Legal Fees and the Taxation of Costs in the Caribbean

May 20

11 min read

The taxation of costs in the Caribbean is the process by which a court officer, usually a registrar, master or taxing officer, examines a bill of costs and determines what sum is properly payable, either by the losing party to the winning party or by a client to the attorney-at-law who acted for them. The term "taxation" is retained in some jurisdictions, while others now speak of assessment, and some have replaced detailed taxation in most cases with prescribed or fixed costs. The underlying questions are, however, constant: what work was reasonably done, at what rate, in what amount, and who bears the cost.

Practitioners encounter the subject in two distinct settings that are frequently confused. The first is the recovery of costs from an opposing party under a costs order, usually described as party and party costs. The second is the relationship between the attorney-at-law and the firm's own client, concerning the fees the client must pay, and the client's right to have the bill examined. The principles, the procedures and the risks differ in each setting, and a fee earner who treats them as one is likely to under-recover from the opponent or over-charge the client.

This article explains the structure of the subject as it is generally understood across Commonwealth Caribbean jurisdictions and sets out a working method for recording, preparing and defending costs. It does not state the law of any single territory. The legal profession legislation, the rules of civil procedure, the practice directions on costs and any prescribed scales of costs differ between Trinidad and Tobago, Jamaica, Barbados, the Eastern Caribbean States served by the Eastern Caribbean Supreme Court, the Bahamas, Belize, Guyana and others, and have been amended over time. The reader must consult the current rules and scales of the jurisdiction concerned.

Two kinds of costs: party and party, and attorney and client

The first step in any costs question is to decide which relationship is in issue.

Party and party costs

Where a court orders one party to pay the costs of another, the paying party is liable for costs that are recoverable under the court's rules, not for everything the winning party has spent. The costs recoverable between the parties are usually narrower than the costs the winning party owes to its own attorney-at-law. The court's discretion on costs, the principle that costs generally follow the event, and the conduct of the parties during the litigation all affect the order. The order may be for costs to be agreed or assessed, for costs on a particular scale, or for a stated sum.

Attorney and client costs

The attorney-at-law's entitlement to be paid by the client arises from the retainer, from any written agreement on remuneration, and from the legal profession legislation of the jurisdiction. Legislation in the region, of which the Legal Profession Act Chap. 90:03 in Trinidad and Tobago is one example, commonly regulates matters such as the form and delivery of bills, the terms on which an attorney-at-law may sue for fees and the client's right to apply for a bill to be taxed. The details differ and must be checked. Professional rules also impose obligations that go beyond contract, including a duty to charge fees that are fair and reasonable and to inform the client of the basis of charging.

The difference matters because a client who has been awarded costs against an opponent may recover less than the amount owed to their own attorney-at-law. The shortfall is a matter between the client and the firm, and the engagement letter should have said so. A frequent source of complaint is the client who understood that winning meant that the other side would pay everything.

Prescribed costs and the move away from detailed taxation

A number of regional civil procedure regimes provide for prescribed costs, in which the costs recoverable by the winning party in a claim are determined by reference to the value of the claim or the stage reached and a table or scale in the rules, rather than by itemised taxation of the work done. Where such a regime applies, the winning party's recoverable costs are governed by the prescribed amounts, and the court may depart from them in defined circumstances, for example where there has been unreasonable conduct or where the matter is of exceptional complexity.

The prescribed approach has consequences for practice that are easy to overlook. It decouples recoverable costs from the actual effort expended: a matter that required extensive work may recover a modest prescribed sum, while a simple matter may recover a sum that exceeds the time spent. It makes accurate estimates at the outset more important, since the client is entitled to know the likely gap between the fees to be charged and the costs likely to be recovered. And it gives weight to early and realistic valuation of the claim, since value usually determines the applicable band.

Prescribed costs do not eliminate taxation or assessment altogether. Matters outside the scale, interlocutory applications, costs ordered on a different basis, and the attorney-at-law's own bill to the client may still require examination. Firms should therefore maintain detailed time and disbursement records, whether or not the scale will determine what is recoverable.

