In Group M Uk Ltd -v- The Cabinet Office  EWHC 3863 (TCC) Mr Justice Akenhead mad some important observations as to the liability to pay the costs of “interested parties”; the late serving of costs schedules; relief from sanctions and hourly rates. The judge granted relief relief from sanctions when a costs schedule was served late and carried out a summary assessment of costs.
The Cabinet Office had, in a public procurement case, succeeded in lifting a suspension on the placing of services after a hearing. Carat had been the successful tenderer and participated in and attended the hearings as an “interested party”. Group M h ad already been ordered to pay the costs of the Treasury Solicitor which had been assessed at £38,695.
WERE GROUP M LIABLE TO PAY CARAT’S COSTS AS AN “INTERESTED PARTY”
The judge had already decided, in a previous hearing, that Group M were liable to pay the costs of the interested party even though they were not a party to the action.
- I also addressed on this occasion the issue as to whether as a matter of principle Carat, as an “Interested Party”, would be entitled to have its costs also relating to the application as it had successfully supported it. I gave an ex tempore ruling, which I set out below, albeit with some added references: “(i) As with other matters in this case, there seem to be issues. Section 51 of the Senior Courts Act 1981, as a matter of generality, gives the High Court a complete discretion as to costs of and incidental to all proceedings in the High Court, amongst others. Section 51(3) states: “The court shall have full power to determine by whom and to what extent the costs are to be paid.”
(ii) This, it seems to me, should be considered primarily as a matter of discretion. Those provisions are sometimes used, for instance, for deciding that someone who is not a party to the case should pay the costs of, say, an insolvent losing party, who has effectively been funded by a third party. Indeed, there must be jurisdiction on the basis on which there can be an order that someone who is not a party should have its costs paid for by one of the parties to litigation.
(iii) I, therefore, do not think that there is a great issue of principle here, as to whether the court has power and/or discretion to order costs to be paid for by a losing party in an action to an interested party. The House of Lords’ decision in Bolton Metropolitan District Council v The Secretary of State for the Environment  1 WLR 1176, to which I have been referred and which relates to an interested party’s costs in a planning appeal, addresses this matter, in particular in the judgment of Lord Lloyd of Berwick at page 1178F to 1179D:
“What then is the proper approach? As in all questions to do with costs, the fundamental rule is that there are no rules. Costs are always in the discretion of the court, and the practice, however widespread and long-standing, must never be allowed to harden into a rule. But the following propositions may be supported:
(1) The Secretary of State, when successful in defending his decision, will normally be entitled to the whole of his costs. He should not be required to share its award of costs by apportionment, whether by agreement with other parties, or by further order of the court…
(2) The developer will not normally be entitled to his costs unless he can show that there was likely to be a separate issue on which he was entitled to be heard, that is to say an issue not covered by counsel for the Secretary of State; or unless he has an interest which requires separate representation. The mere fact that he is the developer will not of itself justify a second set of costs in every case.
(3) A second set of costs is more likely to be awarded at first instance, than in the Court of Appeal or House of Lords, by which time the issues should have crystallised, and the extent to which there are indeed separate interests should have been clarified.
(4) An award of a third set of costs will rarely be justified, even if there are in theory three or more separate interests.
On the facts of the present case the Secretary of State is clearly entitled to the whole of his costs. The only question is whether the Manchester Ship Canal Co should also receive their costs. In my opinion they should. I accept that the issues were all capable of being covered by counsel for the Secretary of State. But the case has a number of special features.
First, the case raises difficult questions of principle arising out of the change of Government policy…The Secretary of State was concerned not only to support his decision, but also to explain and defend his wider policy. If the appeal had gone the other way, the case would in all likelihood have gone back to him for re-determination de novo. To that extent he had to remain aloof from the parties. On the other hand, the developers were concerned only with the outcome of this particular appeal. They were entitled to take the view that on the facts of this case they had a sufficiently independent interest requiring protection so as to justify a separate representation.
Secondly, the scale of the development, and the importance of the outcome for the developers, were both of exceptional size and weight.
Thirdly, this was an unusual case in the sense that the opposition came, not from the local authority, but from eight neighbouring authorities supported financially by a consortium of major commercial interests.
For these reasons, I consider that the developers…are in this case entitled to their costs in this House and below…”
It is clear that, in considering whether to order the costs of Carat, whether those costs should be paid for by the claimants is a matter of discretion, but one which has to be exercised in accordance with practice and precedent, where appropriate.
(iv) I formed the view here that it cannot begin to be said that Carat did not have a very serious and fundamental commercial interest in the outcome of these proceedings; not just an interest in the determination of whether the suspension may be lifted and whether the contract might start, so to speak, within the next few days, but also an interest in all other practical matters in that context, and it was important, it seems to me, that they should be here.
