Eurasian Natural Resources Corpn Ltd v Dechert LLP [Ch D]
| Jurisdiction | England & Wales |
| Judge | Mr Justice Roth |
| Judgment Date | 24 October 2014 |
| Neutral Citation | [2014] EWHC 3389 (Ch) |
| Docket Number | Case No: CH/2014/0273 |
| Court | Chancery Division |
| Date | 24 October 2014 |
[2014] EWHC 3389 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE SENIOR COURTS COSTS OFFICE
Royal Courts of Justice
Rolls Building
Fetter Lane
London, EC4A 1NL
The Honourable Mr Justice Roth
Case No: CH/2014/0273
Lord Pannick QC, Richard LissackQC, Benjamin WilliamsandTamara Oppenheimer (instructed by Signature Litigation LLP) for the Appellant
Charles Hollander QC, Simon BrowneQC andTony Singla (instructed by Clyde & Co LLP) for the Respondent
Hearing dates: 16–17 July 2014
Introduction
Eurasian Natural Resources Corporation Ltd ("ENRC") has applied pursuant to section 70 of the Solicitors Act 1974 ("SA 1974") for an order for the taxation of the bills delivered by its former solicitors, Dechert LLP ("Dechert"). Should that application before the costs judge (along with the detailed assessment of the bills if the application is granted) be heard in private? On 24 April 2014, in a short unreserved judgment, Master Haworth declined ENRC's request that the application be heard in private but gave permission to appeal.
The issue is clearly of importance for both parties. That is evident from the fact that for the hearing of this appeal, which took one day of court time, ENRC was represented by Lord Pannick QC, leading Richard Lissack QC, Benjamin Williams and Tamara Oppenheimer, whereas Dechert was represented by Charles Hollander QC, leading Simon Browne QC and Tony Singla.
The factual background
In December 2010, ENRC received a report from a whistleblower indicating that there may have been fraud involving some of its overseas operations. ENRC was at that time listed on the London Stock Exchange and it instructed outside lawyers to conduct an investigation. Initially, DLA Piper UK LLP was instructed but in April 2011 the partner there with conduct of the matter moved to Dechert and ENRC instructed Dechert to take over the investigation.
Following a leak of the whistleblower report and resulting articles in the press, the Serious Fraud Office ("SFO") contacted ENRC and reminded it of the so-called self-reporting process which they operate in such circumstances. ENRC and Dechert, together with ENRC's general corporate law advisors, Jones Day, held meetings with the SFO in late 2011, and ENRC thereafter agreed to a considerable expansion of the scope of Dechert's investigation as part of a possible self-reporting process. ENRC entered into a formal written retainer with Dechert in April 2011.
The scale and range of the expanded investigation is apparent from the level of Dechert's fees. In total, Dechert has billed ENRC over £16.3 million, of which some £11.7 million was invoiced in the period from 23 July 2012 to 11 April 2013. ENRC became increasingly concerned about the level of Dechert's fees and what it perceived to be serious over-charging. On 27 March 2013, ENRC terminated Dechert's retainer and instructed other lawyers. It is unnecessary to decide to what extent the decision to terminate Dechert's retainer was due to the level of its fees or made for other reasons.
Subsequent to termination of its retainer, Dechert submitted invoices in the total amount of some £5.1 million. ENRC agreed to pay those invoices in order to obtain a release of Dechert's lien over its files, in return for the express agreement by Dechert that it would not object to a detailed assessment of those costs. The balance of the £11.7 million had been paid prior to ending the retainer, and Mr Ehrensberger, the General Counsel of ENRC, explains in his witness statement that this was because the company was concerned not to do anything that might delay or jeopardise the self-reporting process with the SFO, or be perceived to be obstructing that process.
