Court Rejects Admissability Of Costs Lawyers’ Report In Common Law Assessment

Laytons LLP v Savage & Ors [2024] EWHC 512 (SCCO) arose from a Part 7 claim brought by the Claimant law firm, Laytons LLP, against their former clients, the Defendants, for unpaid legal fees. The Claimant had acted for the Defendants between August 2019 and November 2020, raising a total of 32 invoices for £820,064.00. In February 2021, the Claimant brought a Part 7 claim for £365,148.02 relating to the last 22 unpaid invoices.

Chronology of relevant events:

• August 2019: Defendants instructed Claimant to act on their behalf in a shareholder dispute
• August 2019 – November 2020: Claimant acted for Defendants and raised 32 invoices totaling £820,064.00
• February 2021: Claimant brought Part 7 claim for £365,148.02 relating to last 22 unpaid invoices
• April 2021: Defendants served Defence challenging fees and seeking detailed assessment
• August 2021: Court ordered transfer to SCCO for anticipated application by Defendants for detailed assessment
• December 2021: Unless order made requiring Defendants to apply for detailed assessment by 21 January 2022 or be debarred from doing so
• Defendants failed to apply for detailed assessment in time
• December 2022: Defendants applied for relief from debarring order
• January 2023: Defendants’ application for relief dismissed
• March 2023: Court ordered judgment for Claimant with directions for common law assessment limited to specific issues in the Defence
• August 2023: Defendants served a costs lawyer report alongside witness evidence
• October 2023: Claimant applied to exclude the costs lawyer report; Defendants applied for specific disclosure

Key issues:

1. The Claimant’s application to exclude a costs lawyer report served by the Defendants in August 2023 alongside witness evidence. The Claimant argued the report went beyond the scope of the limited issues ordered to be determined at the assessment hearing in March 2023.
2. The Defendants’ application in October 2023 for specific disclosure of documents relating to the earlier invoices that had been paid, to provide context for the unpaid invoices in dispute.

Order of 9 March 2023

1. There be judgment for the Claimant against the Defendants for a sum to be assessed.

2. There be a one day assessment of damages hearing on the first available date convenient to the parties after 9 March 2023.

3. The issues to be determined when assessing the amount of damages to be paid by the Defendants to the Claimant be limited to:

3.1. The terms of the Representation Agreement between the Claimant and Defendants, in particular, whether the same limited the Claimant to charge fees consistent with those set out in paragraph 9 of the Defence;

3.2. The extent to which the Claimant’s fees were demonstrably disputed by the Defendants as per paragraph 10 of the Defence; and

3.3. The rate of interest payable on the Claimant’s invoices.”

The costs lawyer report:

The costs lawyer report obtained by the Defendants from Kain Knight dealt with the following matters:

1. The report stated that Kain Knight had been instructed to provide an opinion on the costs claim as a whole, in accordance with paragraph 3 of Costs Judge Nagalingam’s March 2023 order. However, the court found that the order did not require or permit such a report.
2. The report expressed the opinion that limiting the assessment to the issues in the March 2023 order may seriously prejudice the Defendants’ position. The court considered this an impermissible attempt to widen the scope of the assessment.
3. Paragraphs 13-16 of the report raised issues going beyond those in the Defence and the March 2023 order.
4. Paragraphs 20-29 addressed the hourly rates claimed by the Claimant. However, hourly rates were not included in the issues to be determined per the March 2023 order.
5. Paragraphs 38-45 dealt with the costs estimates provided and interest claimed, which were potentially within the scope of the March 2023 order, but duplicated matters already covered in the Defendants’ witness evidence.
6. Paragraph 45 also addressed the terms and conditions in the Claimant’s retainer, which was one of the permitted issues under the March 2023 order.

Parties’ positions

On the costs lawyer report:

• The Claimant argued it was an impermissible attempt to widen the scope of the issues to be determined, which had been limited by the March 2023 order due to the Defendants’ failure to pursue a statutory assessment. They sought an order that the report have no standing and that the Defendants not be permitted to rely on it.
• The Defendants argued the report would assist the court in dealing with the issues of whether the fees were reasonable and excessive. They said it simply articulated the points they intended to make at the hearing and drew an analogy with an independent solicitor’s report admitted in Turner & Co v Palomo SA.

On specific disclosure:

• The Defendants sought disclosure of the Claimant’s files relating to the earlier paid invoices, arguing this was necessary to provide context to determine if the unpaid fees were reasonable.
• The Claimant opposed the application, arguing disclosure was not necessary to determine the limited issues ordered in March 2023, and that the Defendants were seeking to reopen issues that had been lost due to their failure to pursue a statutory assessment.

The court’s findings:

On the costs lawyer report:

• The report had no standing and the Defendants were not permitted to rely on it. The March 2023 order did not require or permit such a report
• The report was not a formal expert report or witness statement but an opinion based on misconceived instructions that ignored the limited scope of the assessment.
• Elements of the report may form part of the Defendants’ permitted skeleton argument, but the court would only consider submissions on the issues in the March 2023 order.

In my view the report has no standing in this case whatsoever. It may be a document which helps the Defendants organise their thoughts, but ultimately the report represents a tale of what might have been. It is predicated on the Defendants having actually taken the steps necessary to secure a statutory assessment, whilst completely ignoring the fact those steps were not taken.

On specific disclosure:

• The Defendants’ application was dismissed. The court was satisfied the limited issues could be fairly determined without the disclosure sought.
• The bills were itemised or supplemented by further details, providing sufficient information.
• Ordering disclosure would impermissibly widen the scope of the assessment beyond the March 2023 order and the Defendants had foregone the opportunity for a statutory assessment through their own conduct.

No one could reasonably argue against the proposition that, as Mr Nicol put it, “a court is assisted by the best evidence available”. However, that argument is made very much from the Defendants’ perspective and in circumstances where the Defendants, through their own conduct, have lost the opportunity for a statutory assessment and all the mechanistic controls that would have come with the same.

In summary, the judgment confirms the court will determine the limited issues set out in the March 2023 order based on the evidence and procedure permitted therein. The Defendants cannot circumvent their failure to pursue a statutory assessment by seeking to expand the scope through a costs lawyer report or disclosure application.