Vadim Maratovich Shulman v Igor Valeryevich Kolomoisky
| Jurisdiction | England & Wales |
| Judge | Master Rowley |
| Judgment Date | 24 June 2020 |
| Neutral Citation | [2020] EWHC B29 (Costs) |
| Date | 24 June 2020 |
| Docket Number | Case No: SC-2019-BTP-000248 |
| Court | Senior Court Costs Office |
[2020] EWHC B29 (Costs)
IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE
Thomas More Building
Royal Courts of Justice
London, WC2A 2LL
Master Rowley
Case No: SC-2019-BTP-000248
Mark James directly instructed by and for the Claimant
Roger Mallalieu (instructed by Enyo Law) for the Second Defendant
Hearing date: 9 March 2020
Approved Judgment
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.
This is my decision regarding the hourly rates to be allowed for the work carried out on behalf of the second defendant.
Location & Starting Point
The second defendant instructed Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), a firm that he had used previously, to represent him in these proceedings. Skadden's offices are in Canary Wharf and as such as the postcode begins “E14”. That postcode would place the solicitors in the Outer London (or London 3) band for the Guideline Hourly Rates (“Guideline Rates”).
The Guideline Rates were last revised in 2010 and the length of time since then has led to them becoming much maligned, particularly since Mrs Justice O'Farrell said, in the case of Ohpen Operations UK Ltd v Invesco Fund Managers Ltd [2019] EWHC 2504 (TCC), at paragraph 14:
“…the hourly rates of the defendant's solicitors are much higher than the SCCO guideline rates. It is unsatisfactory that the guidelines are based on rates fixed in 2010 and reviewed in 2014, as they are not helpful in determining reasonable rates in 2019. The guideline rates are significantly lower than the current hourly rates in many London City solicitors, as used by both parties in this case. Further, updated guidelines would be very welcome.”
When the Master of the Rolls considered a report proposing to vary the Guideline Rates in 2014, he accepted the conclusion that they could be used as a starting point in detailed assessments even though they had originally only been intended to be used in summary assessments. That was, in my view, a reflection of the fact that there is rarely any other starting point offered by the parties to the court when considering the appropriate level of hourly rates.
The Guideline Rates for City of London (London 1) work are (Grade) A — £409; B — £296: C — £226; and D — £138. The Outer London rates are considerably below these figures (£229–267 / £172–229 / £165 / £121) and it is the claimant's case that the reasonable hourly rate to be allowed fall somewhere between the two given the locality of Skadden and the nature of the case. Consequently, the claimant offers £400 for Grade A; £280 for B; £180 for C; and £130 for D.
In my view, the claimant's starting point is entirely opportunistic. Whilst Canary Wharf may be located in a postcode outwith those allowed by the Guideline Rates for the City (EC1 to EC4), the presence of firms such as Skadden and Clifford Chance as well as many multinational financial institutions inevitably leads to the conclusion that rates equivalent to those to be found in the City are much more appropriate.
Nature of the case ( CPR 44.4(3))
Such rates would be appropriate if the work involved in the particular case justified being done in the City. As the former Senior Costs Judge said, “City rates for City work.” Sometimes that is suggested to be only for legal work involved in transactional matters such as mergers and acquisitions, but it seems to me to be the case that litigation can equally command City rates in appropriate circumstances. Indeed, there would be little purpose in the Guideline Rates if that were not so, given that they were produced for the assistance of judges at the end of short hearings who would be summarily assessing the costs of the litigation.
As would be expected, the advocates for both parties sought to describe the nature of this case in a manner which supported their argument as to the hourly rates to be allowed. For the paying party, Mr James concentrated on the limited procedural steps and the number of witnesses and evidence required before a two-day hearing took place before Barling J. In his submission, the case was a “fairly ordinary” one by the standards of the Commercial Court. It was simply a question of establishing the residence of the second defendant and consequently, whether he had managed to establish that residence in Switzerland by the time these proceedings were commenced, or whether he remained resident in this jurisdiction.
