Factual and Procedural Background
This opinion arises following a judgment handed down on 9 September 2005 and concerns a point of principle arising in the detailed assessment of costs related to litigation involving office-holders and their colleagues at Company A (KPMG). The issue concerns the recoverability of costs for time spent by the office-holders and employees of Company A in the course of proceedings, specifically whether these costs should be treated as remuneration or disbursements under the Insolvency Rules.
Legal Issues Presented
- Whether the entirety of the costs incurred by Company A personnel, including time spent by office-holders and their colleagues, is recoverable as remuneration in the detailed assessment of costs.
- Whether the principle allowing a solicitor litigant in person to recover costs for their own time extends to other professionals and office-holders.
- The applicability of established case law relating to costs, including the interpretation of "costs" under both the Rules of the Supreme Court (RSC) and the Civil Procedure Rules (CPR).
- Whether the costs of time spent by employees of Company A on factual investigation and non-expert tasks can be recovered as costs.
Arguments of the Parties
Appellant's Arguments
- The term "costs" and the indemnity intended by a costs order is broad enough to include expenditure of time as well as money, provided the expenditure of time can be quantified in monetary terms.
- In this case, the litigants (office-holders) are professionals, and the insolvency code provides controls on remuneration, so quantification of time costs poses no problem.
- Time spent by the office-holders and Company A personnel should be recoverable as costs because "time is money".
- The reasoning allowing solicitors acting in person to recover costs for their own time should extend to other professionals and office-holders.
- If a professional can charge for their own time, they should also be able to charge for the time of their staff.
- The decision in Amec demonstrates a shift in approach under the CPR, supporting the recovery of all Company A costs as remuneration.
Appellee's Arguments
- There is no authority supporting the novel approach of recovering all time expenditure as costs, and it would lead to increased litigation costs.
- There is an exception for in-house expert advice, the cost of which may be recovered, but general time spent cannot be recovered.
- The established case law restricts recovery of costs for time spent by litigants in person to solicitors only.
- The position of office-holders is no different from other litigants or fiduciaries and does not justify recovery of costs for their own time spent.
- The decision in Amec is inconsistent with prior authorities and should not be followed.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| The London Scottish Benefit Society v Chorley (1884) 12 QBD 452; 13 QBD 872 (CA) |
A litigant in person who is a solicitor can recover costs for their own time and skill as if they had employed another solicitor, except for unnecessary items. |
The court relied on this case as foundational, establishing that professional skill and time of a solicitor litigant in person are recoverable costs. |
| Re Nossen's Letter Patent [1969] 1 WLR 683 |
Costs of in-house experts employed by a corporate litigant may be recoverable if the experts are truly experts and the costs are reasonable and direct. |
The court applied this principle to Company A (an LLP) treating it akin to a corporation for cost recovery purposes. |
| Buckland v Watts [1970] 1 QB 27 |
Non-solicitor litigants in person cannot recover costs for time spent preparing their case, only out-of-pocket expenses. |
Supported the restriction of recoverable costs for time to solicitors only. |
| Admiral Management Service Ltd v Para-Protect Europe Ltd [2002] 1 WLR 2722 |
Costs of in-house experts may be recoverable under the CPR, but actual entitlement depends on expertise and nature of work. |
The court favored a narrow exception for expert employees’ costs, rejecting broad recovery for general employee time. |
| R (Factortame Ltd) v Transport Secretary (No8) [2003] QB 381 |
Recognition that costs can include fees for forensic accountancy and expert advice, with reasonableness assessed. |
The court found this case did not alter principles on detailed assessment of costs and was not directly applicable. |
| Malkinson v Trim [2003] 1 WLR 463 (CA) |
Extended the London Scottish Benefit Society principle to solicitors acting in partnership and their employees. |
Reinforced that solicitor litigants in person can recover costs for their own time and their employees’ time. |
| Jonathan Alexander Ltd v Proctor [1996] 1 WLR 518 |
Confirmed that courts lack power to award costs for time spent by directors representing companies, except under specific litigant in person provisions. |
Supported the view that only solicitors have special recoverable time costs rights under CPR provisions. |
Court's Reasoning and Analysis
The court began by examining the established principle from The London Scottish Benefit Society v Chorley that a solicitor litigant in person can recover costs for their own time and skill as if they had employed another solicitor. This principle was confirmed and elaborated in Malkinson v Trim, which extended the principle to solicitors acting in partnership and their employees.
The court distinguished solicitors from other professionals, noting that non-solicitor litigants in person cannot recover for time spent preparing their case, only out-of-pocket expenses, as established in Buckland v Watts and supported by CPR provisions.
Regarding in-house experts, the court accepted the Re Nossen's Letter Patent principle that costs for truly expert in-house employees may be recoverable to the extent of their reasonable and direct costs. The court treated Company A, an LLP, as akin to a corporation for this purpose.
The court considered the conflicting approaches in Admiral Management Service Ltd v Para-Protect Europe Ltd and Amec. While Amec suggested a broader recoverability of employee time costs under the CPR, the court found this inconsistent with prior authority and the policy of the CPR to reduce litigation costs. The court preferred the narrower approach in Admiral, considering it more consistent with established principles and CPR objectives.
The court rejected the submission that the office-holders could recover costs for their own time spent unless it fell within the expert exception. The office-holders were not solicitors, and their role did not equate to a professional conducting litigation as part of their profession. The court also rejected the argument that the insolvency court’s control over office-holder remuneration justifies a different approach.
Accordingly, only those costs of Company A that fall within the expert exception under Nossen are recoverable. The court saw no principled difference between time spent by Company A employees and time spent by the office-holders themselves on expert matters, and would allow costs accordingly.
Holding and Implications
The court held that only those costs incurred by Company A personnel and office-holders which fall within the expert exception established in Re Nossen's Letter Patent are recoverable on detailed assessment. Costs relating to time spent on general or factual investigation, document review, or assistance in litigation preparation not requiring expert skill are not recoverable.
The implication is that the principle allowing solicitors litigating in person to recover costs for their own time does not extend to other professionals or office-holders acting in litigation. The court reaffirmed the narrow scope of recoverable costs for time, consistent with the objectives of the CPR to control litigation costs. No new precedent expanding recoverability of costs for time spent by non-solicitor professionals or office-holders was established.