The principles that govern what is allowed

Whatever the procedure, the taxing officer applies a set of principles that practitioners should know and test their bills against before they are submitted.

Reasonableness: the work must have been reasonably necessary, and the amount claimed for it reasonable. The question is not whether the work was useful in hindsight but whether it was a reasonable step when it was taken.
Proportionality: the costs should bear a sensible relationship to the value and importance of the matter and its complexity. Rules of procedure in many jurisdictions expressly refer to proportionality.
Indemnity: a party can recover no more from the opponent than it is liable to pay its own attorney-at-law. A claim that exceeds the client's actual liability will not be allowed.
Basis of taxation: costs may be assessed on a standard basis, under which doubts about reasonableness are generally resolved in favour of the paying party, or on a more generous basis ordered by the court, under which doubts are resolved in favour of the receiving party. The order must be read to see which applies.
Documentary support: items must be evidenced by file notes, time records, receipts and correspondence. An item that cannot be supported is likely to be disallowed or reduced.

These principles apply with particular force to items that are commonly challenged: duplicated attendance by more than one fee earner, time spent on correspondence and internal discussion, work on unsuccessful applications, preparation of documents later found to be unnecessary, and disbursements that were not strictly required.

Preparing a bill of costs

A bill of costs is a structured document setting out the work done, the time spent or the amount claimed, the disbursements and the sum sought. Local rules prescribe form and content, and the practice direction should be followed exactly. The following sequence represents sound practice irrespective of local variation.

Confirm the basis of the costs order and the applicable regime: prescribed costs, standard basis, indemnity basis, or agreement. State the basis on the face of the bill.
Assemble the complete file: the order, pleadings, correspondence, attendance notes, time records, invoices from counsel and experts, and receipts for disbursements.
Divide the bill into logical phases, such as pre-action, pleadings, disclosure, interlocutory applications, trial preparation, trial and post-trial, so that the taxing officer can follow the narrative.
For each item, state the work done, the fee earner by grade, the time and the rate. Where counsel was instructed, record counsel's fees separately with the brief and refresher components.
Apportion costs where an order covers only part of the proceedings, for example one interlocutory application, so that work relating to other issues is excluded.
List disbursements separately with supporting vouchers and indicate which are recoverable under the order.
Review the bill as a sceptical taxing officer would, striking items that cannot be justified, before it is served.
Serve the bill, with notice of commencement or request for a hearing date as the rules require, within any time limit. Failure to commence the process within the prescribed time may result in loss of the right or in adverse consequences as to interest and costs.

Counsel's fees and expert fees

Counsel's fees are often the largest single item. They are recoverable only to the extent that they are reasonable in amount and were reasonably incurred. A brief fee should reflect the complexity of the case, the seniority of counsel and the work done in preparation; a refresher should reflect the length of the hearing. The instructing attorney-at-law should keep counsel's fee notes, correspondence agreeing the fee and a record of the reasons for choosing counsel of the seniority engaged. Expert fees similarly require evidence of the instruction, of the work done and of its relevance to the issues.

Challenging a bill: points of dispute and the hearing

The paying party usually responds with written objections, often called points of dispute or notice of objections, identifying the items challenged and the grounds. Specific objections, supported by reasons, are more effective than blanket assertions that the bill is excessive. The receiving party should reply with an explanation and any further evidence. Many disputes resolve at this stage by negotiation, particularly where the points of principle, such as the rate for a fee earner or whether a phase of work was reasonably necessary, can be resolved globally.

If the matter proceeds to a hearing, the taxing officer will examine the bill item by item or by category. Preparation should include a short schedule of the principal points on which the parties differ, the key authorities on the relevant principles from the jurisdiction's courts, and the file documents that support the contested items. The time records are decisive. A bill whose narrative is consistent with contemporaneous time entries is credible; one reconstructed after the event invites doubt.

