What will they need to pay? Recovering the expenses of litigation

It is a cliché to say that litigation can be expensive. Any party about to embark on a court action will wish to consider the costs before doing so. An early question asked by clients is "How much will it cost?" followed soon after by "How much of that can I recover from the other side?".

Solicitors may be prepared to share the risk and reward of litigation with their clients by considering alternative fee arrangements. "No win, no fee" is one well known example but there are many others including a client paying their solicitor an additional fee if they are successful. 

Cabot Financial (UK) Ltd v Catherine Weir

A recent judgment from the Court of Session in Cabot Financial (UK) Ltd v Catherine Weir has provided clarity on the recoverability of "success fees". The appellant, Catherine Weir, had defended a claim made by Cabot Financial (UK) Ltd. Initially, Ms Weir was a party litigant but later instructed solicitors to assist her. Cabot eventually abandoned its claim as it was unable to produce certain key documents. The court awarded expenses for the initial part of the action on a party - party basis and for the latter on an solicitor/client, client paying to reflect Cabot's conduct including its failure to lodge the documents it relied upon and abandoning the action on the morning of a proof.

The court may award expenses on one of three scales: 

• Party - Party: This is the most common basis and an account of expenses is based on a table of fees and the Auditor of Court will only allow fees which are "reasonable for conducting the case in a proper manner".

• Solicitor/client, third party paying: The court may award expenses on this basis to show its disapproval with how a party has conducted itself. The court will allow expenses and outlays which have been reasonably incurred and an amount which is fair and reasonable having regard to the circumstances of the case.

• Solicitor/client, client paying: Similar to a third party paying account, the court may award expenses to show its disapproval with a party's conduct. The expenses recovered will be much closer to the fees the successful party has actually incurred.

The appellant's solicitors lodged accounts of expenses for each part of the action. For the period for which solicitor/client, client paying expenses applied, they included a 70% uplift which the appellant had agreed would be paid if she was successful in defending the claim. The auditor of court approved the success fee, however, Cabot objected to it and the sheriff held that the auditor should not have allowed the fee. The Sheriff Appeal Court agreed with the sheriff and refused to allow the success fee.

Ms Weir then appealed to the Inner House of the Court of Session. She argued that the effect of an award of expenses on a solicitor/client, client paying basis was that Cabot stepped into her shoes and had to pay all the expenses which she had incurred in defending the action, including the success fee. Cabot argued that the success fee was not an essential part of the litigation process. It was a way to fund the litigation and was a reward for the risk Ms Weir's solicitors had taken.

The decision

The court held that, whichever scale of expenses was awarded, the allowable expenses must relate directly to the litigation. There must be something in the solicitor's file which relates to the work carried out. If third party or client paying expenses are awarded the court may, for example, allow a higher hourly rate for the solicitor's time than would be allowed on a party - party account. The court may also allow expenses which are related to the litigation but are not specifically included in the party - party fees such as instructing the solicitor to provide advice on the prospects of success.

The success fee Ms Weir agreed to pay was not an expense which was part of, or related to, the work undertaken by her solicitors in defending the claim. It was a private arrangement with her solicitors and was not related to the work they carried out on her behalf. Accordingly, she could not recover the success fee from Cabot.

How can Brodies help?

Brodies has the largest disputes and litigation team in Scotland. We have specialist expertise in all areas of dispute resolution and can advise you on the potential expenses of litigation and what you could recover from your opponent if successful. We can advise you on the most appropriate dispute resolution channel to help you achieve your goals, tailoring our advice to meet the nature of your instructions, your appetite for risk, and your budget.