BAR COUNCIL SEMINAR ON COSTS AND FEE ESTIMATES. Paper by Denis McDonald SC Monday 11 th May 2009
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1 BAR COUNCIL SEMINAR ON COSTS AND FEE ESTIMATES Paper by Denis McDonald SC Monday 11 th May 2009 THE CURRENT SYSTEM OF ASSESSING COSTS Introduction 1. The purpose of this paper is to provide an outline of the legal principles governing the current system in operation for the assessment of party and party costs (i.e. the costs recoverable by a successful party in litigation against the unsuccessful party). Party and party costs are to be distinguished from solicitor and client costs (where issues of quantification arise as between clients on the one hand and the clients lawyers on the other). I stress that this is the current system of operation. As many of you will be aware, the current system is supposed to change at some time in the future having regard to the Haran Committee Report In a party and party situation, issues can arise in relation to the measurement of any item of costs including counsel s fees, solicitors fees, and the fees of any expert retained in the case. The basic principle upon which party and party costs are recovered was described by Walsh J. in the Supreme Court in Attorney General (McGarry) v. Sligo County Council 2 as follows:- 1 i.e. the report of the Legal Costs Working Group chaired by Paul Haran published on 7 November, See also the subsequent report of the Legal Costs Implementation Group chaired by Desmond Miller which was published in November The latter specifically recommended that the assessment of costs in a particular case must involve an examination of the work actually done, and that both barristers and solicitors should be obliged to have in place a proper system of time recording, and that bills should be supported by time records. It also recommended that barristers and solicitors should be required to set out their hourly/daily charge-out rates. It also recommends that what it calls global fees such as solicitors instructions fees or barristers brief fees should be abolished and replaced by a set of charges based on the component steps making up the work done. 2 [1991] 1 IR 99 at p 119.
2 The costs involved in this case are party and party costs. The basis of party and party costs is one of indemnity. It is also important to bear in mind that the costs as between party and party are the client s costs. What can be recovered in party and party taxation is the money paid out or, perhaps in tune with more modern practice, the monies which the successful party had already undertaken with his solicitor and counsel and other persons to pay, such as witnesses etc., even though not yet paid. Nothing can be recovered in party and party taxation unless three conditions are fulfilled namely, (a) that the court has made an order for costs in favour of the party, (b) that the matters claimed had been properly incurred, and (c) that the party in question is under a legal liability to pay them. 3. The provisions of Order 99, Rule 37(18) are also relevant. That sub-rule provides that:- On every taxation, the Taxing Master shall allow all such costs, charges and expenses as shall appear to him to have been necessary or proper for the attainment of justice or for enforcing or defending the rights of any party, but, save as against the party who incurred the same, no costs shall be allowed which appear to the Taxing Master to have been incurred or increased through over-caution, negligence or mistake, or by payment of special fees to counsel or special charges or expenses to witnesses or other persons or by other unusual expenses. 4. Neither the decision in the McGarry case nor the provisions of the rules offer much assistance as to the mechanics by which the Taxing Master actually goes about measuring costs. I have no doubt that Paul Conlon will provide a very useful insight into the way in which costs are actually measured on a day to day basis by the Taxing Master and by legal costs accountants. 2
3 5. The legal principles covering the taxation of costs were subject to a significant change in 1995 as a consequence of section 27 of the Courts & Court Officers Act, Prior to the changes effected by the 1995 Act, the system of taxation (at least insofar as counsel s fees were concerned) was largely governed by the principles identified by Hamilton J. 3 in Kelly v. Breen 4. In that case, Hamilton J. said that the Taxing Master could not disallow counsel s fee (or any other disbursement of the solicitor) on the basis that he considered it to be excessive; the Taxing Master could only do so if, in his opinion, no solicitor acting reasonably carefully and reasonably prudently based on his experience in the course of his practice.would have made such disbursements. 6. Under the principles identified in Kelly v. Breen, in assessing the fees payable to counsel, the objective solicitor was expected to have regard to his experience of:- (a) the fees charged and paid in respect of cases of similar nature; (b) the practice of barristers as to marking fees insofar as accepted by solicitors in practice; (c) the fees paid to opposing counsel in the same matter. Section 27 of the Courts & Court Officers Act, The application of the Kelly v. Breen principles led to a situation where it was considered that the Taxing Master was precluded from looking at the actual work undertaken by counsel. Instead, the Taxing Master was expected to measure counsel s fee by reference to what might be considered 3 As he then was. 4 [1978] ILRM 63. 3