Mr James argued that there were only two features of the case which might take it slightly out of the usual run of such litigation. These were the involvement of Swiss law and the allegation that the separation of the second defendant from his wife was a sham. But, Mr James submitted, even those aspects were, in reality, fairly limited. For example, the interpretation of expert evidence was no more difficult in this case than in clinical negligence matters where a lot of expert evidence would be expected.
Mr Mallalieu, for the second defendant, described the case as having great urgency and complexity. An application to contest jurisdiction needed to be made within 28 days or else the party would be deemed to have submitted to the jurisdiction of the court. It was not clear, in Mr Mallalieu's submission, that any extension of time could be made (in order to put sufficient evidence together to support the application) without this, in itself, amounting to a submission to the jurisdiction of the court.
The parties were involved in litigation in other parts of the world and the second defendant needed to be advised by Skadden about the context of these other proceedings when advising him about his prospects of disputing jurisdiction. There was also, in the particulars of claim, an allegation that an oral agreement regarding the jurisdiction of the English courts had been reached between the parties to deal with. The time recording showed that a lis pendens claim was run at the same time as the jurisdictional challenge and this also added to the complexity.
In respect of the value of the case, Mr Mallalieu pointed out that the second defendant had placed a figure of US$500 million on the potential claim at the handing down hearing and that had never been disputed by the claimant. Mr James accepted that there were substantial assets involved in the various claims but said it was unclear whether there were charges on the various properties; whether the businesses were profitable or loss-making et cetera. As such, he would accept that tens of millions of pounds were involved, but the matter in issue was the question of the second defendant's residence, not whether he would get, for example, shares in certain steelworks.
Neither advocate went slavishly through the so-called seven pillars of Wisdom in CPR 44.4(3). As I have set out, they made submissions particularly regarding the size of the claim and the complexity of it. Mr Mallalieu also submitted that the conduct of the claimant in bringing proceedings without there being any Pre-Action Protocol letter first, added to the urgency and therefore the weight of the case, given the time limits involved.
Both advocates relied upon the points of dispute and replies in addition to their submissions. Mr Mallalieu referred specifically to the replies regarding the question of proportionality which tread very similar ground to the hourly rates. I have reconsidered those points of dispute and replies when drafting this decision but do not think there is anything further that I need to add to the summary of the submissions that I have set out.
The claim brought by the claimant was clearly of a significant sum, however it might ultimately have been quantified, if the proceedings had gone any further. The size of the case and its international flavour clearly justified the use of City solicitors to conduct the litigation, in my view.
But there is a limit to the impact that the size of the case can have on the hourly rate. Once it is clearly a significant sum that is involved, there is a finite limit to the rate a solicitor can charge for shouldering the burden of that value, and generally therefore the importance, of the case. It is not as if the hourly rate is proportional to the size of the claim, for example.
Other than the size of the case, it does not seem to me that the second defendant has made out that the litigation was at all out of the mainstream that might be expected to be dealt with by City solicitors. I do not think that the urgency urged upon me by Mr Mallalieu is made out by the papers that have been lodged. It was clear from the beginning that an extension of time for service of the evidence was going to be sought and there was no agonising about whether this might inadvertently cause the client to submit to the jurisdiction. Similarly, it is clear from a note produced by the associate Ms Fu at the outset, that the legal questions to be answered ultimately by the judge were very largely established right at the beginning. It was not a case of novel issues having to be dealt with in terms of legal precedent. It was a matter of establishing the facts and then applying the law to them. I am very clearly of the view that the subject matter of these proceedings in terms of the application to contest jurisdiction was of the normal grist to a City litigation solicitors' mill.
Case law
Mr James relied on two cases in support of the arguments he raised on hourly rates. The first, and more important case, was Dana Gas PJSC v Dana Gas Sukuk Limited and Others [2018] EWHC 332 (Comm) where Leggatt LJ dealt with an application for a...
To continue reading
Request your trial