A costs judge has ruled that ‘exceptionally large increases’ in a firm’s hourly rates justify a closer analysis of costs in protracted divorce litigation. The firm involved said it intends to appeal a decision which raises an important issue for the profession.
In Raydens Ltd v Cole, Raydens Solicitors acted for the ex-wife in matrimonial proceedings between 2013 and 2018. The client's ex-husband was ordered to pay her £800,000 when proceedings concluded in May 2017.This included £290,000 to be paid by July 2017 to clear the ex-wife's incurred costs, which included loan liabilities to a litigation funder. However, payment was not made until the following year.
In April 2018, the ex-wife asked Raydens to cap its fees. The firm refused because it had offered to work for her without payment until she received the funds. However, it decided not to charge interest on late payments of existing debts and she was invited to meet the firm's complaint-handling partner.
The firm issued proceedings to recover outstanding fees, which the ex-wife disputed. However a district judge ruled that her application for detailed assessment was out of time unless she could establish special circumstances.
In a judgment published last Friday, Costs Judge Colum Charles Leonard said the client's submissions on estimates and billing did not justify a finding of special circumstances. But the judge was ‘exercised’ by what seemed to be a ‘quite exceptional increase’ in the firm’s hourly rates between 2014 and 2017.
Master Leonard said: ‘The defendant’s litigation was managed by a partner and junior assistant team. At the time she signed the engagement letter she agreed to specified hourly rates payable over a period estimated at up to 18 months. In those circumstances she might reasonably have anticipated one annual hourly rate review before the litigation concluded. I do not believe that anyone in her position could reasonably have anticipated that before it was over, she would be paying the senior fee earner and his assistant hourly rates that had increased by over 30% and 65% respectively.’
The judge said it was clear from the evidence that the client was unable to stand up to her ex-husband and 'in her distress, she did not have the will to pick a quarrel with her solicitors as well'.
Master Leonard said a finding of special circumstances was justified 'by exceptionally large increases in the claimant’s hourly rates, charged to a client who was already struggling to fund her matrimonial litigation, against a background of quite exceptionally high overall litigation costs'.
In a statement, the firm said: 'Rayden Solicitors is disappointed by the judgment and intends to appeal the learned costs master’s decision that the firm’s annual rate increases amounted to special circumstances to permit an out-of-time assessment of the firm’s costs. These increases were part of the firm’s contract and were agreed by their client.
'At Rayden Solicitors we are always very explicit regarding our rates and our costs. All clients get a monthly fully itemised statement of work undertaken, alongside which they also receive an estimate for the following month’s work (detailing what work is predicted), as well as an update on their likely total costs. If an estimate is to be exceeded – they get a separate estimate during the month. At any time every client has a full understanding and awareness of their cost position and can make choices as to whether to proceed or not.'
The firm said the case 'raises an important issue for the profession as it is quite common for firms to review rates during a retainer that spans several years. It remains disappointing that the courts do not support those solicitors who are transparent on their costs and efforts to keep clients aware of the situation, enabling them to make their own choices.'