“6. ….limited to such supplemental evidence as is required to take account of [the 2nd Court of Appeal Judgment] as to the correct approach to the Valuation Issue.”
“(1) Where a company is being wound up, a floating charge on its undertaking or property created within 12 months of the commencement of the winding up is invalid (unless it is proved that the company immediately after the creation of the charge was solvent), except to the amount of any cash paid to the company at the time of or subsequently to the creation of, and in consideration for, the charge, together with interest on that amount.”
“it will also be appreciated CFA’s are open-ended, depending on the amount of work which ultimately needs to be done. Had this case gone to trial on a CFA with 100% success fee, the total cost to [PHRL] might have been much more than Candey’s Fixed Fee”; (4) stated that DBAs “are generally not being used. The reason for this is that they are overregulated and the penalty for failure to comply with the regulations is that the agreement is unenforceable”. (5) concluded that “Hourly rates, CFA’s and DBAs either do not adequately value the services supplied or, are inappropriate.”
“7.30 in my experience, however, CFAs have been much less used incommercial litigation[compared with litigation relating to personal injury and consumer related issues where the claimant as an individual was often unwilling or unable to fund the litigation and where CFA’s have become predominant] save in certain specific areas, and in my experience the traditional hourly rate basis remains by far the most common method of funding generally in commercial litigation.” 7.32-7.33 [he confirms his view set out in the joint memorandum of experts dated7 November 2019 that CFA’s and DBAs would not be appropriate ways to value the relevant services in this case and in any event it would be very difficult to define a “win” .] 7.34 [that under a CFA, the base costs represent the objective value of services supplied. Success fees form part of a subjective value being added to the objective value to represent compensation received for the risk that the lawyers may not be paid some or all of their fees]. 7.36 [that the second Court of Appeal judgment, as he understands it, precludes any reliance on the particular characteristics of the situation of the company to which services were supplied, and that valuing by reference to a CFA involves taking into account the particular characteristics or situation of the company] 7.37 [merits risk cannot be separated from credit risk] 7.38 [there is no evidence the prospects of success were 58% as asserted by Mr Hurst. However a letter dated July 2015 seeking funding refers to prospects of success having been estimated at more than 60%. If so, and applying the conventional ready reckoner approach, the success fee would be no more than 67% (assuming a full, not discounted CFA).] 7.43 [As regards the definition of “win”, he remains of the view that on the facts of this case it would have been difficult to define. He doubts that such definition would have covered the situation on the facts of this case.] 7.47 [DBAs are excluded from the valuation exercise by virtue of the Court of Appeal’s judgment] 7.48 “I agree that more such agreements are being utilised, but in my experience, this is actually smaller and less complicated litigation whilst they are more common, I remain of the view, as I believe most commentators do, that they are still rare.”
“I cannot see how we can work on a contingency basis on any of the matters we have discussed to date. I am however willing to consider any proposal you may have provided that any agreement is secured. In the absence of any agreement on a contingency basis, unless and until we agree terms on that basis, we should charge you on an hourly basis as set out in the attached terms.”
“1. Our Fees Our services are charged according to the time incurred by our fee earners in six minute units in accordance with industry practice. Our fee earners’ rates are charged at between£100 and£700 plus VAT (currently 20%) per hour. We may require you to provide us with advance payment on account for costs and expenses. We will charge you for any expenses we incur on your behalf, most of which will be subject to VAT. These may include Court fees, barrister’s fees, expert’s fees, travelling costs, photocopying colour printing costs. All estimates of costs are for guidance only and may be revised because of changes in the parties’ strategy and evidence. 2…… 3. Invoicing We will invoice you on a monthly basis and we require our invoices to be paid within seven days of receipt. Thereafter, following seven days’ notice, we may suspend work on your matter until payment is received and charge you interest. You are entitled to object to our invoices and to apply for an assessment underPart III of the Solicitors Act 1974 . We are entitled to retain all papers until fees are paid in full. 4. Alternative Funding for Legal Services We may be able to arrange finance to fund your legal costs via third parties or act on a no-win, no fee basis. You should check your all [sic] policies of insurance e.g. home or business insurance which could cover your legal costs.”
“The board are not persuaded that we can undertake this matter on a pure contingency basis. We really want to help you but we cannot take equity as there is a substantial risk of dilution and dissipation, and with so many BVI entities we could see any interest we hold being undermined by others. We are however prepared to act on a fixed fee price basis of£100,000 per month to include barristers’ fees. The winning party in litigation is entitled to recover their time costs from the losing party. We would also want the right to recover these costs to be paid to us. This is an incentive for us to thus win and you get your cap and control.”
“We are keen to find a solution to work on a pure or hybrid contingency. Until such point and as agreed in our conversation this evening and further to the attached incorporated emails on fees, including our terms and conditions attached, we have agreed a fixed monthly retainer of hundred thousand pounds to cover all legal fees, including the barristers, are set out in the attached email of 24 April. We expect our fees at hourly rates to substantially exceed this sum. In accordance with the principles set out in our email of 24 April if you obtain an order for costs or otherwise reach an agreement with the opponents (identified below) on costs we should be able to additionally recover our hourly rate costs provided these are paid by the opponents….”
