Costs cases in family proceedings used to be few and far between, but a recent decision of Arbuthnot J in the case of KS v VS [2024] EWHC 278 (Fam) has caused something of a stir in the profession. In particular it raises the question of how far, if at all, the Guide to the Summary Assessment of Costs (2021) with its guideline hourly rates, published for use in summary assessments in civil proceedings, has use and application to summary assessments of costs in family proceedings.

Background

Summary assessment of costs was brought into civil proceedings in the years immediately before the Woolf Reforms of 1999. Since then, it has become a familiar part of the landscape of civil proceedings: at the end of every interim application, every one-day hearing, and every short appeal in the Court of Appeal a summary assessment of costs can be anticipated, and parties regularly prepare an N260 schedule of costs for use at the conclusion of the case.

In 2021 the Guide to the Summary Assessment of Costs (2021) was published updating the former guidance, and attaching new guideline hourly rates, the rates being the fruit of Mr Justice Stewart’s working party on guideline hourly rates. The rates were based on data the working party collected from costs judges, in the years 2019 to 2021, and so reflected what judges were awarding by way of hourly rates, rather than what solicitors were necessarily charging in the marketplace for work.

The guide has this to say about the guideline hourly rates:

‘27. Guideline figures for solicitors’ charges are published in Appendix 2 to this Guide, which also contains some explanatory notes. The guideline rates are not scale figures: they are broad approximations only.

28. The guideline figures are intended to provide a starting point for those faced with summary assessment. They may also be a helpful starting point on detailed assessment.

29. In substantial and complex litigation an hourly rate in excess of the guideline figures may be appropriate for grade A, B and C fee earners where other factors, for example the value of the litigation, the level of the complexity, the urgency or importance of the matter, as well as any international element, would justify a significantly higher rate. It is important to note (a) that these are only examples and (b) they are not restricted to high level commercial work, but may apply, for example, to large and complex personal injury work. Further, London 1 is defined in Appendix 2 as “very heavy commercial and corporate work by centrally based London firms”. Within that pool of work there will be degrees of complexity and this paragraph will still be relevant.’

Thus, the London 1 rates are for what might be termed ‘City work’: very heavy commercial and corporate work for centrally-based London firms: conversely London 2 applies to other work undertaken in the City and Central London, particularly within the postcodes EC1–EC4, W1, WC1, WC2 and SW1. The 2021 rates were increased in January 2024, such that the top hourly rate for a grade A solicitor in the London 1 band became £546.

The significance of the guideline hourly rates has been noted in a number of judgments in the last three years, but perhaps the most important is that of Samsung Electronics Co Ltd and Others v LG Display Co Ltd and Another [2022] EWCA Civ 466 where Lord Justice Males noted:

‘5. LG has not attempted to justify its solicitors charging at rates substantially in excess of the guideline rates. It observes merely “that its hourly rates are above the guideline rates, but that is almost always the case in competition litigation”.

6. I regard that as no justification at all. If a rate in excess of the guideline rate is to be charged to the paying party, a clear and compelling justification must be provided. It is not enough to say that the case is a commercial case, or a competition case, or that it has an international element, unless there is something about these factors in the case in question which justifies exceeding the guideline rate.’

Finally, although an assessment should be summary, it should not be arbitrary: thus, in the case of 1-800 Flowers Inc v Phonenames Ltd [2001] EWCA Civ 721 the Court of Appeal settled the scope of summary assessment in these terms:

‘113. That said, however, I am of the view that in the instant case the judge erred in principle when he in effect applied his own tariff to the case, without carrying out any detailed examination or analysis of the costs actually incurred by the opponent as set out in its statement of costs.

114. In my judgment, it is of the essence of a summary assessment of costs that the court should focus on the detailed breakdown of costs actually incurred by the party in question, as shown in its statement of costs; and that it should carry out the assessment by reference to the items appearing in that statement. In so doing, the court may find it helpful to draw to a greater or lesser extent on its own experience of summary assessments of costs in what it considers to be comparable cases. Equally, having dealt with the costs by reference to the detailed items in the statement of costs which is before it, the court may find it helpful to look at the total sum at which it has arrived in order to see whether that sum falls within the bounds of what it considers reasonable and proportionate. If the court considers the total sum to be unreasonable or disproportionate, it may wish to look again at the various detailed items in order to see what further reductions should be made. Such an approach is wholly unobjectionable. It is, however, to be contrasted with the approach adopted by the judge in the instant case.

115. In the instant case, the judge does not appear to have focused at all on the detailed items in the opponent’s statement of costs. Rather, having concluded that the total of the detailed items was unreasonably high he then proceeded to apply his own tariff – a tariff, moreover, which appears to have been derived primarily from a case in which the opponent had not been involved and about which it and its advisers knew nothing. In my judgment the jurisdiction to assess costs summarily is not to be used as a vehicle for the introduction of a scale of judicial tariffs for different categories of case. However general the approach which the court chooses to adopt when assessing costs summarily, and however broad the brush which the court chooses to use, the assessment must in my judgment be directed to and focused upon the detailed breakdown of costs contained in the receiving party’s statement of costs.’

