Factual and Procedural Background
These two appeals, heard together, concern the taxation of costs in separate but analogous cases.
In the first case, the Appellant and Respondent, formerly married, divorced in 1986 with custody of their children awarded to the Respondent. An order for periodic payments was registered in a magistrates’ court. The Respondent’s solicitors obtained a charging order nisi in a county court concerning the Appellant’s property, although this was later deemed misconceived because enforcement lay solely with the magistrates’ court. Despite this, the charging order was made absolute. The Appellant, dissatisfied with prior representation, instructed a London-based solicitor firm, which obtained an order striking out the sale order and a wasted costs order in the Appellant’s favor. The local solicitors challenged the hourly rates claimed by the London firm, contending the Appellant should have retained solicitors local to the county court or his residence. The issue progressed through taxation and review stages, culminating in a ruling by a judge favoring the local solicitors on the reasonableness of instructing the London firm.
In the second case, the Appellant was seriously injured at work and represented by solicitors instructed by his trade union, a well-known London firm. The proceedings were transferred to a local court, and the action settled with a substantial damages award and costs. The defendants objected to the costs claimed by the London solicitors on the basis that costs should reflect local rates rather than London rates. This objection was rejected by the lower courts.
Legal Issues Presented
- Whether the unsuccessful party’s liability for costs should be limited to what a reasonably competent solicitor practising in the locality of the court or the successful party’s residence would charge.
- Whether the successful party is entitled to recover the full costs claimed by the solicitor actually instructed, even if that solicitor practises outside the local area and charges higher rates.
Arguments of the Parties
Appellant's Arguments (First Case)
- The Appellant reasonably instructed a London solicitor firm due to dissatisfaction with local solicitors and advice from a trusted source.
- The importance and complexity of the matter justified instructing solicitors outside the local area.
- The hourly rates claimed were appropriate for the firm’s size and standing.
Respondent's Arguments (First Case)
- The Appellant should have instructed solicitors local to the court or his residence to keep costs reasonable.
- The higher London rates were not reasonable and should not be recoverable.
Appellant's Arguments (Second Case)
- The London solicitors were competent and reasonably instructed by the trade union.
- The costs claimed reflected normal rates for the firm’s size and location.
Respondent's Arguments (Second Case)
- The costs should be limited to what local solicitors would charge.
- The London rates were excessive given the local nature of the proceedings.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Smith v Buller (1875) LR 19 EQ 473 |
Costs should be limited to those necessary for litigation; excessive costs should not be imposed on unsuccessful parties. |
Supported the principle that costs must be necessary and reasonable, limiting recoverable costs. |
| Simpsons Motor Sales (London) Ltd v Hendon Corporation (1965) 1 WLR 112 |
Interpretation of "necessary or proper" costs for taxation. |
Clarified the objective test for costs necessary for justice under previous rules. |
| R v Dudley Magistrates’ Court ex parte Power City Stores Ltd (1990) 154 JP 654 |
Reasonableness of employing certain counsel or solicitors for costs assessment. |
Emphasized that the question is whether the party acted reasonably in instructing the solicitor, not merely if cheaper alternatives existed. |
| KPMG Peat Marwick McLintock v HLT Group Ltd (1995) 2 All ER 180 |
Reasonableness of instructing solicitors in a particular location and the assessment of costs on that basis. |
Confirmed that if it was reasonable to instruct solicitors in a certain area, costs should be assessed by reference to that area's average rates. |
| L v L (1996) 1 FLR 873 |
Principles for assessing solicitor’s remuneration and costs on taxation. |
Outlined key propositions including assessment by reference to average local rates and reasonableness of solicitor choice. |
| Jones v Secretary of State for Wales (1997) 1 WLR 1008 |
General principles of costs assessment. |
Not directly relevant to the appeals but cited for completeness. |
| Kawarindrasingh v White (1997) 1 WLR 785 |
Judicial discretion in costs assessment and overruling taxing officer’s decisions. |
Confirmed that judges are not bound by prior taxing officer decisions and must assess reasonableness afresh. |
Court's Reasoning and Analysis
The court examined whether costs recoverable from the unsuccessful party should be limited to what a reasonably competent solicitor practising locally would charge or whether the successful party may recover full costs charged by the solicitor actually instructed, even if outside the local area and charging higher rates.
The court reviewed the relevant rules on taxation of costs, particularly Order 62 Rule 12(1), which requires allowance of a reasonable amount for costs reasonably incurred, resolving doubts in favor of the paying party. Historical context and authorities were considered to elucidate the test for reasonableness.
In the first case, the judge below erred by focusing solely on a comparison of hourly rates between local and London solicitors, without considering whether the Appellant acted reasonably in instructing the London firm. The court identified relevant factors that should influence this assessment, such as the importance of the matter, complexity, dissatisfaction with local solicitors, recommendations, and accessibility. Applying these, the court concluded it was reasonable for the Appellant to instruct the London solicitors, making their rates recoverable.
In the second case, the court accepted the principle that if the choice of solicitor was reasonable, costs should be assessed by reference to the broad average costs in the area where the solicitor practises. However, it found that the trade union’s practice of instructing London solicitors for a local case without clear necessity was of limited relevance, and suggested costs might be limited to those appropriate to the solicitors’ local branch office. The matter was remitted for further consideration.
Holding and Implications
DISPOSED OF
In the first appeal, the court allowed the Appellant’s appeal, set aside the decision of the lower judge, and restored the order awarding costs at the London firm’s rates, recognizing the reasonableness of instructing that firm.
In the second appeal, the court allowed the appeal and remitted the matter to the Deputy District Judge for further consideration of costs on the basis that costs may be limited to those appropriate to the solicitors’ local office. This decision affects the immediate parties and does not establish a new precedent beyond clarifying the approach to assessing costs when solicitors are instructed outside the local area.