[2024] UKUT 00210 (LC)

This leaves the question of assessment. The costs which the Appellants sought to recover were set out in three statements of costs, one relating to the FTT Costs (“the FTT Statement”), one relating to the UT Costs (“the UT Statement”), and one relating to the costs of the Costs Hearing (“the Costs Hearing Statement”). The total sum claimed across these three statements (together “the Statements”) is substantial, amounting to £60,512.02, by my calculations. By way of comparison, the Respondents were awarded the sum of £10,481.06 by the FTT, in respect of their costs of the FTT Proceedings. The equivalent figure for the Appellants’ FTT Costs, as claimed by the Appellants in the FTT Statement, is £32,564.22.

The Statements were not signed, or at least were not properly signed, as they were presented at the Costs Hearing. It seemed to me however that it would have been wrong to reject the Statements on this behalf. I therefore permitted the Appellants to address this problem by the Appellants, by Mr Wilmshurst, giving an undertaking to the UT to file with the Tribunal and serve on the Respondents further versions of the Statements with the signature box on each Statement properly completed. I should record that this undertaking was complied with prior to my circulating this decision in draft.

I start with a generic issue, which is the extent of the costs which can be recovered by the Appellants in respect of the work done by Mr Nicholson, the First Appellant, in relation to the FTT Proceedings and in relation to the Appeal and the Cross Appeal. The Appellants did not instruct solicitors to act for them in the FTT Proceedings and the Appeal and Cross Appeal. The Respondents did instruct counsel on a direct access basis. Mr Taylor was instructed in relation to the FTT Proceedings. Mr Wilmshurst was instructed in relation to the Appeal and the Cross Appeal, and also made submissions on behalf of the Appellants in relation to the FTT Costs when the same were considered in the FTT Proceedings. The Appellants have made a substantial claim for the time said to have been spent by Mr Nicholson, as a litigant in person, in dealing with the case both in the FTT Proceedings and in the Appeal and Cross Appeal. The claim is a hefty one. Mr Hale told me that the total number of hours which Mr Nicholson was shown as having spent on the case was just over 178 hours. I believe that this figure, which was not challenged by Mr Wilmshurst, excludes the time shown for Mr Nicholson in the Costs Hearing Statement. All this time, so it is submitted, represents work done by Mr Nicholson on the case which would have been done by solicitors, if the Appellants had instructed solicitors. All of this time is claimed at a rate of £130 hour, which is said to be a substantial discount from the rate at which Mr Nicholson’s time is charged out by the company for which he works, McLaren Construction Ltd (“McLaren”). Mr Nicholson, who I understand to be a qualified architect, is Group Pre-Construction Director of McLaren.

There is what appears to be an unsigned letter from McLaren, dated 13^th May 2024, expressed to be from Maurice Archer, Group Strategic Director, which provides the following confirmation:

The Appellants’ ability to recover costs in respect of Mr Nicholson’s time is governed by CPR 46.5, which the parties are agreed I can apply, and which provides as follows:

Concentrating on Mr Nicholson’s time it can be seen that the Appellants are entitled to recover for Mr Nicholson’s time spent doing the work which would have been done by solicitors, had solicitors been instructed, in the amount permitted by CPR 46.5(4). This amount is limited to an amount for the time reasonably spent on doing the work at the rate set out in Practice Direction 46, unless the Appellants can prove financial loss, in which case the amount is the amount that the Appellants can prove to have been lost for the time reasonably spent on doing the work.

Practice Direction 46, at paragraph 3.4, prescribes the following rate, where financial loss cannot be shown:

I should also set out paragraph 3.2 of Practice Direction 46, which provides as follows, in relation to the evidence of financial loss:

It is clear from the above provisions that the burden is upon the Appellants to prove financial loss in this case, in order to avoid being pegged back to the prescribed rate of £19 per hour. I stress the requirement for proof. What constitutes satisfactory proof of financial loss is clearly a case sensitive question. There must however be satisfactory evidence which demonstrates, on the balance of probabilities, that the relevant litigant in person has suffered financial loss.

In the present case the Appellants claimed that Mr Nicholson had suffered such financial loss. The evidence relied upon by the Appellants was a letter dated 12^th July 2024, marked for the attention of the Tribunal, and expressed to come from Maurice Archer, the Group Strategic Director of McLaren, referred to above. I quote the letter in full:

In common with the letter of 13^th May 2024, this letter did not appear to have been signed. By this, I mean that there was a gap at the end of the letter (reproduced above) where one would expect to see a wet signature of Mr Archer. Mr Wilmshurst suggested that the printing of Mr Archer’s name at the foot of the letter constituted the signature, but there was no actual evidence to this effect, and I was left in the dark as to whether Mr Archer had actually signed the letter or not. The same applies to the letter of 13^th May 2024.