4 to be a market rate. 5 The market rate was measured by reference to what the objective solicitor would be prepared to pay counsel for a case of that kind. The legislature clearly regarded this situation as undesirable and, accordingly, section 27 of the 1995 Act was enacted. Section 27 made a number of important changes to the existing practice:- (a) firstly, it gave to the Taxing Master 6 a power to examine the nature and extent of any work done or services rendered or provided by counsel or by a solicitor or an expert 7 ; (b) secondly, it gave to the Taxing Master an express power (in section 27(2) of the 1995 Act) to allow such fees for counsel (or fees for a solicitor or an expert) as he considers in his discretion to be fair and reasonable in the circumstances of the case ; (c) thirdly, it prescribed a new test to be applied by the court on a review of a decision by the Taxing Master 8 on a taxation of costs. Section 27(3) of the 1995 Act provides that the power of the High Court (or of the Circuit Court on a review of a decision of the County Registrar) is now limited to cases where the High Court is satisfied that the Taxing Master 9 has erred as to the amount allowed or disallowed (as the case may be) so as to render the decision unjust. This express requirement to show injustice is new. While it may have been implicit in the principles previously applicable, what was required to be shown prior to the enactment of the 1995 Act was that the Taxing Master had made an error in measuring some item on the bill of costs. 10 There was no explicit requirement that the error should have led to injustice. 5 This was the phrase that was used by Francis Murphy J. in Smyth v. Tunney [1993] 1 IR Or the County Registrar in the Circuit Court. 7 See section 27(1) of the 1995 Act. 8 Or the County Registrar. 9 Or in Circuit Court cases the County Registrar. 10 See the discussion by Laffoy J. in Minister for Finance v. Goodman (No. 2) [1999] 3 IR
5 8. The changes made by section 27 of the 1995 Act were described by Laffoy J. in Minister for Finance v. Goodman (No. 2) as fundamental 11. In Quinn v. South Eastern Health Board 12, Peart J. said that as a consequence of section 27 of the 1995 Act, the Taxing Master will now normally need to look at the work actually done in making his assessment as to whether the fees in question were fairly and reasonably necessary for the attainment of justice or for enforcing or defending the rights of any party. The case law since the 1995 Act 9. Section 27 has been the subject of a number of decisions since its enactment. The first issue the court had to grapple with was the nature of the test imposed by section 27(3). In Smyth v. Tunney (No. 3) 13, McCracken J. (at p 213) stated the relevant test as follows:- The principle upon which I must act, therefore, is not simply to decide whether the Taxing Master erred, but also, if I am to alter his decision, I must find that his decision was unjust. I cannot approach this issue on the basis of trying to assess what costs I would have awarded had I been the Taxing Master. That test was followed by the Supreme Court in Cronin v. Astra Business Systems (No. 2) 14 where McGuinness said (at p 482):- The review of taxation by the High Court is governed by section 27(3). As was pointed out by McCracken J. in Smyth v. Tunney (No. 3)., such a review entails a consideration not alone whether the Taxing Master has erred but also whether such an error has led to injustice. 11 See p 349. See also Kearns J. in Superquinn Limited v. Bray UDC (No. 2) [2001] 1 IR 459 at p [2005] IEHC [1999] 1 ILRM [2004] 3 IR
6 10. There has been debate in the case law as to whether the error on the part of the Taxing Master must be an error of principle or simply an error as to amount. There has also been debate in the case law as to whether the court is entitled to form its own view as to the amount to be allowed. 15 However, it is to be noted that section 27(3) of the 1995 Act itself does not mention the words error of principle. It uses the words..has erred as to the amount of the allowance or disallowance. (Emphasis added). At the end of the day, I am not sure that much turns upon the different approaches which have been adopted. Ultimately, if the amount allowed for any particular item is considered by the court to be either too high or too low, the court is likely to intervene and substitute its own view. Thus, even in Smyth v. Tunney (No. 3) 16, McCracken J., notwithstanding his statement (at p 213) that he could not approach the issue on the basis of trying to assess what costs I would have awarded had I been the Taxing Master, went on to consider the amount which he believed ought have been awarded by the Taxing Master and he substituted this amount for the amount actually awarded. As Kearns J. said in Superquinn Limited v. Bray UDC (No. 2) 17 :- In discharging its function, the High Court inexorably must, if it can, form a view itself of the particular item of costs or the amount it would have awarded in any given situation. Otherwise, there is no basis upon which any conclusion as to injustice can exist in the absence of some mistake of principle. 11. In the Superquinn case, Kearns J. suggested that unless an error of the order of 25% or more had been established in relation to the amount of any item assessed by the Taxing Master, the court should not intervene. This view has not been accepted by all of the judges. For instance, Peart J. in 15 See Superquinn Limited v. Bray UDC (No. 2) [2001] 1 IR 459 in particular, at pp [1999] 1 ILRM [2001] 1 IR 459 at p
