UK Supreme Court decides that Receiving Parties limited to one Firm's costs and legal costs incurred or paid in a foreign currency should be converted at the time the invoices were paid

Micula and others v Romania [2023] UKSC 2018/0177 (23 May 2023)

Paragon Costs were instructed on behalf of the Paying Party, Romania. Jamie Carpenter KC was instructed to represent Romania at the hearing.

Romania, the Appellant/Cross-Respondent was ordered to pay the costs of the Respondents / Cross-Appellants in proceedings conducted in the High Court, Court of Appeal and Supreme Court.

The Receiving Parties were represented by two separate firms throughout. Each firm instructed its own team of Counsel, including leading and junior Counsel.

Costs Judge Leonard and Costs Officer Sewell, sitting in the Supreme Court, considered two preliminary issues arising in the detailed assessment:

1. The correct interpretation of the Supreme Court’s Costs Order that the Receiving Parties are entitled to “one set of costs”.
2. The treatment of costs charged and/or paid in a currency other than Sterling.

Interpretation of the Costs Order

Following a substantive judgment on the appeal, on 11 November 2020 the Supreme Court made the following costs Order:

“Romania pay the Micula Parties’ costs in the Supreme Court and below, to be assessed on the standard basis if not agreed and limited to one set of costs to be shared between the Micula teams in proportion to their actual costs expenditure, equal to one set of costs (being the higher set of costs claimed) but with allowance for two KCs and one junior between them.”

For the detailed assessment, the two firms representing the Receiving Parties each produced their own bill of costs, on which bases they then produced a Master Bill of Costs in which they sought to recover, in respect of each category of work in the bill, the higher costs incurred by a Receiving Party.  In this way, they argued that one set of costs meant one combined set of non-duplicated costs of all the Receiving Parties, seeking to rely on the approach followed in Ong v Ping [2015] EWHC 3258 (Ch). 

The practical impact of this can be most easily demonstrated in the following table set out in the judgment:

Effectively the sum claimed in the Master Bill amounted to more than either firm had incurred and meant the Receiving Parties were claiming as much as 81% of their combined total costs.

Romania took issue with this approach, Mr Carpenter KC submitting that this was not what the Court intended when making the costs order; rather, the Court intended that the Receiving Parties could claim between them one or other set of legal representatives costs in full, which ever was the higher, not a ‘mix and match’ of both legal representatives’ costs.

Romania also took issue with the Receiving Parties’ approach to claiming Counsel’s fees.  Whereas ordinarily the Supreme Court only allows the costs of one Leading Counsel and one Junior to be recovered, in this Costs Order it allowed, as an exception to that rule, the costs of two Leading Counsel and one Junior.  Romania argued that in circumstances where the higher set of legal representatives’ costs claimed already included the costs of two Leaders and one Junior, the Receiving Parties were not permitted to instead claim the higher costs of the Leader or Junior of the other lower set of legal representatives costs.

Finally, Romania identified to the Court the practical difficulties that would arise on a detailed assessment if the approach adopted by the Receiving Parties were to be followed.

The Court carefully considered the meaning of “one set of costs” and whether and to what extent Ong v Ping was relevant. The Court concluded at Paragraph 91:

            91.       We have concluded that the Receiving Parties’ formulation of their costs claim is          not justified by the wording of the Costs Order; that the Costs Order is not the same as the costs orders made either in Bristol-Myers Squibb Co v Baker Norton or in Ong v Ping; that it      cannot have the same effect as the orders made in those cases; that the Receiving Parties’        formulation of their costs claim is not in any event consistent with Bristol-Myers Squibb Co           v Baker Norton or Ong v Ping; and that the practical and financial consequences of the Receiving Party’s approach, as highlighted by Mr Carpenter’s examples, supports the conclusion that their interpretation of the Costs Order is not sustainable…..

The Court accepted Romania’s interpretation of the phrase “one set of costs”,as in effect meaning one of set of legal representatives’ costs. It concluded that the Costs Order made it clear that the Supreme Court did not consider it reasonable for the five Receiving Parties to be separately represented and that flowed through in relation to Counsel’s fees too. The First Receiving Party (being the First of Five Claimants), having incurred the higher costs, would be able to recover the profit costs of his legal representative and the fees of his two Leaders and one Junior at any one time.

Approach to Foreign Currency conversion

At various stages in the whole proceedings, the Receiving Parties were charged by their legal representatives in a foreign currency (US Dollars or Euros) and paid in foreign currencies (Euros). In their bills of costs for assessment, the Receiving Parties claimed their costs in Sterling, but offered no information about the currency in which they been charged or had paid their costs, or the methodology used by them in converting those costs into Sterling for the purpose of their bills of costs. 

Of note, neither the CPR, nor the SCCO Guide nor the Supreme Court’s practice direction provide any guidance on what the correct approach is. Previous case authority revealed that the courts were prepared to assess bills of costs expressed in foreign currencies as well, of course, in Sterling.

Romania sought to rely upon the judgment of the Senior Cost Judge in Deutsche Bank AG v Sebastian Holdings Inc [2020] EWHC B16 (Costs) in arguing that the bill should have been drawn so as to show the charges in the original currency, and converted to Sterling based on the exchange rate at the time of payment by the Receiving Party of those costs.

The Receiving Parties argued for a different approach, relying upon Cathay Pacific Airlines Ltd v Lufthansa Technik AG [2019] EWHC 715 (Ch) to contend that the date on which any currency conversion in a bill of costs should take place is the date when the bill is filed with the Court.

The Receiving Party also argued that the bill should be assessed first and then issues regarding the currency conversion could be addressed at a later date. Romania argued that it was neither justifiable nor appropriate to defer the conversion exercise until the assessment has been completed.

After considering both the Deutsche Bank AG and Cathay Pacific Airlines Ltd decisions, the Court concluded that, for the purpose of the bill of costs, the appropriate date of conversion for sums paid by the Receiving Parties in a currency other than Sterling is the date of payment (not the date when the bill was filed).

The Court also concluded that it was not appropriate to defer the conversion exercise until the assessment had been completed.

Summary

The Costs Order made by the Supreme Court on 11 November 2020 provided for the Receiving Parties between them to share, in proportion to their actual expenditure, the amount recovered on the assessment of the costs incurred by the First Receiving Party, that being the higher of the two sets of legal representatives costs with which the court was concerned when the Costs Order was made.

The Receiving Parties are, under the terms of the Costs Order, entitled to submit for assessment (within the costs of the First Receiving Party) the fees of two Senior Counsel and one Junior. They are not entitled to claim the costs of other counsel, whether instructed by the First Receiving Counsel or by the other legal representatives.

Within the Receiving Parties’ bills the appropriate date of conversion into Sterling, for sums charged to or paid by the Receiving Parties in a currency other than Sterling, is the date of payment. It was accepted that it was not appropriate to defer the conversion exercise until the assessment of the bills has been completed.

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