The Appellants’ case, on the basis of this letter and the earlier letter, is that out of the 178.1 hours spent by Mr Nicholson on the case, 128 of these hours were spent during office time, using the resources of McLaren. I should mention, in case of doubt, that 16,640 divided by 130 does equal 128. By reference to the letter the Appellants say that Mr Nicholson is now indebted to McLaren, pursuant to the terms of his contract of employment, in the sum of £16,640. This constitutes a financial loss, within the meaning of CPR 46.5(4)(a), which permits the Appellants to recover for Mr Nicholson’s time at a rate higher than £19 per hour, up to 128 hours (assuming 128 hours are allowed as reasonable). The Appellants say that £130 per hour is more than reasonable as the equivalent of an hourly rate for the services of a solicitor, even after making the one third deduction required by CPR 46.5(2).

I am not able to accept this case. The reason for this is that the Appellants have not proved, to my satisfaction and on the balance of probabilities, that Mr Nicholson has suffered the alleged financial loss. I have no witness statement from Mr Nicholson to confirm what is said in the letter, nor from Mr Archer, nor from anyone else at McLaren. All I have is a letter, produced by the Appellants, which may or may not have been signed.

The problems with the absence of proof of the alleged financial loss do not end there. Mr Nicholson filed written submissions, dated 13^th May 2024 (the day before the hearing of the Appeal and the Cross Appeal), which dealt with costs and were described as “Submissions in relation to exceeding the hourly charging rate for a Litigant in Person”. In these submissions Mr Nicholson sought to make the case that his time should be recoverable, by way of costs at a rate in excess of £19 per hour. The submissions quoted CPR 46.5 and Practice Direction 46. These provisions would have been familiar to the parties in any event, because they were the subject of argument in the context of the Respondents’ claim to recover the costs of their time, as solicitors, following their victory the FTT. Mr Nicholson’s submissions make no reference to the financial loss which is now alleged. So far as loss was concerned, Mr Nicholson said this:

There was no evidence to explain why there was no mention, in these written submissions, of the financial loss which is now alleged. If this paragraph disclosed any loss, it was a loss to McLaren, although this was not stated. I find all this extraordinary. In the Costs Hearing Mr Wilmshurst sought to explain the situation, on instructions, on the basis that the submissions had been prepared in haste. I did not find this a satisfactory explanation and, in any event (and this is of course no reflection on Mr Wilmshurst), I consider that I should make my decision on the question of whether financial loss has been suffered on the basis of evidence, not information provided on instructions. So far as evidence was concerned, there was none to explain the absence, in the written submissions, of reference to the financial loss now alleged. A claim is now made that Mr Nicholson has suffered substantial financial loss as a result of his work on this case, on the basis that he owes McLaren a very substantial sum, namely £16,640. At the time when Mr Nicholson was preparing his written submissions in support of the hourly rate claimed for his work, at a time when he would have known the importance of being able to demonstrate financial loss, no mention was made of the alleged debt to McLaren. There is no evidence to explain the absence of reference, in the written submissions, to the financial loss which is now alleged. As I have already pointed out, those submissions made specific reference to CPR 46.5, which states clearly the need for a litigant in person to demonstrate financial loss, in terms of recovering for the time spent on the relevant case by the litigant in person, in order to avoid being restricted to the prescribed rate of £19 per hour.

Beyond this, there are other features of the letter which puzzle me. By reference to the extracts from Mr Nicholson’s contract of employment, as quoted in the letter, Mr Nicholson would have been guilty of gross misconduct in spending so much of McLaren’s time and resources on this case, unless he had permission to do so. The letter of 13^th May 2024 makes no reference to such permission having been given. It is simply said that the Main Board of McLaren was aware of the time and company resources spent by Mr Nicholson on the case. It seem extraordinary that McLaren, particularly in an employment context, should now be turning round and saying that Mr Nicholson is indebted to McLaren in the sum of £16,640. I have not seen either Mr Nicholson’s employment contract or the staff handbook, beyond what is quoted in the letter, but if it is assumed that McLaren does have the contractual right to recover a sum of this kind, I would have expected this matter to have been considered and addressed between Mr Nicholson and McLaren some considerable time ago. If Mr Nicholson was aware that McLaren would be charging him for his time spent on the case, and given the amount of time which it is said that Mr Nicholson was spending on the case, both in the FTT and in the UT, I would have expected the situation to have been addressed by Mr Nicholson and McLaren some time ago. There is however no evidence of any communication between Mr Nicholson and McLaren in this respect, prior to the recent letter of 12^th July 2024.

Beyond this, I note that the extract from the staff handbook gives McLaren the right to recover any cost or loss incurred by McLaren “due excessive outside of work activities”. There is no evidence of what cost or loss McLaren says that it has incurred “due excessive outside of work activities”. I cannot see that this cost or loss necessarily equals the company time spent by Mr Nicholson on this case. It might do. Equally it might not. It appears that what needs to occur, for the right of recovery to arise, is excessive outside of work activities. What that means and what loss it is said to have caused to McLaren in this case have not been addressed by the Appellants.

