Introduction:
The recent case of R (Allseas Group SA) v Paul Sultana [2023] EWHC 2731 (SCCO) stands as a testament to the evolving landscape of private prosecutions and the considerations involved in assessing the reasonableness of the costs incurred in conducting a private prosecution, and the appropriate hourly rates. This comprehensive article explains the factual intricacies of the judgment, exploring key arguments, legal tests, and the broader implications for the market. Although Edmonds Marshall McMahon (“EMM”) were not a party to, nor involved in the case in any way, we were proud to have been highlighted by the Lord Chancellor as a touchstone for reasonableness when assessing the costs of bringing a private prosecution.
The Appellant’s Case on Hourly Rates:
The Allseas case concerned a large-scale fraud in which Allseas Group SA were persuaded by Paul Sultana and others into investing £100m into a fraudulent investment scheme. Allseas instructed a law firm at hourly rates in excess of £600 per hour, dating back to 2014. On assessment of those costs, the Criminal Cases Unit, on behalf of the Lord Chancellor, slashed the costs and the hourly rates as being unreasonable. The Appellant’s argument was broadly that no other firm was capable of conducting a case of such magnitude at any less rates. The Lord Chancellor’s response was to repeatedly refer to Edmonds Marshall McMahon as a prominent private prosecution law firm who was willing and able, at that time, to undertake private prosecutions of this nature and setting a benchmark for measuring the reasonableness of the costs of a private prosecution. The Lord Chancellor specifically referred to a case in which EMM secured a landmark decision on the recoverability of private prosecution costs in 2020.
The crux of the Appellant’s case also revolved around the assertion that the Guideline Hourly Rates (GHRs) should not be treated as “maximum” rates. The Determining Officer’s adherence to the 2010 GHRs without accounting for the passage of time and other relevant factors, was deemed inadequate in achieving reasonably sufficient ‘compensation’, as mandated by section 17(1) of the Prosecution of Offences Act (1985 Act).
The Appellant’s argument emphasised the need for bespoke rates, contending that a one-size-fits-all approach for Grade A fee earners did not acknowledge the unique contributions made by individual fee earners. The Appellant also argued that there was an absence of adjustments for factors like complexity, difficulty, and skill, as outlined in regulation 7 of the 1986 Regulations and Rules 45.2(7) of the Criminal Procedure Rules.
The Lord Chancellor’s Evolving Submissions:
Throughout the proceedings the Lord Chancellor’s submissions evolved. Initial arguments focused on the absence of a tendering process for solicitors, challenging the legitimacy of hourly rates without evidence of market testing. Reference was made to legal advice to the Appellant in 2014, and the subsequent lack of a tendering process, prompted the Lord Chancellor to advocate for applying the 2010 GHRs, adjusted for inflation.
However, a “position statement” filed shortly before the hearing introduced a different narrative. The Lord Chancellor, represented by specialist costs Counsel Mr Rupert Cohen, conceded the reasonableness of the Appellant’s solicitors selection for the private prosecution. This concession did not obviate the need to consider market rates, since the measure of reasonable compensation must align with market standards (R (Virgin Media Ltd) v Zinga [2014] EWCA Crim 1823). The crux of the Lord Chancellor’s argument rested on the notion that a private prosecutor should actively examine the market, seek tenders, and gather evidence before selecting legal representatives. Failure to engage in this process, according to the Lord Chancellor, created an evidential obstacle necessitating a fall back on the GHRs.
The Two-Stage Test on Assessment:
A pivotal aspect of the Lord Chancellor’s argument introduced a two-stage test on assessment under section 17(1) of the 1985 Act:
- The first stage assessed whether costs were reasonably and properly incurred. Even with the reasonableness of the solicitors’ selection acknowledged, the Lord Chancellor argued that this only satisfied the first test.
- The second stage, according to Mr Cohen, required a consideration of the market to determine reasonably sufficient compensation. The Lord Chancellor contended that market rates, informed by a tendering process or similar market testing, should guide the Court’s decision.
This two-stage test, as argued, emphasised the importance of understanding and evaluating market dynamics to arrive at a compensation amount truly reflective of the prevailing standards.
