Hourly Rates, Courts Discretion and Informed Consent
EVX v Smith  EWHC 1607 (SCCO) involved a clinical negligence claim that was pursued on behalf of a child requiring a Litigation Friend, which was successful in achieving a settlement of £225,000.
The settlement required the approval of the Court. A deduction of £28,000 from the Claimant’s damages was also sought to be approved by the Court to meet the shortfall in costs recovered from the Defendant and Solicitor /Own Client costs.
The Claimant had made no complaint as to the sums to be deducted from the damages.
The Claimant Solicitors’ Irwin Mitchell argued the Litigation Friend had approved the hourly rates by entering into a Conditional Fee Agreement which provided for the rates claimed, the CFA had been orally explained to the Litigation Friend and therefore as she had given approval, the rates must be considered reasonable and not subject to review.
The Litigation Friend had been informed that costs would be claimed by way of the shortfall from those recovered from the Defendant and had agreed the settlement of costs with the Defendant.
Cost Judge Brown did not accept there was a presumption that the “agreed” hourly rates were reasonable and considered CPR 46.9(3) and the Solicitors’ requirement to establish informed consent.
The Judge held CPR 46.9(3)(c)(ii). Where costs are unusual the Solicitor should advise the client that, as a result, the costs might not be recovered from the other party. It is not enough for the Litigation Friend to have been informed of the prospect that there would be a shortfall in recovery of the costs from the Defendant, nor that she was informed of the amount that the solicitors say would be payable by way of shortfall as the case went on, nor that she approved settlement of costs with the Defendant. The terms of CPR 46.9(3) are linked so that the solicitor’s explanation must be directed to the unusual nature of the costs: in this case, the hourly rates (paragraph 58).
The Litigation Friend had been informed of an obligation to pay a shortfall but had not been given an explanation or reason as to why the costs sought may not be recovered in full. The Judge found that the solicitors were likely to have been fully aware that the relevant hourly rates were likely to be unrecoverable from the Defendant.
Cost Judge Brown was of the view there was no informed consent to the hourly rates claimed and therefore no presumption of reasonableness.
Cost Judge Brown proceeded with a detailed assessment of the costs claimed on the basis this was in the interests of the Claimant. The Judge, having considered the Grade A rate of £315 to £320, found this to be reasonable. However, the Judge found that the hourly rate of £235 to £240 for a Grade C fee earner in Southampton was unreasonably high for the work done and also ‘unusual in amount’. The work conducted by the lower grade fee earner was carried out under supervision, with input and reliance from Counsel and exceeded Guideline rates for 2021. Cost Judge Brown also referred to the information that was provided as to experience and qualifications, as highlighted in the case of Barking, Havering & Redbridge University Hospitals NHS Trust v AKC  EWHC 2607 (QB)
The Judge reduced the hourly rates to what he considered to be appropriate.
Solicitors should be mindful that simply because the Claimant has agreed the terms of the retainer, that the hourly rates charged between the Solicitor and Client will not automatically be presumed to be agreed as reasonable.
The rates are still subject to a review by the Court when considering any reduction to damages as a result of a shortfall in costs recovered from the paying party.
Solicitors need to be clear as to informed consent and inform the Client that such hourly rates are unlikely to be recovered, it is not sufficient to simply advise that there will be a deduction from the damages for any shortfall in costs recovered. The Claimant needs to be informed of the reasons why such costs claimed may not be recovered in full.
How can PIC help?
If you require any advice in respect of Retainers, Recoverable Hourly Rates or seeking to recover a shortfall of costs from the Client please contact Partners in Costs for further advice.
Catherine Singleton, Costs Lawyer