Ross v Stonewood Securities Ltd.

On an appeal from a detailed costs assessment, overall proportionality is a preliminary judgment regulating the method of assessment. The costs judge first adopts a global view. If the costs appear disproportionate, each item must then be shown to have been necessary and reasonable. That ruling does not determine the amount recoverable or exclude costs merely because the litigation was complex.

An appellate court should interfere only where the costs judge’s decision falls outside the generous ambit of reasonable disagreement. Counsel has no legal duty to prepare an explanatory memorandum, although unexplained fees may properly be disallowed where necessity is not demonstrated.

The Court of Appeal had ordered Stonewood Securities Ltd. to pay 75 per cent of Mr Ross’s costs in bankruptcy proceedings. Costs Judge Rogers assessed the costs payable between the parties at approximately £64,000 and those payable by the Legal Services Commission at approximately £97,000.

With permission, Mr Ross and his counsel appealed. They challenged the preliminary finding that the total costs were disproportionate, the hourly charging rate, the time spent on documents, the allocation of costs, and the reductions made to counsel’s fees. The central issues were whether the costs judge had applied the correct proportionality approach and whether the reductions were legally and evidentially justified.

1. Appeals dismissed. The court upheld the costs judge’s assessment and rejected the challenges to the preliminary proportionality ruling, charging rate, document time and counsel’s fees.
2. Under the approach explained in Lownds v Home Office [2002] 1 W.L.R. 1311, the costs judge first makes a global assessment of proportionality. If the costs appear disproportionate, each item must be shown to have been both necessary and reasonable. A finding of disproportionality regulates the detailed assessment; it does not itself penalise the receiving party or determine the recoverable sum.
3. The costs judge need not analyse the material in detail or use the factors in CPR r 44.5(3) as a checklist at the preliminary stage. The decision is one of judgment and experience. The receiving party remained able to justify work spent on the complex history, but had not done so adequately.
4. The appellate jurisdiction was one of review. The court could interfere only if the decision fell outside the generous ambit within which reasonable disagreement was possible. Costs Judge Rogers had recognised the unusual features of the litigation and was entitled to conclude that the costs appeared disproportionate.
5. The hourly rate was not shown to be wrong. Higgs v Camden & Islington Health Authority [2003] Costs LR 211 was a decision on its own facts and established no general rule for charging rates.
6. Armitage v Nurse [2000] Costs LR 231 did not impose a legal or professional duty to prepare a memorandum explaining counsel’s fees. It identified the risk that unexplained fees might be disallowed. The absence of such a memorandum did not invalidate the decision, because the fees remained inadequately explained and their necessity was not demonstrated.

• High Court (Chancery Division): appeals by Mr Ross and Mr Levy against Costs Judge Rogers’s detailed assessment were dismissed.
• Court of Appeal: Stonewood had previously been ordered to pay 75 per cent of Mr Ross’s costs. The judgment refers to the relevant decisions as reported at [1997] BPIR 735 and [1998] 1 BCLC 56, and to the order of 19 December 2000.