Solicitors not entitled to 'windfall' on legal fees

SOLICITORS SHOULD not be entitled to a legal costs “windfall” on the basis of a litigant securing a multimillion euro judgment rather than smaller sums, the Master of the High Court has said. The paperwork is generally much the same in such cases, he said.

Master Edward Honohan made the remark when dealing with costs issues in a case where solicitors for the Educational Building Society (EBS) sought legal costs of some €30,000 against a man who had consented to the society getting an order for judgment against him in a sum of €9.5 million.

He also noted the continuing failure to implement the recommendations of various reports on legal costs, with the result the courts still have to set the ground rules for costs. Given the recession-related increase in the number of cases being brought over debts, he stressed the need to keep the costs of this litigation under constant review. If whole portfolios of property are being repossessed by lenders, the costs of those actions “are likely to be significant as an overload on the economy generally”, he said.

He said solicitors are obliged to advise clients being sued over debts who have no defence to the claim against them that each summons contains an “easy pay option” capping the creditor’s costs at €167, irrespective of the amount of the claim.

Clients should also be advised, where they have no real defence to a claim over a debt, they could incur significant extra costs by instructing solicitors to enter an appearance in the matter. In most such cases before him, he could see “no logic” behind the tactic of entering an appearance.

Master Honohan, who deals with a range of matters including costs issues in preparing cases for trial, made his remarks in a judgment dealing with legal costs issues arising in the case brought by the EBS.

The defendant had entered an appearance to the summons served on him, but filed no replying affidavit at the hearing to enter final judgment against him and consented to judgment.

An issue arose as to whether the Master of the High Court would himself measure the costs of the case or refer that issue to the Taxing Master of the High Court.

Master Honohan said there was continuing confusion about which side’s bill for costs is the subject of such applications, but he was not concerned with costs issues between EBS and its solicitors, only with the costs claimed against the defendant.

He said similar cases continued to provide the broad parameters for costs awarded, with the “going rate” applied without any “explicit analysis” of its make-up. If the “going rate” was sums billed by other solicitors in earlier cases, there appeared no possibility of inquiring whether another solicitor might, in a competitive environment, charge less when, he believed, “that must surely be the yardstick”.

Even if solicitors are charging less per hour now, High Court taxing masters have no access to independent data recording such reductions, he said. He believed there was a case for allowing taxing masters to establish whether rates quoted by a solicitor reflected rates which might be available if the case was put out to an “even perfunctory” tender process.

A previous High Court judgment had outlined a formula under which costs, such as drafting fees, could be reduced for work which was repetitious, he noted. Taking into account all those matters, Master Honohan said his inclination was to measure costs in the EBS €9.5 million case as “not very much higher” than for a €900,000 or a €90,000 judgment. “There should not be anything which should be characterised as a windfall, pure and simple.”

As Master of the High Court dealing with “umpteen such cases”, it would not be inappropriate for him to fix standard recoverable costs for such cases, he said. He would have done so here if the claim was “for a less jaw-dropping sum” than €9.5 million.

Because he did not know exactly what work was done in the case and by what grade of lawyer, and in light of the “confusing signals” from costs scales set out in the rules of court, he ruled that the costs be assessed by a taxing master.