Karis Developments Ltd v EMW Law LLP
| Jurisdiction | England & Wales |
| Judge | Master Brown |
| Judgment Date | 13 January 2020 |
| Neutral Citation | [2020] EWHC B14 (Costs) |
| Date | 13 January 2020 |
| Docket Number | Case Nos: 1705239 and 1803877 |
| Court | Senior Court Costs Office |
[2020] EWHC B14 (Costs)
IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE
Master Brown
Case Nos: 1705239 and 1803877
Mr. Mallalieu, instructed by Kyriakides & Braier Solicitors, for the Claimant
Mr. Bacon QC instructed by and for the Defendant
Hearing dates: 9–12 July 2019
Approved Judgment in public
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
I am required to determine various preliminary issues which arise on two claims for detailed assessment on various bills delivered by the Defendant, a firm of solicitors, to the Claimant. The hearing in this matter took place over three days from 10 to 12 July 2019. The oral evidence was not completed until substantially after 4.30 pm on 12 July 2019 and it was not possible for counsel to complete their submissions that day, so the matter had to be adjourned for submissions. There were difficulties arranging a hearing for such submissions soon after the hearing; in the event the parties agreed that transcripts of the evidence should be obtained and that there should be submissions in writing only. The last of those written submissions was served on 2 October 2019. I am grateful to both counsel for their comprehensive submissions which I have considered in detail.
The Claimant is a company involved in property development. From about April 2016 the company instructed the Defendant in respect of a number of matters including a claim against Lewes District Council (‘LDC’) arising out of agreements concerning the development of land, and a related claim in professional negligence against the Claimant's former solicitors Howard Kennedy (‘HK’).
After termination of the retainer with the Defendant the Claimant instructed another firm of solicitors to pursue the claims against LDC and HK. The claim against LDC, which had been issued in the Chancery Division was discontinued pursuant to a settlement agreement dated 11 March 2019 on the basis of no order as to costs. Whilst it is understood that no claim has yet been issued against HK there remains a real prospect of such a claim being pursued. The evidence before me related to privileged matters arising in the claim against LDC and the claim against HK. As I had understood it and was confirmed on the first day of the day of the hearing, there had been no general waiver of privilege in the proceedings. It was not practical for the hearing to be conducted part in public and in part in private; accordingly, I decided that the hearing should take place in private. For the same reasons, parts of this judgment are given in private and have been removed from the judgment to be given in Public (where parts have removed this has been indicated by highlighting).
The bills subject to the claims for detailed assessment are:
(1) Bill no. 4004811 in the sum of £50,000 (plus VAT) dated 21st February 2017 (‘the £50,000 bill’)
(2) Bill no. 4005064A headed ‘Re Lewes District Council’ dated 24 May 2018 in thesum of £169,126.13 inclusive of VAT (‘the LDC bill’)
(3) Bill no 4005055a headed ‘Re The Ecology Consultancy’ dated 24 May 2018 in the sum of £6,270 inclusive of VAT ‘the Ecology Consultancy bill’)
(4) Bill no 4005056a headed ‘Re 60 Middle Street Brighton’ and dated 24 May 2018 in the sum of £3,420 inclusive of VAT (‘the Middle Street bill’)
(5) Bill no 4005057a headed ‘Re Claim by Conran & Partners’ dated 24 May 2018 in the sum of £2,910 inclusive of VAT (the Conran bill’)
(6) Bill number 4005382 stating on its face ‘Re RBS’ dated 25 May 2018 in the sum of £17,100 inclusive of VAT (‘the RBS bill’)
The issues
The parties entered into a conditional fee agreement (‘CFA’) dated 21 February 2017 to fund the pursuit of claims against LDC and HK. Prior to entering in the CFA, the Claimant says, as a condition for entry into the CFA the Defendant required payment of a sum £50,000 (represented by the £50,000 bill), which sum the Claimant agreed to pay and did pay.
The first issue, as it has evolved, is as to whether the sum of £50,000 was, as the Defendant says, strictly limited to costs for work in the claim against LDC up to 25 November 2016 (the costs of the work thereafter being subject to the CFA) or whether the payment of this sum was, as the Claimant says, to ‘clear the decks’ in respect of all of the then outstanding fees on all matters for which the Defendant were acting for the Claimant, including a potential claim against Royal Bank of Scotland Plc (‘RBS’), two disputes concerning claims brought variously by businesses called the Ecology Consultancy and Conran & Partners, and a property transaction relating to 60 Middle Street, Brighton. The claims by the Ecology Consultancy and the Conran & Partners arose out of the agreements with LDC (both organisations contended that liability for their fees for the work done on the project could be passed under the agreements to the Claimant).
