Blurry Lines of Expertise

A common problem in costs assessments, particularly in commercial litigation, is the recovery of fees incurred by third party service providers whose services do not fall squarely within the definitions of expert witness, professional witness or solicitor.

In fact, there have been a number of cases over the years where this issue has arisen, most notably perhaps, in Agassi v Robinson (HM Inspector of Taxes) (No. 2) [2005] EWCA Civ 1507 where Mr Agassi was a Litigation in Person (“LIP”). His tax advisers, Tenon, had provided assistance to him in his conduct of the proceedings, including instructing counsel on his behalf. As Tenon did not have the right to conduct litigation, Mr Agassi was not entitled to recover any of Tenon’s fees that related to work which a legal representative would have done, for example, time spent providing general assistance to counsel. However, Tenon’s representative, Mr Mills, was a qualified accountant whose tax expertise was required, for example, in the instruction of counsel. Therefore the court found that, to the extent the work done by Tenon could be described as ‘expert advice’, the fees would amount to a disbursement that a legal representative would have incurred and would be recoverable. The question of whether the costs would amount to a ‘disbursement’ concerned the provisions of CPR 48.6(3)(a)(ii) – now Part 46.5(3) – which provides that a LIP can only recover costs in so far as they relate to work which would otherwise have been done, or the disbursements would otherwise have been incurred, by a legal representative.

The more recent decision of Octoesse LLP v Trak Special Projects Ltd [2016] EWHC 3181 (TCC) concerns Trak’s recovery of construction claim consultant’s fees in relation to adjudication enforcement proceedings. Similar to Agassi, Trak acted as a LIP and the claim consultants provided assistance. This assistance extended to the preparation of the Defence and a witness statement, instructing counsel, liaising with the court and attending at court. Mrs Justice Jefford considered Agassi and a string of decisions concerning the recovery of claims consultants’ fees, including NAP Anglia Ltd v Sun-Land Development Co Ltd [2012] EWHC 51 wherein Edwards-Stuart J decided that the costs of work done by claims consultants who assisted solicitors, Prettys, in the case were recoverable, in principle, as their prior knowledge of the case helped to save costs. Their fees were allowed to the extent that they did not exceed the amount a solicitor would have charged for doing the same work. In Octoesse, Mrs Justice Jefford, in keeping with the decisions in Agassi and NAP, found that had solicitors been instructed, it would have been practical and normal for them to seek the assistance of the claim consultants and that their fees would usually fall within the meaning of ‘disbursements’ in CPR 46.5(3)(a). In the circumstances, the claim consultants’ fees were allowed to the extent those costs did not relate to work which a solicitor would normally do, i.e. liaising with the court and preparing a schedule of costs. Some of their time liaising with counsel was also disallowed on the basis that solicitors may have sought their assistance but would not have wholly relied upon them. This decision appears to ‘blur the lines’ a little over what is and what is not ‘solicitor’s work’ or a ‘disbursement’ and the decision to allow a substantial proportion of the claims consultants’ time as a disbursement was, undoubtedly, in recognition of the fact that their involvement was designed to save costs.

Similar decisions have been made in relation to the fees of other third party service providers including; in-house experts, costs consultants, loss adjusters and foreign lawyers.

For example:

Re Nossen Letter Patent (1969) Ch.d 28.10.68) – The Respondent’s bill included claims for costs in respect of research and experiments carried out by its expert employees. The court found that it was reasonable for the Respondent to recover a sum in respect of expert services performed by its own staff provided the amount was restricted to a reasonable sum for the actual and direct costs of the work undertaken, and not a proportion of the corporation’s overheads.

Nicholas Crane v Canons Leisure Centre (2007) – This case concerned the recovery of additional liabilities on costs consultant’s fees. The issue here was whether the costs consultant’s fees were to be treated as part of the solicitor’s profit costs (thereby attracting a success fee) or as a disbursement. The court found that the costs consultant’s work was undoubtedly solicitors’ work and not a disbursement, the determinative factors being the nature of the work done and the retention of responsibility for the work.

