Court of Appeal
Date: 19/12/07

The Issues: The parties could not agree costs and the matter proceeded to detailed assessment. The claimant’s solicitors instructed costs consultants, acting under delegated authority. Could the work carried out by the costs draftsmen be considered profit costs, and therefore a success fee be applied and recovered, or were their fees simply a disbursement.

Held: The costs draftsmen were doing work which the solicitors had undertaken to their client to do (para 15). It was solicitor’s work and had they carried out the work themselves then the solicitors would have been able to charge and recover a success fee. In theory, the solicitors remained liable to the claimant for any negligence in the conduct of the costs assessment.

There are cases where work done by “outsiders” has been held to have been done, for costs purposes, as a fee earner for the solicitor, e.g. when a solicitor engages another solicitor such as when a London agent acts for a solicitor out of London.

LJ May did not think that the classification of the cost of this type of work could sensibly depend on whether the solicitor did the work themselves, whether they delegated the work to another firm of solicitors or whether they delegated it to costs draftsmen who were not solicitors.

As an alternative the defendant argued that the success fee of 45% should be significantly reduced because there was little or no risk in proceeding to detailed assessment after the claim had been won and any success fee should therefore have been reassessed. However this argument was not accepted on the basis that a single agreed success fee had to be looked at with the knowledge known at the time the success fee was set, without the benefit of hindsight (para 16), and further the Court has no power to direct that a success fee is recoverable at different rates for different periods of the proceedings (para 17).

In the circumstances, the appeal was allowed and the claimant recovered a success fee of 45% for the work carried out by the costs draftsmen.

Comment: This case can assist firms to improve their profitability because a success fee can validly be charged on costs draftsmen’s fees. To do so, it would be best to ensure that:

• The draftsmen's fees are treated as a firm overhead and paid from the nominal account rather than added to the client's ledger as a disbursement.
• The client should be charged for the time taken (which obviously needs to be recorded by the costs draftsman) at the appropriate hourly rate - normally grade C or D.
• It may be prudent for the solicitor's client care letter to include a statement that the firm can outsource certain tasks from time to time but that the client would be charged for the work at the solicitor's hourly rate as though the work had been undertaken by the solicitor themselves.
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