“Quite exceptional” increase in hourly rates calls for an explanation, says costs judge

A “quite exceptional” increase in a family law firm’s hourly rates during the course of a multi-year retainer amounted to special circumstances to order a Solicitors Act assessment of its bill despite the application being made out of time.

Costs Judge Leonard said the increases between 2014 and 2017 – from £245 to £320 for a partner and £100 to £165 for a junior assistant – called for an explanation.

“There has to be an issue about informed (or any) approval by the defendant of the hourly rate rises imposed by the claimant,” he added.

Raydens Ltd v Cole [2021] EWHC B14 (Costs) was a divorce case that involved “a long history of protracted, difficult litigation, mounting costs and funding difficulties”, the judge recounted.

Between November 2013 and September 2018, northern home counties firm Raydens rendered bills totalling £263,000, of which £44,000, excluding any claim to interest, was outstanding.

Ms Cole complained about the increases in the hourly rates, among other things. The firm rejected this and told her that, as she was given regular updates on costs, she could have asked it to stop work “at any time”. It brought a claim to recover the unpaid costs.

Her application for detailed assessment under section 70(3) of the Solicitors Act was out of time, but the district judge transferred the case to the Senior Courts Costs Office to rule on the preliminary issue of whether there were special circumstances that meant there should be an assessment anyway.

Costs Judge Leonard declined to make a finding of special circumstances based on the arguments that Raydens did not provide adequate estimates and costs information, and possible irregular billing.

However, he said he was “exercised by what seems to me to be a quite exceptional increase in the claimant’s hourly rates between 2014 and 2017”.

He explained: “While I have already come to the view that it would be inappropriate for present purposes to make any finding on estimates, it is pertinent that these increases took place against a background of exceptionally high accruing costs, originally anticipated in tens of thousands but ultimately exceeding £260,000, the sheer scale of which inevitably had a significant impact of the assets that were to become available to the defendant following her divorce.”

At the time Ms Cole signed the engagement letter, she agreed to specified hourly rates payable over a period estimated at up to 18 months, the judge continued.

She might “reasonably” have anticipated one annual hourly rate review before the litigation concluded, but “I do not believe that anyone in her position could reasonably have anticipated that, before it was over, she would be paying the senior fee-earner and his assistant hourly rates that had increased by over 30% and 65% respectively”.

The firm’s argument that it took into account the rates charged in its local legal services market as well as rates charged by similar specialist matrimonial firms in London offered “a broad context for the rises, but not an explanation”, Costs Judge Leonard said.

This included whether the firm considered the extent to which the increases would exacerbate the funding difficulties that Ms Cole had experienced.

The judge speculated that, while the assistant’s rate may have risen due to his increasing seniority and experience, this would raise the question of whether he should have been replaced by someone whose hourly rate was closer to that originally agreed.

“It does not seem to me to be an answer to any of these concerns to say… that the defendant had the choice of discussing these increasing rates with the claimant or just ceasing to instruct the claimant.

“With regard to discussion, if there is an explanation to justify such exceptional hourly rate increases, it does not seem to have been offered to the defendant, who was presented with a fait accompli.

“It is common ground that the defendant’s experience of the matrimonial litigation has, over the years, taken a severe toll on her mental health, for which she has needed treatment. The defendant herself has said that she felt at the time that she had no choice but to accept the increases, and I find that quite credible.”

Costs Judge Leonard said that to suggest Ms Cole could just have parted company with Raydens in the midst of such difficult and stressful litigation, while struggling with funding difficulties, “does not seem to me to be realistic, especially given her state of mental health”.

Martyn Griffiths (instructed by Keidan Harrison) for the claimant. Simon Teasdale (instructed by Railton Law) for the defendant.

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Costs News
Published date
15 Sep 2021

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