With these thoughts in mind, I turn to consider the judgment of Arbuthnot J.

The judgment

The facts of the case were not unusual. In the context of putative divorce and financial remedy proceedings in England and Wales, the husband **applied for a stay of those proceedings on the basis that proceedings were already afoot in Monaco. The application for a stay succeeded; as the judge noted in paragraph 2 of her judgment, the couple had an international life based in Monaco, there was never a family home in England, the husband was a business man with international financial interests but his base was Monaco, the proceedings in Monaco pre-dated the proceedings in England and the wife had engaged in them: in short Monaco was the forum where the parties had the most real and substantial connection and the continuation of those proceedings would not lead to substantial injustice for the wife.

The judge then went on to deal with the costs of the applications. An amended schedule was provided by the husband’s representatives seeking £331,448.50. The judge concluded that the applications she was dealing with fell under FPR 28.2, rather than FPR 28.3 and she would therefore apply the approach prescribed by the Civil Procedure Rules to the extent that they were ported across by the Family Procedure Rules. The judge went on to reject the position that there should be no order for costs, and instead decided to make a costs order against the wife, who had lost the applications. But the judge at this point in her judgment brought into play the Guide:

‘34. The application of the Guide was considered by DHCJ Colton KC in H v GH (supra). The hourly rate and band for the work is set out in Appendix 2: “Guideline figures for the summary assessment of costs explanatory notes”. The hourly rates were re-considered on 1st January 2024 and a percentage uplift has occurred. To take just one example, for a grade A solicitor the hourly rate was increased on 1st January 2024 from £512 to £546.

35. Significantly the guide says that the general rule is that a summary assessment of the costs should be made in certain circumstances (when the case is a fast track case) and when the hearing has lasted “not more than a day”. The case I am concerned with lasted just over two days although perhaps it should have been shorter.

36. In paragraph 51 DHCJ Colton KC said that, “strictly speaking, the guideline rates do not apply in the Family Court” but said that, “it would be a very odd result if hourly rates which, in civil proceedings, could not be recovered absent a ‘clear and compelling justification’, can readily be recovered in family proceedings. It is also undesirable that the benefits of guideline hourly rates (consistency, proportionality, and predictability) should be lost in the assessment of costs in family proceedings”.

37. I accept of course that different considerations may apply in the Family Court compared to those in the Civil Courts, but these different considerations are perhaps not as obvious in financial remedy proceedings as opposed to ones about children and their welfare.

38. In my judgment, each part of the justice system should have a costs framework which is consistent, proportionate and predictable. This will be of great assistance to parties as they enter the system. If costs are treated in that way and parties become aware that they may not be able to recover every penny they have spent, that might have the effect of first encouraging parties not to change representatives frequently and second, in parties looking for solicitors who charge less for similar work. This may drive down the costs of litigation in financial remedy proceedings, in particular.

39. It seems to me the guidance is helpful as it sets out what a reasonable and proportionate hourly rate is in the various types of cases that come before the court. As a really rough, rule of thumb a top hourly rate of £546 which can be recovered from a losing party, seems a proportionate amount.’

In assessing the amount she then went on to find:

‘40. In this case I am not going to give guidance, but I draw support from the Guide. Looking at the proceedings in the round and the findings as well as the relative positions of the parties, I make a summary assessment on the standard basis. I do not consider the wife should pay the full amount claimed by the husband because of his conduct as set out above which increased costs. A proportionate amount is 85% of the husband’s claim of £331,000. This amounts to £281,000. The next step is to consider how much of that amount is recoverable. Taking a broad brush approach and assuming a reduction of 30% on standard assessment, the amount to be paid by the wife is £196,000. I consider this to be a proportionate and reasonable amount in the circumstances.’

Conclusions

A number of thoughts occur to me when looking at this judgment. The first is that the use of guideline hourly rates in family cases drawn from a guide prepared for civil cases, where the data for those rates was drawn exclusively from civil cases not family, seems an unhappy cross fertilisation within the legal system. Solicitors are a unified profession, but they work in many different markets, charging many different rates. There may well be scope for a set of guideline hourly rates for family cases, but they would not be based on the data underpinning the civil cases.

The second is that notwithstanding the reference to the guideline hourly rates in the judgment, there is curiously no express application of them. One cannot determine from the judgment how many hours have been allowed, or at what rate. The passing reference to the London 1 rates also presupposes that this work was analogous to City work, properly so called, rather than work that takes place in the City of London.

The third is that the summary assessment seems to have been painted with a broad brush indeed: there is little discussion of the constituent elements of the schedule. I cannot even discern with vulgar curiosity how much of the schedule was attributable to the solicitors, and how much to counsel.

But the lack of analysis is dangerously close to a move away from assessment to arbitrary reduction. The imposition of a 30% discount smacks of a tariff being applied based on deductions in other cases. It harks back to the old rule of thumb, that a party might expect to recover 70% of their costs and seeks to give effect to that outcome. Having said that, it would appear to be more or less what the Court of Appeal did in Samsung, when pulling a figure together!