“20% of any Success, monetised (in accordance with fair market values and norms (to be determined by Expert Determination as set out below in the absence of any agreement) of a benefit in non-monetary form. This amount is fixed and includes VAT (where applicable). A DBA gives you certainty that you will not pay more than a fixed amount. If we are unable to achieve a Success, you will not be liable to pay us anything. “Success” means that any claims brought by any of the Claimants against any of the Opponents are decided in any of the Claimant’s favour, whether by a court decision or a settlement agreement or in any way that any of the Claimants derives any benefit of any kind from pursuing the claim. ….. The reason for setting our payment at this level is because it reflects our risk of not being paid; our exposure to pay barrister’s fees, foreign lawyer’s fees, enforcement costs and other expenses from our own funds whether you win or lose; the likely manner in which your Opponents may try to defend your claims and/or evade payment of any Judgment we obtain; and the likely delay in receipt of our fees. There is thus significant risk but greater potential reward for the firm.”
“ 86. Ideally this firm wanted to continue to be paid on an hourly rate basis as it had been throughout the early stages of the proceedings. As a firm we do however undertake a lot of work on a contingency basis in the form of damages based agreements and conditional fee agreements. We undertake that type of work as we have found that by taking substantial commercial risk we can obtain a higher fee. Most of our competitors do not undertake such work and they may require instead to be paid pursuant to the traditional model on an hourly rate basis with funds on account. 87. In my experience the possibility or question of a fixed or contingent fee is something raised by most clients. It was, unsurprisingly, something I had discussed on occasion with PHRL (and internally with Mr Dunn) at various times during 2014 and 2015….. on30 July 2015 I proposed to PHRL the outline of a contingency fee agreement. Having thereafter looked at the law relating to damages based agreements and conditional fee agreements we felt that the former was inappropriate (given that we were not funding Counsel) and the latter was incapable of dealing with all matters. This left open the option of a fixed fee. I discussed a possible terms and figures of Ms Turnbull (and Mr Dunn) in the summer of 2015 Ms Turnbull agreed terms in principle which recorded in my email of9 August 2015 . The proposed fee was£4.5 million .”
“The Company’s initial intention was to enter into a form of mixed contingencyconditional fee agreement which we were not prepared to agree (in any respect) given the risks that such an agreement could be champertous and/or in breach of the DBA Regulations. This was something we considered from our own perspective with senior costs counsel. It was on this basis that we wanted to be paid either (i) on an hourly rate basis (a repeatedly articulated preference), with outstanding fees paid in the usual way, or (ii) a fixed fee on commercial terms”
“17. The Applicants are fully aware that no credible London firm would have agreed to act on these cases on the standard hourly rate basis in October 2015 on terms that they might (depending on the outcome of the litigation or other external events in relation to the solvency of clients) never be paid, and in any event that they might well be paid nothing for a number of years…… Indeed, the reality is that the only basis upon which any competent firm would have agreed to act would be if their fees were funded by a third party. I do not believe that any other firm would have agreed to act on the same terms as our Fixed Fee. They would not have been in a position to take the risk. Through our extensive experience of working on alternative means of funding commercial disputes, I am unaware of any reputable, experienced law firm who would have agreed to step into act for PHRL at such a late stage in the proceedings other than on the basis that they would be paid a very large sum of money, of at least£1 million on account of their fees. As far as I am aware this simply was not an option open to the company. 18. There were other methods by which this litigation could have been funded. However, all of them would have involved the client paying very significantly more than conventional hourly rates for work done….. For example, my firm could have acted on a CFA. But this would have entitled it to charge a premium of 100% on its hourly rates. We did not, however, consider a CFA suitable for this case. The advantage of a Fixed Fee over a CFA was that it made price certain to both parties, whereas a CFA would have been open-ended. Litigating under a CFA could have been much more expensive to the client had this case gone to trial, or thereafter to appeal. Another possibility would have been a damages based agreement. Under such an agreement, lawyers are able to take up to 50% of any compensation recovered. Again, this enables lawyers to recover remuneration for risk which may greatly exceed their conventional time costs. Here, however, a damages based agreement did not appear to be appropriate, because the primary remedy sought was not damages, but a buy-out of the opponent’s shares. A final possibility would have been third party funding. Here again, any firm would have required very substantial remuneration for risk. I understand that funders typically require a return of at least four times their funding from the proceeds of litigation.… In the present case, we were unable to obtain third-party funding. This left the Fixed Fee as the best option. 19. As a commercial business lawyer I believe that the value of the services supplied by my firm after21 October 2015 in monetary terms is in fact very easy to determine. In the absence of the Fixed Fee the Company would have got nothing from the London Litigation. As a consequence of the Fixed Fee the sum recovered for the Claimant in the London Litigation amounted to the recorded sums as set out in settlement agreement which were released in cash. This sum was US$13.2 million or£10.15 million as at today’s exchange rate. I would subtract from this sum the costs paid in disbursements after21 October 2015 , namely£1,226,725.95 which leaves a sum in excess of£8.9 million . That is one measure of the value for the value [sic] of the services supplied. The only other measure is the bargain struck, namely the Fixed Fee. It is the latter which is the better measure as it was the correct contract price, the deal freely agreed and negotiated by the parties.”