(v) I am told, and have no reason to doubt, that the two witness statements of Matthew Platts who is the President of Amplifi UK, the UK media arm of Dentsu Aegis Network Limited, effectively the holding organisation for Carat, were drafted under the aegis of Carat’s solicitors. They have proved to be of some real importance in this case in describing Carat’s position, particularly in the circumstances where the major area of complaint of the claimant is based on an assertion that Carat could not conceivably have priced its bid in a way which was sustainable.
(vi)Therefore, they had to address that issue. It was within their specific knowledge in dealing with that particular application. Their interests were properly represented by Ms. Sloane and those instructing her. There was, as I understand it, no objection to her attendance. There was no objection to her participation in the oral advocacy advanced in this case. I, for one, at least, found her contribution and the evidence of Mr. Platts helpful and important as far as this case was concerned.
(vii) I have no doubt at all that this is something which falls well within the practice endorsed in the House of Lords and applied by Underhill J on R v (on the Application of Peel Investments (North) Limited) v The Health & Safety Executive  EWHC 1012 (Admin) in which Underhill J, albeit in a different type of case, felt able, in comparably similar circumstances, albeit factually different, that it was an appropriate case for costs to be ordered in favour of the interested party who came along. Certainly her contribution on the possibly unlawful extension of any contract was helpful.
(viii) That is not to say that Mr. Moser QC could not have dealt with it. His written submissions broadly addressed the possibility but I was particularly helped by Ms. Sloane’s analysis, so far as unlawfulness is concerned.
(ix) I would just correct one thing Mr. Bowsher QC has said (which was that I had decided not to decide whether the extension of Group M’s existing contract was lawful): although I have made it clear that I have not decided the issue, I have had to address the issue of the lawfulness of the extension of Group M’s existing contract to determine whether it was a properly arguable point. It is on that basis that I considered that it was germane to the judgment, as must be absolutely clear, at least from the oral part of the judgment that I gave this afternoon which may not have been fully in front of Mr. Bowsher QC when he made submissions on that. So it seems to me that it is fair enough and appropriate enough for the costs of the interested party to be borne by the claimants.
(x) That said, it may be on any summary assessment that one can have regard to what is a fair and reasonable amount in the context of all that an interested party, in those circumstances, might be considered reasonably to have done, rather than just attending to hear and see what might be happening (in effect, like a noting brief), which might be a perfectly legitimate thing to have done, but would not necessarily attract any costs.”
RELIEF FROM SANCTIONS
The Statement of Costs had been served late. It was argued that, as a result of this lateness, the costs should be assessed at nil. The judge considered the Mitchell and Denton criteria. In particular the three stage test in Denton.”
- In my judgment, this three stage test can be applied here. Considering the first stage, it must be the case that the purpose of the practice direction requirement that the Statement of Costs is provided 24 hours or more before the hearing in question is to enable each party to prepare their response to the other’s so that the summary assessment (for the party in whose favour the costs order goes) can be carried out by the Court then and there; its purpose is to save time and costs. Obviously, the Court cannot carry out a summary assessment if the Statement of Costs has not been served at all and, if it is served late, there is a risk that the party against whom a costs order is being made in principle will not have had enough time to take instructions and to address the proposed summary assessment and therefore that it will not be fair on that party for there to be a summary assessment on that day.
- That is exactly what happened here and I am not at all surprised that the Group M’s legal team had insufficient time to prepare their response to this substantial costs bill presented by Carat’s legal team at about midday, three hours before the handing down of the substantive judgment. The very purpose of the Practice Direction’s time limits was thus frustrated. I do consider therefore that the breach by Carat of the requirements of the practice direction in serving its Statement of Costs only three hours before the handing down of the judgement can be classified as serious and significant in this respect. It has meant that the parties have been put to some limited extra trouble and expense of preparing written submissions and that the Court has been put to the limited trouble of dealing with the costs issues at a later date. But for the breach, all the arguments put forward in the written submissions would have been put and addressed on the same day as, and immediately after, the handing down of the judgment. That said, given the issues raised, I would probably have reserved judgment in any event and it has taken me only fractionally more time to deal with it two weeks later; I estimate no more than 15-30 minutes.
- Moving to the second stage, I can totally understand why the default occurred. I am told (and have no reason to doubt) that settlement discussions continued between the Cabinet Office and Group M in the week before the hearing and it was only on the evening of Friday, 31 October 2014 that Carat was informed that the hearing was going ahead; indeed the date of 4 November 2014 had, only shortly before then, been confirmed as the date for the hearing. Carat has said that it did not receive the court bundles until the beginning of Monday, 3 November 2014, when it began to work on them in earnest and it did not receive Group M’s or the Cabinet Office’s own Statements of Cost until the hearing itself. One needs to bear in mind that public procurement litigation in general (and the current case was and is no exception) engenders intense and sometimes frenetic activity within both the legal and client teams, usually within a very short period of time. Thus, I can understand and accept that it would have been difficult for Carat to put together a finalised and realistic Statement of Costs much before the time that its legal team did.