7 Quinn v. South Eastern Health Board 18 expressly questioned this view. He expressed reservations about the 25% formula proposed by Kearns J. Peart J. emphasised that what might be viewed as just or unjust must be viewed on a case by case basis having regard to the work done as different factors might be at play, rather than by an arbitrary formula. The approach taken by Peart J. appears to be consistent with the legislative policy set out in section 27(1) of the 1995 Act which, as we have already seen, makes clear that the Taxing Master now has power to examine the nature and extent of any work done or services rendered. Section 27(1) provides that, on a taxation of costs as between party and party, the Taxing Master.shall have power on such taxation to examine the nature and extent of any work done, or services rendered or provided by counsel (whether senior or junior), or by a solicitor, or by an expert witness appearing in a case or any expert engaged by a party, and may tax, assess and determine the value of such work done or services rendered or provided in connection with the measurement, allowance or disallowance of any costs, charges, fees or expenses included in a bill of costs. 12. Notwithstanding the changes brought about by section 27 of the 1995 Act (with their emphasis upon the nature and extent of the work actually done in any particular case), the courts have emphasised that the Taxing Master should not consider fees in a vacuum. He should have regard to fees marked in comparable cases. The courts have taken the approach that while the Taxing Master should not follow comparators in a slavish way, he should nonetheless have regard to them. Thus, in Gallagher (a Minor) v. Stanley 19, Kearns J. 20 said that if the Taxing Master is to reject comparator cases which have been opened to him, he must at least provide some reasons for doing so. The approach taken by the court is perhaps best 18 High Court, unreported, 30 November, High Court, unreported, 23 March, At p 7. 7
8 exemplified by what was said by Ó Caoimh J. in Doyle v. Deasy & Company 21 where he said:- With regard to the use of comparisons, neither I nor any of the judges who have assessed the area of comparative evidence in the area of taxation suggest a slavish approach to the adoption of same. As the area is not an exact science and it is probable that few, if any, cases would be exactly the same, comparators must only be a guide to the assessment in question. However, I am satisfied that they are a most valuable guide. It must be borne in mind that where reference is made to solicitors acting on the basis of their experience, they are called upon to make assessments on the basis of comparative cases in their experience. However, as in all areas, care must be exercised and this includes the exercise of advancing appropriate comparative evidence. 13. In looking at comparators, regard should be had not only to written decisions of the Taxing Master, but also to settlements which have been achieved between legal costs accountants. In Doyle v. Deasy, Ó Caoimh J. rejected the approach taken by the Taxing Master in that case in rejecting comparisons which arose from settlements as opposed to decisions of the Taxing Master. Ó Caoimh J. said:- I am satisfied that such settlements involving as they do experienced cost accountants may well be of assistance in the assessment of another case and cannot be rejected merely because the cases in question were settled between the parties without the necessity to proceed to taxation by the Taxing Master. 22 The onus of proof in appeals to the High Court 21 High Court, unreported, 21 March, See also the approach taken by Smyth J. in Landers v. Judge Patwell [2006] IEHC
9 14. In appeals to the High Court, 23 the onus is on the appellant to show that the Taxing Master has erred and that the decision is unjust. 24 That may not be a particularly difficult task if the report of the Taxing Master is not sufficiently well argued. One of the difficulties in trying to stand over a decision of the Taxing Master is that very frequently, the Taxing Master will not have spelt out in sufficiently cogent terms the basis for his decision. Thus, for example, the rejection of comparator cases by the Taxing Master was found not to have been sufficiently well justified in Doyle v. Deasy (above), Harold v. Jameson 25 and in Landers v. Judge Patwell 26. In each of these cases, the High Court overturned decisions of the Taxing Master on the basis that he had failed to properly justify his decisions. Procedure to be followed 15. In this context, I should explain that on a review of taxation to the court under section 27(3) of the 1995 Act, the following will be put before the court:- (a) the report of the Taxing Master (in which he sets out the reasons why he has reached his decision in relation to the bill of costs the subject matter of the taxation); (b) any previous rulings given by the Taxing Master. Rulings may have been given by the Taxing Master at an earlier stage in the process. I should explain that taxation involves a two stage process, namely:- (i) the hearing of the initial taxation when the Taxing Master reviews the bill of costs and hears legal costs accountants for both sides in 23 Or appeals to the Circuit Court from the County Registrar. 24 See Cronin v. Astra Business Systems Limited (No. 2) [2004] 3 IR 476 at p 486 per McGuinness J. 25 High Court, unreported, Ó Caoimh J., 31 July, [2006] IEHC 248 (Smyth J.). 9