The Defendant says that the agreement in respect of the sum of £50,000 covered costs incurred in respect of the LDC matter up to 25 November 2016 only and preserved their right to bill separately for work on the LDC matter from 25 November 2016 and on the other matters referred to above. If the Claimant were right, the bills at (3) to (6) above are to be assessed at nil and to the extent that any sum should be payable pursuant to the CFA for the work up to the date of the agreement to pay £50,000 they are to be treated as compromised by the payment of £50,000.
If I were to accept that the Defendant's contention on the first issue the second issue arising is as to whether any sums can properly be charged by the Defendant in the RBS bill. The Claimant alleges there was a conflict of interest which ought to have prevented the Defendant acting for the Claimant and by reason of fiduciary duties arising, or terms to be implied in the contract between parties, the costs should be assessed at nil. The issue, as it has been raised in the Statements of Case, for me to determine is whether there was any such conflict of interest.
In the (further) alternative to the first issue, is the third issue which is (as it had developed) whether the £50,000 bill was a sum agreed by way of compromise in respect of outstanding fees or whether it was an invoice seeking payment for all the WIP (work in progress) on the LDC case up to 25 November 2016. If the latter, there is an issue as to whether it was a valid statute bill; and if so, whether there are special circumstances justifying an assessment of this bill (pursuant to section 70 of the Solicitors Act 1974). As I understand the Claimant's case on this point, the issue only arises if I find against the Claimant on the first issue above.
The fourth issue, as initially set out in a Directions Order made on 15 August 2018 is as to whether the CFA was “wrongfully terminated”. The Defendant contends that pursuant to the terms of the CFA it is entitled to payment of its fees as the CFA was terminated by them under provisions of the contract which require the Claimant to pay their fees.
The termination provisions in the CFA include the following:
14.1 The Client [Claimant] can end this agreement in writing at any time. Unless done so on the written advice of EML [the Defendant], or pursuant to clause 14.2 below, if the Client does not continue with either or both the Claims, the Client will become liable for, and must pay, EML's Fees at the Normal Rates and all Disbursements for the work done up to the termination date in relation to the Claim (s) which the Client does not continue. If the Client continues with either or both of the Claims after termination of EML engagement and wins either of them, the Client will also have to pay the Success Fee and the Normal fees for any work undertaken by [Defendant] and Counsel (if Counsel is working under a CFA) plus VAT as well as any other Disbursements
14.2 EMW can end this agreement if:
(a) the Client rejects EMW's reasonable advice or counsel's reasonable advice on any matter relevant to the Claims;
…
(b) EMW believes on reasonable grounds that most Claims do not have reasonable prospects of success. In this event, the Client will only have to pay Disbursements and VAT.
In the case of 14.2(a) … above, the Client will have to pay EMW's Fees, at the normal rates for the work done to the termination date and Disbursements together with VAT, if applicable. If the Client then goes on to “win” either or both Claims, the client will also, in addition, be liable for the Success Fee plus VAT, if applicable, in accordance with Clause 6 above.
The Defendant contends that it was entitled to terminate pursuant to Clause 14 (2) (a) and refers to the content of a letter dated 10 July 2017 from Defendant to the Claimant which reads as follows:
“ I write further to your telephone call to me this morning and to your subsequent email.
It seems to me that the true position is that, as recorded in your email timed at 13.02 today you do not accept our advice in relation to the Part 36 Offer that we have advised you to make. We do not accept that it is contrary to your interest.
Be that as it may, it is apparent that you do not wish to follow our advice and in the circumstances, this letter is our notice of termination of the conditional fee agreement (the Agreement) dated 21 of February 2017 in accordance with clause 14.2(a) thereof.
Subject to the terms of the agreement I am happy to arrange for an orderly transfer of our papers to your new solicitors. In the regard I understand that you wish to instruct [Messrs] Cubism Law. I am therefore currently ascertaining our costs to date which I will then advise to you under separate cover. Subject...
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