I stress that this is not a case where I am making findings that the Appellants’ case is fabricated or anything of that kind. The position is a good deal simpler than that. The Appellants have failed to prove their case that Mr Nicholson has suffered financial loss within the meaning of CPR 46.5(4). All I have, by way of evidence, is the letter dated 12^th July 2024. So far as that letter is concerned, it raises a number of questions. The Appellants have provided no evidence to answer those questions.

In the absence of any evidence, beyond the letter, I am not satisfied that Mr Nicholson has suffered the financial loss which is alleged. In those circumstances Mr Nicholson’s time, so far as I may be prepared to allow it as recoverable time, is restricted to the prescribed rate of £19.00 per hour.

For the sake of completeness I should mention that Mr Hale drew my attention to the case of Knight v Maggioni [2006] EWHC 90056 (Costs), a decision of Master Simons, Costs Judge. The case was, so Mr Hale submitted, authority for the proposition that the Appellants could not recover anything for the time of Mr Nicholson unless they could demonstrate that Mr Nicholson had spent the relevant time on matters within his own expertise, which would otherwise have required the attention of an expert. I do not read Knight v Maggioni as authority for this proposition, which is stated in a part of the judgment where Master Simons was recording the submission of one of the parties. The terms of CPR 46.5 seem clear to me. Litigants in person can recover for their time spent working on a case, provided that the time would have been allowed if the work had been done by a legal representative on behalf of the litigant in person. The key restriction on the ability of the litigant in person to recover for such time is that the litigant in person is restricted to the prescribed rate of £19 per hour, unless financial loss can be shown.

This brings me to the question of the number of hours which should be allowed for Mr Nicholson’ time. I start with the FTT Statement. The total number of hours shown for Mr Nicholson on the FTT Statement, by my calculations, is just over 136 hours. This includes 5 hours for attendance at the hearing before the FTT itself, which is plainly irrecoverable, given that Mr Nicholson was a party to the FTT Proceedings. This figure also includes 5 hours spent on the FTT Statement, which I understand to represent time spent by a Ms Golding of Chollerton Legal Services on preparing the FTT Statement, I assume by the provision of costs drafting services. This time, if it is allowable, seems to me to be constitute a disbursement, and can be put to one side for the purposes of determining Mr Nicholson’s hours. This leaves around 126 hours, which still strikes me as excessive. I accept that a certain amount of work had to be done. I will allow what I regard as a generous figure of 80 hours for the time of Mr Nicholson. Applying the prescribed hourly rate of £19, this translates to £1,520.

Moving to the UT Statement, it shows, by my calculations, a total amount of 34.5 hours for Mr Nicholson. Removing 6 hours which is shown for Mr Nicholson’s time for attending the hearing of the Appeal and the Cross Appeal, and removing a half hour shown for what I assume to be the time of Ms Golding, brings the total down to 28 hours. This again strikes me as excessive. I will allow a figure for 20 hours for the time of Mr Nicholson in relation to the Appeal and the Cross Appeal. Applying the prescribed hourly rate of £19, this translates to £380.

In summary, I allow a total of 100 hours for the time of Mr Nicholson for the FTT Proceedings and the Appeal and the Cross Appeal. Applying the prescribed hourly rate, this generates a figure of £1,900 for Mr Nicholson’s time, of which £1,520 is attributable to the FTT Proceedings and £380 is attributable to the Appeal and the Cross Appeal.

I move next to disbursements. I start with the fees of counsel, Mr Taylor, in the FTT Proceedings. The total claim is for £9,500. This figure did not square with the figure shown in the relevant fee note for Mr Taylor, which showed a figure of £8,500. There was a separate fee note for earlier work done by Mr Taylor, but it appeared to relate to work done by Mr Taylor before the case was referred to the FTT, which I assume to be non-recoverable. In any event, the earlier fee note did not explain the £1,000 discrepancy which I have identified. I do not think that the discrepancy matters because £8,500 seems to me to be a reasonable figure for Mr Taylor’s fees. I therefore allow the figure of £8,500 for Mr Taylor’s fees.

Turning to the Appeal and the Cross Appeal a total sum of £14,250 is claimed for Mr Wilmshurst’s fees. This amount strikes me as too high, particularly by comparison with Mr Taylor’s fees. I will allow a figure of £10,000 for Mr Wilmshurst’s fees.

I will also allow the VAT claimed on the fees of Mr Taylor and Mr Wilmshurst. I assume that neither of the Appellants is registered for VAT in a personal capacity.

Turning to the smaller sums claimed by way of disbursements, my analysis is as follows:

In summary therefore, I assess the Appellants’ FTT Costs and the Appellants’ UT Costs in the following amount:

This leaves the costs of the Costs Hearing itself, to which I now turn.