McAteer v Devine & Ors

Factual and Procedural Background

The respondent, an accountant and businessman, initiated two consolidated sets of proceedings against multiple defendants including property developers, solicitors, an accountant, and an estate agent. The claims against the appellant solicitor included breach of contract, conspiracy, unlawful interference with trade, malicious falsehood, negligence, and/or negligent misstatement. Various claims were struck out in part or in full against some defendants, leaving a case against the appellant based on breach of contract and conspiracy.

The appellant had previously acted as solicitor for the respondent and for companies in which the respondent and other defendants were shareholders. The respondent alleged that the appellant misused his professional relationship to orchestrate litigation and harm the respondent's business interests, including alleged breaches of confidentiality and conspiracy involving the disclosure of sensitive information and interference with legal aid entitlements.

The trial judge found no satisfactory evidence of conspiracy or breach of contract by the appellant, though he noted several unwise actions by the appellant during the proceedings. The litigation was lengthy and complex, involving multiple stages, applications, and attempts at settlement.

The appeal concerns a costs order made by the trial judge, who fixed a gross sum in lieu of taxed costs under Order 62 rule 7 of the Rules of the Court of Judicature 1980. The appellant challenged this costs order.

Legal Issues Presented

1. Whether the court properly exercised its discretion under Order 62 rule 7(4) to fix a gross sum in lieu of taxed costs.
2. The appropriateness and basis for the amount fixed by the court as a gross sum for costs.
3. Whether the reduction in costs awarded to the successful party was justified given the evidence and circumstances of the case.

Arguments of the Parties

Appellant's Arguments

• The appellant contended that the costs incurred amounted to approximately £550,000 and sought an award of two-thirds of that sum (around £360,000) as a gross sum or alternatively an order for taxation of costs.
• Mr Hanna QC argued that the trial judge did not challenge or question the appellant’s figure for costs, and that the appellant was prepared to rely on the judge’s silence as acceptance of the estimate.

Respondent's Arguments

• The respondent argued that the trial judge’s award of £40,000 plus VAT was an excessive reduction from the appellant’s claimed costs and lacked evidential basis.
• He contended that there was insufficient explanation or evidence supporting the fixed sum awarded and that the reduction was arbitrary.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Scherer v Counting Instruments [1986] 1 WLR 615	Costs discretion and principles for withholding costs from the successful party.	Referenced to explain that costs normally follow the event but can be withheld only on just grounds supported by material relevant to the litigation.
Silva v Czarnikow Ltd (1960) 104 S.J. 369	Guidance on awarding fixed costs sums under court rules.	Assisted in distilling principles governing awards under Order 62 rule 7.
Leary v Leary [1987] 1 WLR 72	Requirement for judicial exercise of discretion and evidential basis for fixed costs awards.	Critical in evaluating whether the trial judge exercised discretion properly and whether the fixed sum was arbitrarily chosen.
Taylor Made Gold Co Inc v Rata & Rata (a firm) [1996] FSR 528	Principles relating to costs awards under court rules.	Referenced in the context of costs discretion.
Sheffick Ltd v JDM Associates & Ors (No 4) 22 Con LR 51	Application of costs rules and discretion.	Considered in the distillation of principles for awarding fixed costs sums.

Court's Reasoning and Analysis

The court acknowledged the complexity and length of the litigation and accepted the trial judge’s factual findings and assessments regarding the parties’ conduct and opportunities for settlement. It recognized that the trial judge was entitled to exercise broad discretion under Order 62 rule 7(4) to fix a gross sum to avoid the expense and delay of taxation of costs.

However, the court found that the method by which the trial judge arrived at the fixed sum of £40,000 plus VAT was flawed. The figure represented an approximately 89-93% reduction from the appellant’s claimed costs without any evidential basis or explanation. The court held that such a large reduction without supporting evidence or judicial reasoning was effectively an arbitrary figure, contrary to the requirement that discretion be exercised judicially.

The court emphasized that while a detailed taxation process was not required, some evidential foundation beyond mere assertion was necessary to justify the fixed sum. The absence of any challenge to the appellant’s estimated costs by the trial judge did not justify the drastic reduction without explanation.

Given these deficiencies, the court concluded that the appropriate course was to set aside the fixed sum order and remit the matter for taxation of costs in the conventional manner, with guidance from the trial judge on the extent of any reduction justified by the appellant’s conduct during the proceedings.

Holding and Implications

The court ALLOWED THE APPEAL and set aside the trial judge’s order fixing a gross sum of £40,000 plus VAT in lieu of taxed costs.

The costs are to be taxed by the Master in the conventional manner, subject to any percentage reduction the trial judge considers appropriate in light of the appellant’s conduct and the circumstances of the case. The court will hear submissions on the costs of this appeal separately.

This decision restores the standard process of taxation of costs rather than permitting an arbitrary fixed sum and underscores the necessity for a judicially reasoned basis supported by evidence when exercising discretion under Order 62 rule 7(4). No new precedent was established beyond affirming proper exercise of discretion in costs awards.