Legal costs – Solicitors’ retainer – Solicitors appearing on record as representing multiple clients – Whether claimants rebutting presumption that defendants liable to pay solicitors – Whether judge erring in apportioning costs equally between defendants – Claimants’ appeals dismissed — Defendants’ appeal allow in part
The claimants and the first two defendants were parties to agreements to develop penthouses in a block owned by the second claimant. The first defendant was a wholly owned subsidiary of the second defendant, which had been incorporated for the sole purpose of carrying out the development. The third and fourth defendants were directors of both companies. The first defendant was granted a development lease of the roof space, which was then charged to the second defendant as mortgagee. It entered into covenants under which it agreed to pay commission to the claimants on final sale of the penthouses and granted a leaseback option, which was exercisable if the development was not built on time.
The first defendant ran into financial difficulties that jeopardised its ability to complete the development as required by the lease. The second defendant, as mortgagee, agreed to sell the lease to the fifth defendant to finance the development. In proceedings by the claimants challenging the legality of the sale and claiming damages, the High Court dismissed claims in economic tort against the third, fourth and fifth defendants and dismissed claims in tort and equity against the first and second defendants. With regard to the claims in contract, judgment was granted in favour of the second claimant against the first and second defendants and in favour of the first claimant against the first defendant: see [2007] EWHC 74 (Ch); [2006] PLSCS 26.
The judge made costs orders, recording that one firm of solicitors had represented the first to fourth defendants, although there had been only one retainer letter which was addressed to the second defendant. The firm prepared a bill of costs that dealt with the first to fourth defendants as one global account and the costs judge decided that the bill should be apportioned equally between them on the basis that the costs were common to each of them.
The claimants appealed against the ruling as to the apportionment of costs and the order as to retainer. The defendants appealed against the disallowance of costs in respect of a former partner of the solicitors (H).
Held: The claimants’ appeals were dismissed; the defendants’ appeal was allowed in part.
Once it had been established that a firm of solicitors was acting for a receiving party, a presumption arose that the client was liable to pay the solicitor. The onus was on the paying party to rebut that presumption by showing that there were no circumstances in which the solicitor would be able to look to it for payment.
Where no express agreement concerning the division of costs was in place, a general rule of thumb was to divide the costs equally between the parties, but that should not to produce injustice. Where costs could be shown to be attributable to one party rather than another, the liability fell only on that party.
In the present case, the costs judge had weighed the facts and arguments presented to him and there was material on which he could properly reach the conclusion that he did. The apportionment that he had adopted was a factual determination that an equal apportionment represented a fair assessment, on the facts of the case, that all the work was carried on for all the defendants. It could not be said that the conclusion reached by the costs judge was clearly wrong: Adams v London Improved Motor Coach Builders [1921] 1 KB 495 and R v Miller [1983] 3 All ER 186 considered.
The costs claimed in respect of H would be allowed, apart from those in respect of the preparation of a witness statement. It followed that it was necessary to break down the bill to show how much was attributable to that task.
Per curiam: This case highlighted the problems that could arise if solicitors acting for more than one client did not record in writing the details of their remuneration. Solicitors would be wise expressly to set out the liability of each of their clients, both to the solicitors and as between themselves.
Vikram Sachdeva (instructed by Goldkorn Mathias Gentle) appeared for the claimants; Andrew Post (instructed by Berwin Leighton Paisner) appeared for the defendants.
Eileen O’Grady, barrister