ENRC's application under sect 70 SA 1974 was issued on 18 October 2013. In opposition to that application, Dechert served in February 2014 detailed evidence from two partners and two associate solicitors employed by the firm. Those four witness statements, which in themselves exceed 220 pages, are accompanied by 13 lever arch files of exhibits. Altogether, Dechert's evidence gives what purports to be a very full account of the various practices at ENRC being investigated, identifying many of the individuals involved and describing the way they conducted themselves in response to Dechert's investigations.
It is not in dispute that much of Dechert's evidence comprises a mass of otherwise confidential and sensitive information which had come into its hands only as a result of its instruction by ENRC and the work done on ENRC's behalf. Subject to the considerations discussed below, this is information and comprises documents that would be covered by legal professional privilege ("LPP").
The SFO investigation has since developed into an active criminal inquiry. It is clear that if ENRC's application for taxation, and the detailed evidence served, were heard in public, the SFO would attend that hearing in order to glean information of assistance to its inquiry. For present purposes it can be assumed, and Dechert does not seriously dispute, that at least some of the material set out in Dechert's evidence could potentially and significantly prejudice the interests of ENRC in the SFO inquiry. Indeed, so concerned is ENRC about the disclosure of this information that it has made clear that if its application for taxation is not heard in private it will rather withdraw the application than proceed.
Section 70 of SA 1974
Sect 70 SA 1974 provides, insofar as material:
"(1) Where before the expiration of one month from the delivery of a solicitor's bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be assessed and that no action be commenced on the bill until the assessment is completed.
(2) Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the assessment), order—
(a) that the bill be assessed; and
(b) that no action be commenced on the bill, and that any action already commenced be stayed, until the assessment is completed.
(3) Where an application under subsection (2) is made by the party chargeable with the bill—
(a) after the expiration of 12 months from the delivery of the bill, or
(b) after a judgment has been obtained for the recovery of the costs covered by the bill, or
(c) after the bill has been paid, but before the expiration of 12 months from the payment of the bill,
no order shall be made except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the assessment as the court may think fit.
(4) The power to order assessment conferred by subsection (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill."
In the present case, the application by ENRC was made within 12 months of the delivery of the bills but after the bills had been paid. Accordingly, the application falls under sect 70(3)(c) and it is necessary for ENRC to show "special circumstances". As explained above, Dechert has accepted that there should be a detailed assessment as regards the £5.1 million paid after the termination of their retainer. However, the burden is on ENRC to show special circumstances justifying such an assessment for the balance of about £6.6 million. ENRC's application therefore effectively involves two stages:
i) determination of whether there are special circumstances to order a taxation for the bills in the amount of c. £6.6 million, which cover work done in the period 17 May – 30 November 2012;
ii) detailed assessment of the bills submitted after termination of the retainer (in the amount of c. £5.1 million) and, depending on the answer to (a), of the earlier bills.
"Special circumstances" are not defined in the statute but have been considered in the authorities. The question whether special circumstances exist has been described as essentially a value judgment in which both the size of the bill and the fact that the bill called for an explanation are relevant factors: see generally Civil Procedure 2014, Vol 2, para 7C–118.
Prior to the coming into force of the Civil Procedure Rules ("CPR"), applications for detailed assessment were ordinarily heard in private. That changed with the CPR and it is common ground that they are now heard in public, albeit that it is only in a very rare case that anyone other than the parties chooses to attend. However, such an application, in particular as between a solicitor and its (present or former) client, is not litigation in the ordinary sense. It is appropriate to consider the background to this special jurisdiction of the court.
The power of the court to order a taxation of a solicitor's bill has its origins in the disciplinary control which the court exercised as part of its inherent jurisdiction over its own officers. That jurisdiction became subject to successive statutory provisions, culminating in the SA 1974 which now prescribes exclusive time limits for an application for taxation: see the historical exposition in the judgments of the Court of Appeal in Harrison v Tew [1989] QB 307 (appeal dismissed, [1990] 2 AC 523). Although now subject exclusively to statutory control, in substance it remains a form of regulation by the court of the conduct of its officers, which explains why there is no remotely equivalent regime applicable to the fees billed by...
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