10 relation to each item on that bill. Having heard both sides, the Taxing Master will reach a decision on each item on the bill; (ii) if either side is dissatisfied with the ruling of the Taxing Master on any item in the bill of costs on the initial taxation, they can bring in objections to those items and the matter is then debated before the Taxing Master again following which a final ruling is given on those items; (c) the bill of costs itself; (d) any objections brought in to the initial taxation. Such objections are required to be made in writing; (e) all written submissions filed on both sides. The use of such written submissions is becoming more commonplace. These will usually have been drafted by the legal costs accountants involved but in some cases, counsel will be asked to assist in the preparation of these submissions. The tradition is that this will be a barrister unconnected with the case 27 ; (f) the pleadings; (g) any transcript of the hearing before the Taxing Master; (h) any transcript of the hearing before the High Court. The sufficiency of the report 16. The court has stressed on a number of occasions that the report of the Taxing Master should be sufficiently detailed in order that the court may 27 The same tradition applies in relation to reviews of taxation of costs before the High Court. None of the barristers who appeared in the case will ordinarily appear in such a review. 10
11 understand the basis for the Taxing Master s decision. For instance, in Superquinn v. Bray UDC (No. 2) 28, Kearns J. said:- It seems to me that in the aftermath of the Act of 1995, any ruling of the Taxing Master must of necessity, set out in some detail an analysis of the work and the reasoning which leads to the determination made in respect of solicitors instructions fees and counsel s fees, particularly having regard to the powers and responsibilities imposed on the Taxing Master by section 27(1) and (2), and on the court by section 27(3) given that the court may be called upon to review taxation. 17. Where the Taxing Master has provided a detailed report setting out the nature and extent of the work done, the court will be in a much better position to assess whether the allowances made by the Taxing Master are correct. If a detailed report is provided, it becomes more difficult to overturn the decision of the Taxing Master. This is clear from the decision of Gilligan J. in Boyne v. Dublin Bus 29. In that case, Gilligan J. said 30 :- It does appear appropriate to stress that the Taxing Master should, in arriving at his decision, set out the results of his examination of the nature and extent of the work that is carried out in any particular case by the relevant person or body claiming a particular fee. This is for the purpose of enabling this court to consider whether in arriving at his decision the Taxing Master has had regard or excessive regard to some factor which he either should not have had any regard to, or to which he should have much less regard. This practice would also enable this court to be clear as to whether there is any significant factor to which the Taxing Master ought to have had regard and to which he either had no regard at all or insufficient regard. In essence, the Taxing Master should set out a clear picture as to the nature and extent of the work carried out 28 [2001] 1 IR 459 at p [2006] IEHC At p
12 by the relevant person or body claiming the fee. It is fortunate that in the particular circumstances of this case, sufficient factual information is available to enable the court to come to a conclusion in all but one of the contested items. Some practical issues from a barrister s perspective 18. From counsel s perspective, it is therefore very important that sufficient information should be available to the Taxing Master to enable him to see the nature and extent of the work undertaken by counsel. It would therefore be advisable for counsel, when sending a fee note to the instructing solicitor, to send a detailed letter or memorandum along with the fee note in order to justify the fee claimed. In addition, if the Taxing Master is to properly review the nature and extent of the work undertaken by counsel, it would be wise that counsel should be in a position to provide (if required) all of the notes and records maintained by counsel in relation to work done. I appreciate that this is not something that was generally done in the past, but given the changes brought about by section 27 of the 1995 Act, it would be important that counsel should be in a position to provide this level of detail in the future (if required). 19. There are two further aspects of the decision of Gilligan J. in the Boyne case which are particularly relevant for us:- (a) in the Boyne case, a challenge was made to the letter sent by the plaintiff s solicitor to the client pursuant to section 68 of the Solicitors (Amendment) Act, 1994 which requires a solicitor to provide a cost estimate to a client as soon as practicable after taking instructions. There had been a letter sent by the plaintiff s solicitor in that case, but the defendant suggested that it did not comply with section 68 because (so it was suggested) it did not provide much by way of detail. The defendant submitted that in the circumstances, the plaintiff was not 12
