Sheehan v Corr Supreme Court [Appeal No 94/16]
On 15 June 2017 the Supreme Court issued a judgement in a matter which the Court described as "raising very important questions in relation to the taxation of a party's costs in litigation".
Background facts
The Plaintiff to the original High Court action, Isabelle Sheehan, suffered catastrophic injuries at birth, resulting in profound disability. Proceedings were taken against her Consultant Obstetrician. Breach of duty was admitted in the defence to the action, but causation was not admitted until approximately five weeks prior to trial. The matter then proceeded as an assessment of damages, which was heard over the course of 5 days in October 2011. The case was ultimately settled for a total of €11.5m.
The Plaintiff's solicitors, Augustus Cullen instructed cost accountants to prepare a bill of costs which proceeded to taxation. Their instructions fee was €485,000, which was set out without any detailed breakdown or explanation of that figure. Augustus Cullen had only begun time recording in August 2011, and therefore time spent on the case from 2009 to August 2011 was not recorded. This time was therefore estimated, and in support of their estimate Augustus Cullen provided a print out of the number of entries/actions recorded on their keystone case management system up to the date of judgment (1,463 activities). Two senior solicitors, both with hourly rates of €375 had been working on the file and Augustus Cullen estimated that between 1,000-1,200 hours had been spent working on the case in total.
The taxation came before the Taxing Master in September 2012, and was heard over two days. The solicitor's instructions fee was reduced by the Taxing Master to €270,000. Augustus Cullen objected to this decision, and the objections were heard by the Taxing Master over 4 days between September 2013 and March 2014, ultimately leading to an increase of the solicitor's instructions fee to €276,000.
High Court Decision
Augustus Cullen appealed the Taxing Master's decision to the High Court. This appeal was heard over 3 days in 2015 before the President of the High Court, Justice Kearns. Justice Kearns dismissed the appeal, stating, "the Court has identified some errors made by the Taxing Master but none are such, in the opinion of the Court, to warrant any interference in the allowance made in respect of the solicitor's instructions fee in this case."
Court of Appeal Decision
Augustus Cullen next appealed to the Court of Appeal. The Court of Appeal upheld the appeal and felt that the High Court had erred in relation to four issues:
- Time: The Court of Appeal held that the Taxing Master failed to have sufficient regard to the time involved in this complex, high value claim, and that he erred in first assessing the complexity of the claim. The Court stated, "The foundation stone of a proper assessment of a Bill of costs is an assessment of the time and labour and charges of each solicitor for each professional service provided. The issues of complexity, novelty, importance of the case to the client and its value are only to be considered thereafter."
- Intangibles: The Court of Appeal held that the Taxing Master inappropriately considered intangibles (complexity, novelty, skill specialised knowledge and complexity) at the outset, and before looking at the time involved. The Court stated "He took intangibles into account at the very start of his analysis instead of at the end. That is of course an error in methodology."
- Economic Downturn: The Court of Appeal held that the consideration of the economic downturn prevailing at the time of the original action was inappropriate, and that "there is no specific provision in the Rules for an adjustment up or down depending on economic circumstances. Instead this should be reflected in the assessment of the professional charge made by a solicitor under a particular service at a particular time."
- Two Solicitors: The Court of Appeal held that the Taxing Master's decision not to allow the fees for two senior solicitor's attendance at trial was incorrect, noting that while the matter proceeded as an assessment, "nevertheless it was a difficult, complex and hard-fought assessment" the Court felt that "a senior solicitor was required to conduct the case in court and another senior solicitor was required to carry out simultaneous negotiations outside court."
Supreme Court Decision
This time, the Defendant appealed the decision of the Court of Appeal to the Supreme Court, and both the Law Society and the Bar Counsel appeared as amicus curiae and filed written submissions in relation to the appeal. The Supreme Court were asked to consider the above issues, specifically;
- Time/Intangibles: To what extent consideration of time spent be elevated above the criteria set out by Order 99 Rule 37(22) of the Superior Courts. (This Rule states that the Taxing Master shall have regard to all relevant circumstances, and in particular to the complexity, difficulty or novelty of the case; the skill, specialised knowledge and responsibility required; the number and importance of the documents involved; the importance; the value and the place and circumstances and any other fees and allowances payable.)
- Economic Downturn: The relevance of the economic downturn to instructions and brief fees.
- Two Solicitors: Is it within the discretion of the Taxing Master to disallow the costs of two solicitors?
The Supreme Court were influenced by, and approved the decision of CD v Minister for Health [2008] IEHC 229, and quoted from Justice Herbert's judgement as follows,
"The learned Taxing Master should have objectively examined each of the separate items in the bill of costs which together make up the claim for a general instructions fee. He should have ascertained precisely what work was done by the solicitors for the costs, with particular reference to the documentation furnished in support, and by what level of fee earner it was done.
The learned Taxing Master should next have considered whether it involved the exercise of some special skill on the part of the doer and indicated what he considered that skill was and why he considered its use was necessary in the circumstances. The learned Taxing Master should have indicated what amount of time he considered should reasonably have been devoted to this work employing as much precision as the nature of the work and the information available to him would permit. The learned Taxing Master should have considered whether the doer of the work bore any special responsibility in the course of carrying out that work and identified what he considered that to be and how it arose. The learned Taxing Master should have considered the extent to which the work was proper and necessary for the attainment of justice so as to be allowable on a party and party taxation."
Time/Intangibles
In relation to time, the Supreme Court held that time should not be elevated above the relevant criteria as set out by Order 99 rule 37(22), stating that "the amount of time actually spent on a case is only one element of the relevant circumstances by reference to which the nature and extent of the work done is assessed."
The Court then noted that while, "it is undoubtedly in the interest of a solicitor or barrister that time records, or other documents containing accurate or credible evidence of time spent, are available to the Taxing Master…there is no obligation on the solicitor or barrister to maintain time records, or to include time records in the bill of costs."
Economic Downturn
In relation to the economic downturn the Court found that, "the Taxing Master should have regard to the impact of the economic climate at the time the work was done on the remunerative value of that work." The Court noted that this could be achieved by review of appropriate comparators, but did not agree with the High Court's suggestion that the Taxing Master commission a yearly report on the prevailing economic and financial changes to assist in this regard.
Two Solicitors
The Supreme Court made no definitive finding in relation to this, simply stating that "the reasons set out in the judgement of the Court of Appeal are more conducive to the view that the Taxing Master erred" and ordered that the matter be remitted to the Taxing Master for reconsideration.
Conclusion
In overturning the Court of Appeal decision, the Supreme Court has allayed concerns that certain fee arrangements would no longer be tenable, and that legal practices would effectively be penalised for not employing a time recording system whereas firms who did engage in time recording may find their fees subject to less scrutiny by the Taxing Master.
Separately, it is worth noting also that bills for work undertaken between 2009 – 2014 face the possibility of a reduction in fees due to the economic conditions prevailing at the time, and this should be kept in mind when negotiating fees with Plaintiff's solicitors for cases which span this time frame.
