Retainers, prolixity and budgets in the mix

In this case Costs Judge Leonard carried out a detailed assessment and considered three items that required addressing :-

  1. A challenge to the retainer between a client and solicitor

  2. A Claimants claim that the 2nd Defendant was seeking costs incurred by the 1st

  3. The Claimant’s contention that the 2nd Defendant should not able to reply upon a costs budget

Reed v Woodward Property Developments Ltd & Anor [2023] EWHC 36 (SCCO) (12 January 2023) Neutral Citation Number: [2023] EWHC 36 (SCCO)

The three parties to the case involve a barrister, a building company and the building company director.  The budget prepared for the 1st and 2nd Defendants (being the 1. The company and 2. The Director) made it difficult to distinguish the exact costs of each party.  What made matters worse was the argument from the barrister (Claimant) was that the director had agreed to the building project manager.

A claim is issued on 30 August 2016 and then a spaghetti dish of events and court appears then takes throughout 2017 to 2019 involving liquidation of the building company (1st Defendant) and the court programme which included:-

  • 2/5/17 2nd Defendant applies to have claim against him struck out – succeeds on 17/11/18
  • 11/07/17 DJ Watkins in the Bristol County Court approves budget of the 1st and 2nd Defendants of £83,534.04 stating incurred costs don’t appear to reasonable.
  • 7/11/17 expert evidence exchanged
  • 19/08/18 Claimant’s appeal allowed by HHJ Hughes KC
  • 26/02/18 1st Defendant goes into voluntary liquidation – no assets or indemnity insurance to meet the claim.
  • 5/6/18 DAS, the insurer not informed until this day of the liquidation
  • 28/11/18 DAS applies to be removed as acting for the 1st Defendant
  • 10/12/18 Order approves DAS coming off record
  • 12/04/19 DJ Watkins approved updated budget in sum of £131,146. 84 – budget headed “costs budget of the first to 10/12/18 only) and second Defendant dated 13/03/19
  • 03/10/19 witness evidence exchanged

Matters progressed to a 3 day trial and judgment was given on 1st June 2020 where HHJ Ambrose said the Second Defendant had no case to answer.  He found the Second Defendant did not act as project manager and was working in his capacity as director of the firm. HHJ Ambrose made a costs award that the Claimant pay the Second Defendant 75% of his costs.  An appeal was made the Claimant resulting in a judgment of Mr Justice Bourne dismissing the appeal, confirming the award made by HHJ Ambrose and awarding the 85% of the costs of the Second Defendant.

Starting with the retainer issue Costs Judge Leonard reviews the history of events between DAS and the two Defendants and the challenge made by the Claimant.

A cautionary tale takes place with the challenge as the points of dispute did not comply with PD 47 para 8.3 – which need to short and to the point – in this case they appeared to be tediously lengthy and repetitive.

A conflicting story takes place in the lead up to the presentation of facts in this case dealing with way the action was funded covering a private paying client or by ATE insurance.  In this case the Claimant had a suspicion the CFA came to light after the event leading to the validity being disputed.

The Claimant argued, relying upon Radford v Frade [2018] EWCA Civ 119 and Pentecost v John [2015] EWHC 1970 (QB), that a CFA cannot have retrospective effect unless the solicitor has already been acting for the client under a valid contract of retainer.

In concluding the position of the retainer four established principles were examined

  1. The indemnity principle
  2. The certificate of the solicitor confirming the indemnity principle has not been breached
  3. It is not necessary for a retainer to be in writing
  4. Even if a claim is funded by an insurer it has no bearing on a party’s right to recover costs – save for specific agreements

In the points of dispute the question of a retrospective CFA was raised and in his judgment Leonard says

  1. Forde v Birmingham City Council[2009] 1 WLR 2732 established that there is no prohibition on retrospective CFAs. As for the proposition that there must be a valid contract of retainer in place for a CFA to have retrospective effect, the position is summarised in the passages from Northern and Shell Plc v John Laing Construction Ltd [2002] EWHC 2258 (TCC) quoted by Turner J:

“The parties’ intention that a contract or deed is to have retrospective effect is more readily to be seen where the parties had a prior contractual relationship preceding the contract… in question but it is still possible for such retrospective effect to occur where no such prior contractual relationship was in existence where such is provided for by the clear words of the contract or deed”.

The conclusion was the retainer was valid – there is no good reason to test the evidence when a bill of costs certificate is signed – the retainer was ruled as valid.

Turning to the division of costs, after the explanation from DAS of coming off the record after the liquidation of the 1st Defendant, the costs judge said there could be no question of an incorrect division of costs between the 1st and 2nd Defendant’s.

After considering the issues with regard to the budget it was concluded that the Second Defendants costs were be assessed by detailed assessment without any reference to the budget as the budget had incorporated the costs of the 1st Defendant.

Getting the retainer right at the beginning will prevent the challenge to its validity – experience has taught us a regular review of retainers to keep on top of legal challenges in the Courts is a wise investment of time.

Where a case has more that one party and costs are being prepared – keeping meticulous notes as to who has incurred the costs and who will prevent lengthy arguments – the practice of keeping different file notes for individuals and joint costs helps the division and ultimately the presentation of the costs in a way that cannot be open to a testing challenge.

The moral of this story is keeping it all short and sweet – the bigger the challenge, the bigger the argument, the bigger the length of a challenge or even a description will eat into judicial time when the relevant argument can be lost in prolixity.

Here at Partners in Costs we are often asked to review retainers to ensure their validity and our training team constantly reiterates the message of perfect file notes every time leads to speedy conclusions to the costs process.

Adrian Hawley, Head of Engagement and Strategic Development