Location Considerations in Determining Hourly Rates:
An intricate facet of the Lord Chancellor’s submissions delved into the relevance of location in determining appropriate hourly rates. Given that the GHRs are location-specific, the Determining Officer, according to the Lord Chancellor’s argument, must identify the appropriate location for the case. Factors such as the nature, importance, complexity, and difficulty of the work, along with the time involved, play a role in determining the suitable location.
The absence of a tendering process, in the Lord Chancellor’s perspective, introduced doubt regarding the representation of market rates. The Determining Officer, adhering to regulation 7(3) of the 1986 Regulations, was urged to identify the least expensive location where the work could reasonably be undertaken. This involved a meticulous consideration of the relevant circumstances of the case.
The Court’s Conclusions on the Appellant’s Choice of Solicitor:
The decision of Costs Judge Leonard in R(Allseas Group SA) v. Sultana [2023] EWHC 2731 (SCCO) (“Allseas”), handed down on 31 October 2023 expressly rejected an argument (see paragraph [106]) that tendering is required. The learned Judge restated (see paragraphs [116] and [117] in particular) that the test is whether the prosecutor acted reasonably in instructing the firm that it did. If so, then it follows that the decision not to tender was a reasonable one. In Allseas, the judgment concluded that the Appellant’s choice of solicitors for the prosecution of the Defendant was objectively reasonable as there was a course of previous dealing in respect of a civil case.
The Court indicated that the Crown Court Judge HHJ Loraine-Smith’s decision not to limit the costs recoverable by the Appellant under section 17(2A) of the 1985 Act, was influenced by the reasonableness of instructing the solicitors. This alignment further solidified the Court’s stance on the reasonableness of the choice of solicitor.
Approach to Assessing Solicitors’ Hourly Rates:
The judgment presented a detailed analysis of the Court’s approach to assessing solicitors’ hourly rates. Departing from a rigid application of the GHRs, the Court acknowledged the necessity of adjustments to reflect the passage of time and other relevant factors.
The Court highlighted the difficulty in determining an exact inflation-based adjustment for the 2010 GHRs. Instead, it averaged out the yearly increase in the GHRs between 2010 and the rates’ update in 2021. The resulting figures, rounded to the nearest £5, became the adjusted GHRs for central London.
Hourly Rates and Factors Influencing Adjustment:
The Court’s approach to hourly rates involved an additional layer of complexity, considering factors beyond mere inflation adjustments. Recognising that the case presented characteristics of heavy commercial litigation, the Court assessed whether these circumstances justified City of London rates.
However, a crucial distinction was made between civil proceedings and criminal cases. The Court cited Hickinbottom J’s observation that practitioners in criminal work could reasonably expect to receive less than their civil counterparts. This consideration prompted the Court to adopt rates commensurate with solicitors in an appropriate location, departing from the potential City of London rates indicated by the case’s complexity.
The judgment highlighted the case’s exceptional nature, emphasizing its heavier, more complex, and difficult aspects compared to precedent cases. The Court’s recognition of the difficulties associated with proving the Defendant’s criminal conduct, and the intricate legal proceedings justified an approach tailored to the unique challenges presented by the case.
Comment
The judgment in Allseas not only navigates the intricate realm of assessing hourly rates in private prosecutions, but also sheds light on the evolving stance of the Lord Chancellor on the benchmark for reasonableness in private prosecution costs. The Court’s departure from a rigid application of the Guideline Hourly Rates signifies a nuanced approach, acknowledging the need for bespoke rates reflective of the evolving legal landscape.
As we navigate the aftermath of the Allseas case, we are prompted to consider the broader implications for private prosecutions. The nuanced interplay between the choice of solicitor, market considerations, and the evolving nature of legal costs requires a comprehensive understanding before embarking on a private prosecution. We are proud to have featured in many of the leading cases in the jurisprudence in private prosecutions over the last decade and that EMM was highlighted by the Lord Chancellor as a touchstone for reasonableness, standing as an exemplar in this developing field of law.
Ashley Fairbrother, Jack Walsh & Monique Iginla