- Moving on to the third stage, I have little doubt that it would be wholly unjust to refuse Carat the entirety of its costs because of its failure to submit its Statement of Costs more than 24 hours before the handing down of the judgment. In this context I draw upon the Court of Appeal’s approach in the Denton appeal in relation to the Decadent Vapours’ appeal heard at the same time when at Paragraphs 64-5:
“64. At the third stage, however, the judge should have concluded that factor (a) pointed in favour of relief, since the late payment of the fees did not prevent the litigation being conducted efficiently and at proportionate cost. Factor (b) also pointed in favour of the grant of relief since the breach was near the bottom of the range of seriousness: there was a delay of only one day in sending the cheque and the breach was promptly remedied when the loss of the cheque came to light. It only affected the orderly conduct of the litigation, because of the approach adopted by the defendants and the court.
65. On a consideration of all the circumstances of the case, the only reasonable conclusion in this case was to grant relief. If relief were not granted, the whole proceedings would come to an end. It is true that the claimant had breached earlier court orders (as indeed had the defendants). As discussed at paras 27 and 36 above, previous breaches of court orders may be taken into account at the third stage. Nevertheless, even taking account of the history of breaches in the Decadentlitigation, this was not a case where, in all the circumstances of the case, it was proportionate to strike out the entire claim. In our judgment, the defendants ought to have consented to relief being granted so the case could proceed without the need for satellite litigation and delay.”
(a) The failure to comply with the Practice Direction was at the lower end of serious.
(b) Unlike the provisions relating to costs and management budgets which expressly impose a sanction (unless other factors suggest that the sanction should not be imposed), no sanction is expressly identified in the Practice Direction. Paragraph 9.6 of the Practice Direction simply requires the Court to take the failure into account.
(c) Exactly the same arguments of principle and of quantification of costs would have been argued and have had to be addressed in any event. The hearing on the handing down of the judgment would, I assess, have taken about another 45 to 60 minutes and there would have had to have been more preparation for the hearing, which would all have cost more at that stage. Although, I suspect, that the costs of dealing with the matter after the event and by way of written representations would be somewhat more than the cost of dealing with a summary assessment at the hearing, I suspect that Group M’s additional costs are relatively small and would be unlikely to exceed several thousand pounds at the outside. Carat makes no claim for its additional costs. The Court has not been unduly inconvenienced.
(d) Having decided that in principle that Carat should have its reasonable costs of its involvement in the Cabinet Office’s application, it would be unjust to refuse it any quantified sum simply because for understandable reasons it did not file its Statement of Costs more than 24 hours before the handing down judgment. The prejudice or detriment suffered by Group M is minimal, other than possibly its incurring a small amount of costs (say £2,000) over and above what it would have incurred in any event if the Statement of Costs had been served more than 24 hours before the handing down. To punish Carat for its failure in effect to the tune of some £40,000 plus would to most right thinking people be wholly disproportionate. The additional cost can be taken off any summary assessment to which Carat is found to be entitled.
- There is a related sub-issue which has been raised which is that Carat’s solicitors did not provide with its Statement of Costs on 5 November 2014 a breakdown of the largest item in their Statement of Costs, £32,581, for dealing with documents, that only being provided on 11 November 2014. Practice Direction 44 says at Paragraph 9.5:
“(1) It is the duty of the parties and their legal representatives to assist the judge in making a summary assessment of costs in any case;
(2) Each party who intends to claim costs must prepare a written statement of those costs showing separately in the form of a schedule…
(3) The Statement of Costs should follow as closely as possible Form N260.”
Form N260 provides for a schedule to be filled in for work done on documents, with there being envisaged a one line description of work for each item of work. Group M rely on this as another breach of the Practice Direction and argue that the whole sum should be disallowed on summary assessment.
- For comparable reasons to those set out in Paragraph 15 above and before, I consider that, although there was a breach, it would be disproportionate to disallow the whole of this amount when the cost to Group M flowing from the non-compliance must be minimal; I would very much doubt that it would extend to more than 30 minutes of an associate’s time (say £240).
THE ASSESSMENT OF COSTS
As ever it is interesting to consider the assessment process.