Lady Justice Hallett (at para 35 & 36 of the Judgment):

“I respectfully agree with May LJ, therefore, for the reasons he gives, that to construe these particular provisions and determine whether or not these costs are properly described as base costs or disbursements, one must focus on the nature of the work done (whether it is solicitors’ work) and where responsibility for the work lies”.

“In my view, the work done by Costings was undoubtedly solicitors’ work. It was the type of work Rowley Ashworth were retained to do. Rowley Ashworth may have chosen to delegate their work, but they never relinquished control of it and responsibility for it. At every stage of the process Costings’ work was under Rowley Ashworth’s supervision. Costings drafted a Schedule of Costs with a view to negotiating a settlement; this was subject to approval by Rowley Ashworth. Costings drafted a Bill of Costs; this was checked and signed by a Rowley Ashworth partner. Rowley Ashworth instructed Costings to draw up the Points of Dispute (which they approved) and to conduct the detailed assessment before the Costs Officer. For this, Costings required rights of audience and instruction by a qualified litigator. They were, therefore, deemed to be temporary employees of Rowley Ashworth and, as such, assisted Rowley Ashworth in the conduct of the litigation. Finally, had there been any failure on the part of Costings, Rowley Ashworth could have been held accountable. Given that background, for my part, I am satisfied that Costings’ work is properly described as work done “on behalf of the solicitors” and their fees are properly described as base costs within the terms of paragraph 1.2.1. Accordingly a success fee is payable on them”.

Susan Elizabeth Cuthbert v Stephen Ronald Gair & Wendy Isabell Gair (t/a Bowes Manor Equestrian Centre) (2008) SCCO) – In this case the costs of Loss Adjusters, incurred pre-action, were not recoverable because the pre-action work was of a nature that would otherwise have been done by a solicitor. The court also found that the fees of a loss adjuster incurred after the instruction of solicitors would not be recoverable as a disbursement since there is usually no formal agency agreement between the eventual solicitors and the loss adjusters.

Campbell v Campbell 2016 EWHC 1828 (Ch) – The Claimant LIP had instructed a law firm in Jersey to assist in relation to English proceedings. The work undertaken included work which a solicitor would otherwise have done. The Court found that services provided by a lawyer qualified in another jurisdiction did not constitute “legal services” for the purposes of r.46.5(3)(b). There was no material difference between the position of a lawyer qualified in another jurisdiction and the specialist tax advisers in Agassi. The position may have been different, of course, if the foreign lawyers were acting under the instruction of English Solicitors (Crane v Canons Leisure).

There is a question mark, however, over whether the costs recovery position would be any different where (a) a Jersey based LIP instructs an English solicitor (not on the record), who in turn instructs the LIP’s Jersey lawyer to do ‘solicitor’s work’ and (b) the Jersey based LIP instructs his Jersey lawyer directly. That issue must, I would suggest, turn on the question of the level of responsibility and supervision which the English solicitor accepts and whether the solicitor does anything more for the LIP.

The common denominators in all of these decisions, it seems, are (i) a third party service provider’s costs will only be recovered to the extent that the third party’s particular expertise was required and (ii) that the fees incurred can properly be described as a disbursement for which it was reasonable for a solicitor to have incurred.

So when considering challenges to fees incurred by a third party service provider, consider (a) whether the third party service provider is acting under the instruction of a solicitor (Cuthbert v Gair; Crane v Canons Leisure; ‘Campbell’); (b) whether all the fees incurred relate to activities which fall within the service provider’s area of expertise; and (c) whether all or some of the fees incurred can be treated as a disbursement and/or, having regard to the nature of the matter, are fees which were reasonable for a solicitor to have incurred in the interest of saving costs (Octoesse).

The extent to which the third party service provider’s costs will be recoverable is a difficult one to judge and Octoesse is a good example of how far the court will go in exercising its wide discretion in order to ensure a just outcome. In circumstances where the lines between what may and what may not be recoverable become blurred, it may be wiser to claim the full amount rather than to risk self-assessing the costs too harshly. The parties are likely to determine the recoverable amount by negotiation and if that cannot be achieved, the court may be more understanding than you think, especially where the costs (overall) are proportionate.

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