Kerry Underwood

NO COSTS FOR SOLICITOR ACTING FOR HIS OWN COMPANY: ANOTHER WRONG COSTS DECISION

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Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

In

Financial Solutions (Euro) Ltd v The Financial Conduct Authority: [2020] UKUT 0243 (TCC)

the Tax and Chancery Chamber made an order in favour of the applicant and against the Financial Conduct Authority on the ground of its unreasonable decision making, and then went on to assess those costs.

The judge was dealing with a not uncommon situation where the client’s solicitor was the sole director of the applicant limited company.

Fairly obviously a solicitor who is the sole director of a limited company is likely to instruct her or his own firm.

It has been well established since the 19th century that a solicitor acting for herself or himself can claim costs as a solicitor for doing that work, for the very obvious reason that otherwise additional time and money would be spent on instructing outside solicitors – see

The London Scottish Benefit Society v Chorley, Crawford and Chester (1884) 13 QBD 872.

The Court of Appeal recently held that this principle holds good under the Civil Procedure Rules – see

Halborg v EMW Law LLP [2017] EWCA Civ 793 

where the Court of Appeal confirmed that a solicitor who acts for himself as a party to litigation can recover not only his out of pocket expenses, but also his profit costs, but he cannot recover for anything which his acting in person has made unnecessary.

 

“The reason is not because of some special privilege but on the purely pragmatic grounds that (a) there has actually been an expenditure of professional skill and labour by the solicitor party, (b) that expenditure is measurable, (c) the solicitor party would otherwise employ another solicitor and, if successful, would be entitled to recover the costs of that other solicitor, and (d) since he cannot recover for anything which his acting in person has made unnecessary, the unsuccessful party will have the benefit of that disallowance and so would pay less than if the solicitor party had instructed another solicitor.”

 

Although tribunals are not subject to the Civil Procedure Rules, and generally costs are not awarded, it must be the case that once a tribunal has decided, as here, that a party’s conduct warrants a costs order,  then it should apply the common law principles allowing a solicitor who acts for himself or herself to recover costs.

In a strange decision that turned logic on its head the judge said:

 

“62. I question the appropriateness of a firm of solicitors allocating as a fee earner in respect of Tribunal proceedings a person who is also the principal witness in the proceedings. In my view that creates scope for significant conflicts of interest and the ability to draw the line between those costs that are properly characterised as fees charged by the legal firm and costs which are not properly characterised because they relate to the time spent by Mr Markou in his capacity as the person giving instructions to the legal firm and its Counsel on the matter. I therefore disallow the costs claimed in respect of Mr Markou.”

 

Very obviously the costs would be much greater if the party/witness had to instruct an outside firm of solicitors.

If an individual acting for herself/himself can claim costs as a solicitor, then surely a solicitor acting for the separate legal entity of a limited company, of which she or he happens to be the sole director, must also be able to claim costs.

 

Comment

A wrong decision.

Also can we change the citations of TCC, which means both the Technology and Construction Court and the Tax and Chancer Chamber? Better still, confine initials to the same legal dustbin as Latin tags.

Res ipsa loquitur.

Written by kerryunderwood

August 12, 2020 at 10:53 am

Posted in Uncategorized

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