- The Costs bill submitted by Carat’s solicitors on 5 November 2014 was in the total sum of £70,072.50, based on solicitors’ rates of £650 per hour for partners, £480 per hour for a relatively junior associate solicitor, £415 per hour for another slightly more junior associate and £165 per hour for trainee solicitors. The total was made up as follows:
(a) Attendances upon Dentsu Aegis £2,957.50
(b) Attendance upon Treasury Solicitor £995.50
(c) Attendances upon claimants £879.50
(d) Attendances upon Counsel £5,201.50
(e) Attendance upon Counsel’s Clerk £207.50
(f) Attendance upon TCC £985.00
(g) Work on documents £32,581.00
(h) Attendance at hearing £6,265.00
(i) Counsel’s fees £20,000.00
17.I propose to deal with this in relatively summary form and I will address each argument put forward by Group M in order:
(a) Group M argues that Carat should not be treated as if it was a party to the proceedings and, in effect, some discount should be made to reflect the fact that to some extent it was just maintaining a watching brief, which in ordinary circumstances would not attract a costs order at all. I agree. It is of course impossible to determine precisely what in terms of costs it would have incurred simply for keeping a weather eye on what was going on in the litigation. Doing the best that I can, I would assess this at £10,000 which would fall to be deducted.
(b) Group M contends that because Carat has claimed for the time for two partners and one associate from its solicitors competition department and for one partner and one associate from their litigation department there must have been duplication. Carat explains that the competition department handles procurement work and the litigation department in this case handled preparation of two witness statements from Mr Platts which were deployed in the proceedings; that is a legitimate explanation. However, that explanation also candidly accepts that there had to be two competition partners because one was on leave in the 13 days period prior to the hearing and the other had to stand in for her during that period. It seems to me that this must have led to some duplication because the stand in partner would have had to read herself in to a case in which the partner on leave had already read himself. To that extent, it is not fair or reasonable for Group M to have to pay for that element. The stand in partner’s time claimed for was 4 hours and six minutes and I assess that two hours at his rate of £650 per hour should be deducted (£1,300).
(c) Group M suggests that Carat’s solicitors’ rates should be marked down to bring them closer to those of the Treasury Solicitor who acted for the Cabinet Office. The suggestion is, for instance, that partners should be charged at 50% (£325 per hour) of the claimed for rate to bring it closer to the £200 hourly rate charged for a Grade A solicitor working for the Treasury Solicitor. I do not consider that this is a valid comparison. Commercial parties such as Group M and Carat in a substantial procurement case such as this can reasonably be expected to use City firms, and in fact they both did (retaining Messsrs Freshfields and Slaughter and May respectively).
(d) Group M suggests that it would not be reasonable to charge Group M for two partners and two associates to attend a conference with Counsel. It seems that two partners and two associates attended for a 1½ conference and probably one associate attended an additional 4 hours on Counsel. I agree that attendance by four solicitors would not be reasonable and would reduce the overall charge by £1,500.
(e) It is suggested that it was not reasonable or necessary for two associates to attend the hearing on 4 November 2014. I agree, given that Carat was represented by reliable Counsel and that it was an Interested Party and not a full party to the proceedings. £2,905 will therefore be deducted.
(f) Group M suggests that the hours claimed in the documents schedule (70.5 hours) were excessive in the light of Carat’s limited role in the proceedings. There is something in this point. However, the provision of the statements of Mr Platts were of importance not only to Carat but also to the Court’s understanding of the ramifications of the suspension remaining in place; its solicitors needed to read a substantial amount of the documents produced by the other parties to assist in the drafting of those statements. I consider that a reduction of £7,000 would be reasonable in all the circumstances and would reflect the reasonable amount of time that should be charged to Group M for the level of work required on documents.
(g) A bad point was taken in Group M’s submissions about the overall amount of hours spent by Carat’s solicitors compared with those supposedly recorded in the Statement of Costs for Group M’s solicitors. Messrs Freshfields have confirmed this by letter to the Court dated 18 November 2014.
(h) Finally Group M argues that it would not be reasonable to allow Counsel’s brief fee of £20,000 given her limited involvement and suggests a reduction of £10,000. I agree in broad terms that the full sum should not be allowed but would deduct only £5,000.
Therefore, from the total bill of £70,072.50, I would deduct the following amounts to produce a net summary assessment:
(a) Paragraphs 15(d) and 17 above (delay discount): £2,240
(b) Paragraph 18 (a) above (watching brief element): £10,000
(c) Paragraph 18 (b) above (partner on leave): £1,300
(d) Paragraph 18 (d) above (conference attendance): £1,500
(e) Paragraph 18 (e) above (trial attendance): £2,905
(f) Paragraph 18 (f) above (work on documents): £7,000
(g) Paragraph 18 (h) above (Counsel’s fee): £5,000
Total deduction: £29,945
- I therefore summarily assess the overall bill of costs payable to Carat as £40,127.50 accordingly.