Crane v Canons Leisure Centre

Fees charged for work delegated by solicitors to independent costs draftsmen are base costs where the work is solicitors’ work and the solicitors retain control of, and responsibility to the client for, its proper performance. The classification does not depend on whether the work is performed in-house, by another solicitor or by a non-solicitor costs draftsman.

A success fee applying to the litigation as a whole may therefore be recovered on those costs. The court cannot retrospectively impose a lower success fee for costs-only proceedings merely because the substantive claim has already succeeded. Nor should parties generally be required to agree separate success-fee rates for the costs-assessment stage.

The claimant compromised a personal injury claim for £1,500 plus costs. His solicitors, who acted under a collective conditional fee agreement, instructed independent costs consultants to prepare the bill and conduct the subsequent detailed assessment proceedings.

Master Wright held on appeal from the costs officer that the consultants’ charges were disbursements. They therefore did not attract the solicitors’ 45% success fee. The claimant appealed directly from Wandsworth County Court with permission from HHJ Paul Collins CBE.

The central issues were whether the consultants’ charges were base costs or disbursements under the agreement and whether the agreed success fee should be disallowed or reduced for the costs-only proceedings.

1. By a majority, the appeal was allowed. May and Hallett LJJ held that the independent costs consultants’ charges were base costs on which the agreed success fee was payable. Maurice Kay LJ dissented on that issue.

2. The contractual distinction was between charges for work done by or on behalf of the solicitors and expenses incurred on the client’s behalf. The proper inquiry concerned the nature of the work and the location of responsibility for it. Work remains capable of being base costs when it is solicitors’ work which the solicitors have undertaken to perform and for which they retain control and responsibility, despite delegating its performance to an independent contractor.

3. The consultants prepared the schedule and bill, drafted documents for approval and conducted the assessment under the solicitors’ instructions. The solicitors supervised the work, approved and signed the relevant documents and remained accountable for any failure. The work was therefore done on behalf of the solicitors. Its classification did not sensibly depend on whether it was performed in-house, by a solicitor agent or by a non-solicitor costs draftsman.

4. Maurice Kay LJ would have upheld the classification as disbursements. Although accepting the policy behind success fees, he considered it unjust to impose a success fee for the solicitors’ benefit when they had instructed an independent person to perform the work. He rejected both the concept of “solicitors’ work” and the solicitors’ potential liability to the client as determinative.

5. The Respondent’s Notice failed. Applying KU v Liverpool City Council [2005] EWCA Civ 475, the court had no power to rewrite the agreement by substituting a lower or nil success fee for the costs-only stage. Halloran v Delaney [2002] EWCA Civ 1258 established that a success fee may extend into costs-only proceedings.

6. May and Hallett LJJ further held that no principle required parties to agree separate success-fee rates for costs proceedings. Such a requirement would complicate conditional fee agreements and encourage satellite litigation. The same agreed uplift could extend to costs proceedings because success fees finance the risk of unpaid work across unsuccessful cases.

1. Court of Appeal (Civil Division): By a majority, allowed the appeal and restored the treatment of the costs consultants’ charges as base costs attracting the success fee. The Respondent’s Notice was dismissed.
2. Wandsworth County Court: Master Wright allowed an appeal from the costs officer in part. He classified the consultants’ charges as disbursements and reduced the assessment costs by removing the success-fee element. HHJ Paul Collins CBE granted permission and transferred the further appeal directly to the Court of Appeal.
3. Costs officer: Assessed the underlying costs and allowed £3,860.85 for the assessment proceedings, including a success fee reduced from 50% to 45%.