“Your primary claim against Tarek is for declaratory relief and the consequential right to buy Tarek out at 80% of market value to be assessed (at a point in time to be determined by the court) by an expert accountant/valuer. Thus there may be no damages as such. We think that a DBA would still work as the intention could not have been to exclude such claims from being undertaken on a contingency basis but it is not a risk we want to take (there is no case law at all on the point). We have therefore proposed a fixed fee….. We have yet to meet any litigation solicitors who actually undertake DBAs, we are pretty unusual: we do not think anyone would match this proposal…. For the avoidance of doubt our preference is to be paid on an hourly rate with funds on account of future work but we are prepared to act on this basis.”
“..of course one may have many hourly rate matters of a lower value and a much larger fee on a small quantity of DBAs, by value. It makes little sense to undertake smaller cases on a DBA, whereas it is much more attractive to do them on bigger cases where quantum is much larger….. What I can say is simply that contingent work is, and was at the relevant time, an integral part of our business and that we charge and have charged in accordance with variety of alternative fee models.”
“As Mr Hurst shows, under a DBA a solicitor is entitled to take up to 50 percent of the sums recovered, to remunerate it for deferring its entitlement to paymentand to allow for the risk of non-payment” (stress provided). 120. And as regards a CFA: “..the CFA may still be a useful point of comparison, as solicitors are expressly entitled to charge thereunder for both deferment and risk, up to a statutory cap of a 100 per cent enhancement on time spent.”
“a stifling effect on the ability of wronged litigants to pursue their cases, shutting out deserved parties access to this honourable court, due to simply having a lack of funds to agree to pay the traditional hourly rate”
“The situation appears to be, however, that there is a diminishing pot of money available. The longer this litigation continues the smaller that pot will become. This raises the question whether it is proportionate to prolong this litigation in the hope of finding a precise answer: “The perfect is the enemy of the good”[“La Bégueule” (Voltaire, 1772)]. Voltaire also said: “A long dispute meansboth parties are wrong.”
“Figures based on an ongoing and enduring survey carried out by Jim Diamond, a costs lawyer. Whilst the survey has not been carried out in a way that would survive peer review, it is generally regarded as a good indicator of the rates that are charged to clients (as opposed to those that are allowed between opposing parties). Indeed, the survey has been published or referred to by the Law Society, the Legal 500, Financial Times, Legal Week and The Guardian.”
“3.12 Principles upon which GHRs [Guideline hourly rates] should be set. One of the first tasks of the Costs Council will be to formulate the principles upon which GHR are set. I suggest that the aim of the GHR should be to reflect market rates for the level of work being undertaken. These would be the rates which an intelligent purchaser with time to shop around for the best deal would negotiate. 3.13 How GHRs should be used in summary assessments. The GHRs are blended rates, unlike the old “A” and “B” rates which were formerly used. Therefore, as their name suggests, the GHRs can only be guidelines or starting points. The judge doing the summary assessment should move up or down from those rates, as appropriate.”
“Is there any justification for paying “City” rates to firms of solicitors which choose to set up in the City of London but are not doing “City” work? In my view, “City” rates should only be paid for heavy commercial work. Defamation, clinical negligence and similar work should not be remunerated at rates above London 2”
“there is no funding available from any source for undertaking the sort of indepth survey which the Civil Justice Council’s Costs Committee and its expert advisers consider is required to produce an adequate evidence base. There is also considerable doubt that even if such funds were forthcoming there would be sufficient numbers of firms willing to participate and provide the level of detailed data required to enable the Committee (and in turn myself) to produce accurate and reasonable GHRs.”
“…a number of trends in the legal services market and other factors that are rendering GHRs less and less relevant. They include, but are not restricted to: • advances in technology and business practices and models; • the ever-increasing sub-specialization of the law which is seeing the market increasingly dictate rates in some fields (particularly commercial law); • the judiciary’s use of proportionality as a driving principle in assessing costs; • the greater adoption of (and familiarity with) costs budgeting amongst the judiciary and practitioners alike.”
“The table…. is based on the assumption that the relevant guideline rate includes a B factor of 50 per cent. This assumption could well be wrong; it is impossible to say because there is no reliable data by which the A factor can be discovered. This means that the role of the A-plus-B analysis is limited to being a cross-check or a tool for comparing rates; it should not be used as a means of calculating rates de novo.”
“..It should also be borne in mind that, not infrequently, when a detailed schedule of costs is prepared, the total claimed is more than the figure first estimated.”
“Time which has been bulk recorded to cover numerous time entries in a single item, generally covering a large amount of hours over periods where it seems likely breaks would have occurred. In my view it is very difficult to record time accurately in this way.”