases in hourly rates

Raydens Ltd v Cole [2021] EWHC B14 (Costs)

Background

The claimant solicitors acted for the defendant in protracted matrimonial proceedings between November 2013 and September 2018. The defendant’s husband in the proceedings were ordered to pay the defendant £800,000.00 with £290,000.00 to be paid by 19 July 2017. The £290,000.00 was received 14 months later on 28 September 2018.

The claimant raised two invoices on 20 July 2018 (partly paid) and 17 October 2018 (wholly unpaid) for £263,426.11 excluding interest. If the payment by the defendant’s husband had been made in time, it would have discharged all liabilities with the remaining surplus payable to the defendant. As there was a delay in payment, additional interest had accrued and left the defendant with a shortfall payable.

The defendant wrote to the claimant raising concerns regarding the fees being charged and sought a reduction due to perceived poor advice causing adverse effects on her mental health and employability. The claimant sought a meeting which was not accepted and then issued proceedings to recover their fees in September 2019.

The defendant filed a defence seeking the detailed assessment of the claimant’s costs. At a CMC District Judge Ayers ordered a stay and referred the matter to the SCCO to consider whether special circumstances should be granted under the Solicitors Act 1974 s.70(3).

The defendant filed a witness statement in support of their position and the claimant filed one in response.

Hearing on Special Circumstances

The defendant’s case was as follows:

1. The adequacy of estimates and provision of costs information throughout the lifetime of the retainer

2. A history of what he described as very significant unilateral increases to hourly rates

3. An irregularity in billing, as represented by the two invoices that are the subject of these proceedings

4. A fourth factor was disposed by agreement and not pursued.

Master Leonard confirmed that the test for finding special circumstances is ‘whether there is something out of the ordinary course, sufficient to justify a departure from the time limit otherwise imposed by section 70(3)’.

Increases in Hourly Rates

The claimant’s engagement letter provided for hourly rates to be reviewed each April. The claimant was notified, as per the letter of engagement, of the following rate increases:

The claimant’s hourly rate increased by c.30%. The supporting fee earners rate increased from £100 to £165 during the claim, an increase of 65%.

The Court’s Finding

Master Leonard rejected the defendants’ submissions in relation to point 1 and 3 as they had not been raised in the defendant’s witness statement but instead in counsel’s skeleton argument served two days before the hearing. The defendant was able to serve a further witness statement but failed to do so and the claimant did not have the opportunity to consider these issues and respond.

The claimant confirmed that when reviewing the rates, they took into account the rates charged by the local legal market and similarly specialist London firms. Master Leonard was of the view that this provided a context for the increases but not an explanation to why the rates increased to such an extent over the four years. Additionally, due to the toll the underlying proceedings had on the defendant’s mental health, it would not have been in her interest to start arguing with the claimant regarding the fees charged or to change firm in the middle of complex and stressful litigation.

It was Master Leonard’s view that the rate increases do call for an explanation and there may be an issue about informed approval by the defendant of the hourly rates imposed by the claimant. ‘A finding of special circumstances is justified in this case by exceptionally large increases in the Claimant’s hourly rates, charged to a client who was already struggling to fund her matrimonial litigation, against a background of quite exceptionally high overall litigation costs’. Given this finding a detailed assessment was ordered.

Conclusion

It is apparent from the judgment that Master Leonard had a level of sympathy for the defendant and the struggles the underlying action had caused. On top of this there were spiralling costs that far exceeded the estimates and the increased hourly rates only compounded the issue. It is apparent from the evidence provided by the parties that the defendant may not have been properly informed of these costs or had them explained. Based on the available information there were calls for an explanation of the costs and therefore special circumstances could be found.

The increases to the rates do justify special circumstances in this claim, however it would not necessarily translate that this approach would apply to other claims especially if there were some justification provided at the time of the increase or the increases/overall costs were more modest.