13 himself under a legal liability to discharge his own solicitor s bill and that accordingly, the plaintiff was not entitled to recover any costs from the defendant on a party and party taxation. These arguments were rejected by Gilligan J. Gilligan J. came to the conclusion that the letter which had been written did provide the plaintiff with sufficient particulars for the purposes of section 68 of the 1994 Act. However, Gilligan J. added that if the letter had been insufficient or if no letter had been sent, this is something which could be taken into account by the Taxing Master when deciding upon the appropriateness of the fees sought, and that the failure to comply with the statutory requirement was a matter to which the Disciplinary Tribunal of the Law Society could have regard in an appropriate case. The approach taken by Gilligan J. in that case was consistent with the approach taken by Peart J. in A & L Goodbody v. Colthurst 31 ; (b) the second aspect of the Boyne case which is relevant is that in that case, Gilligan J. upheld the Taxing Master s allowance to junior counsel of a fee equivalent to two-thirds of that allowed to senior counsel. In taking this approach, Gilligan J. had regard to what is stated in paragraph 12 of the Code of Conduct which provides that barristers fees are based upon work done, and that a barrister is entitled to take into account certain matters when marking or nominating a fee including the complexity of the issue or subject matter, the length and venue of any trial or hearing, the amount or value of any claim, the time spent on the case, and any other special features of the case. In that case, there was evidence that junior counsel had cross-examined the economist called on behalf of the defendant. Although this was a personal injury case, a significant issue arose as to whether the plaintiff was entitled to rely upon a 3% rate of interest for the purposes of calculation of the appropriate multiplier to be applied to any claim for future loss of earnings. Effectively, the defendant tried to re-run the point raised (and decided against the 31 High Court, unreported, 5 November,
14 defendant) in McEneaney v. Monaghan County Council 32. In the circumstances, junior counsel had played a particularly vital role in the hearing. Gilligan J. came to the conclusion that the Taxing Master was justified in taking the view that an appropriate fee for junior counsel was two-thirds of the fee marked by senior counsel. In taking that approach, Gilligan J. drew attention to the following:- (i) junior counsel was involved in the examination of a number of witnesses and the cross-examination of the economist; (ii) junior counsel had prepared the written submissions relating to the economic argument; (iii) junior counsel carried the responsibility of ensuring that senior counsel had not overlooked any particular aspect or element of the evidence or law; (iv) junior counsel was required to take a careful note of the evidence given during the trial; (v) junior counsel for the defendant had been allowed a fee based on two-thirds of senior counsel s fee; (vi) no compelling evidence or argument had been presented to the Taxing Master on the objections that he should depart from the well established custom and practice under which junior counsel marked a fee equating to two-thirds of the fee marked by senior counsel. 20. The decision in the Boyne case has a number of consequences for barristers:- 32 High Court, unreported, O Sullivan J., 26 July,
15 (a) in the first place, it draws attention to the importance of complying with the PPC ruling that barristers send an appropriate fee estimate. A failure by a barrister to send such a fee estimate may well be taken into account by the Taxing Master when deciding the appropriateness of the fees sought by counsel as part of the Taxing Master s examination of counsel s work undertaken pursuant to section 27(1) and section 27(2) of the 1995 Act 33 ; (b) while the failure to comply with the requirement may not deprive a barrister s client of the entitlement to recover costs, it may affect the quantum to be recovered and one could envisage circumstances where a flagrant breach of the requirement might persuade the Taxing Master to disallow a claim for counsel s fees in full; (c) while the decision suggests that a brief fee for junior counsel based on two-thirds of the fee charged by senior counsel is a useful yardstick, it would be dangerous to be too complacent about marking fees on this basis. It would be very important that junior counsel should be in a position to show that they made a real contribution to the case such that a fee based on a two-thirds rate is appropriate having regard to the quality and level of the work undertaken by junior counsel. The twothirds rate is by no means automatic; (d) it is also important to bear in mind, as Peart J. pointed out in Quinn v. South Eastern Health Board 34 that the changes brought about by section 27 of the 1995 Act can work both ways. They can assist in ensuring that junior counsel is paid appropriately for all of the work undertaken. If junior counsel has had an equivalent role to senior counsel in the case, or performed at a similar level to senior counsel, then 33 Sending a fee estimate will become even more important if the recommendations of the Implementation Committee (see footnote 1 above) find their way into new legislation. 34 High Court, unreported, 30 November,
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