The determination is normally recorded in a certificate or order for the sum allowed. Procedures for review or appeal against a taxing officer's decision exist in most jurisdictions, subject to time limits and in some cases to the need for the objecting party to identify specific items. The routes and deadlines differ and should be confirmed in the rules.

An illustrative worked example

The following figures are illustrative arithmetic only. They are not market data, do not represent any prescribed scale or any jurisdiction's rates, and are used solely to show how the principles operate on a bill.

Suppose a firm claims 40 hours of work by a senior attorney-at-law at an assumed hourly rate of 200, and 30 hours by a junior attorney-at-law at an assumed rate of 120. The profit costs claimed are therefore 8,000 plus 3,600, which is 11,600. The paying party objects that 6 hours of the senior's time duplicated work performed by the junior, and that the junior's rate should be 100 rather than 120. If the taxing officer accepts both objections, the senior's allowed time falls to 34 hours, or 6,800, and the junior's allowed rate gives 3,000. The allowed profit costs become 9,800 rather than 11,600, a reduction of 1,800. The example shows two recurring points: duplication between grades of fee earner is a common ground of reduction, and rates are open to challenge unless the firm can show that they are reasonable for the work and grade.

The client's bill: fees, retainers and the right to challenge

The second setting concerns the firm's own account to its client. A firm that wishes to be paid, and to withstand a challenge, should observe the following disciplines.

Record the basis of charging in a written engagement letter: hourly rates by grade, fixed fees, retainers, the treatment of disbursements and tax, and the expected range of fees. Where the legislation or professional rules require a written agreement or particular content, comply precisely.
Explain the difference between the fees the client owes and the costs the opponent may be ordered to pay, and record that the client has understood it.
Deliver bills in the form required by the legislation, signed where required and with sufficient narrative to permit the client to understand the charge. A lump sum without particulars is vulnerable to a request for taxation.
Update the client when costs are exceeding the estimate, before the excess is incurred rather than after.
Handle client money in accordance with the accounts regulations, and transfer funds from the client account to the office account only against a delivered bill or notice, as the rules require.

A client who is dissatisfied with a bill may in many jurisdictions apply for the bill to be taxed, subject to statutory conditions as to time and as to payment. Taxation of the attorney-at-law's bill may result in reductions and, where the reduction is substantial, in an order that the attorney-at-law bear the costs of the taxation. The consequences also include potential professional discipline where the fees are found to have been unreasonable. For these reasons, a firm should view a complaint about fees as an occasion for a prompt and documented review of the bill, and not as a purely administrative matter.

Record keeping that supports taxation

Most failures on taxation are failures of record keeping, not of legal argument. A firm should keep the following from the first day of a matter.

Record	What it must show	Why a taxing officer will care
Time entries	Date, fee earner, grade, duration, description of work	Primary evidence of work done and of its reasonableness
Attendance notes	Substance of calls, meetings and hearings	Supports claims for attendances and shows necessity
Engagement letter and fee agreement	Basis of charging and any estimate	Establishes the client's liability and the indemnity principle
Disbursement vouchers	Payee, date, amount, purpose	Necessary for recovery of each disbursement
Counsel and expert instructions	Terms, fee agreed, work requested	Evidences reasonableness of high value items
Costs orders and offers	Orders, offers of settlement and responses	Determines basis, entitlement and any consequences of rejected offers
Correspondence on estimates	Warnings to the client of costs exceeding estimate	Protects the firm in a client challenge

Offers of settlement deserve a special mention. The rules of procedure in many jurisdictions give offers made in prescribed form consequences for costs. A claimant who beats its own offer, or a defendant who makes an offer that the claimant fails to beat, may secure a costs advantage. Offers and their dates should therefore be kept with the matter record in an easily accessible place.

Interest, enforcement and limitation

Once costs are certified or agreed, they are enforceable in the same manner as a judgment debt, subject to local rules. Interest on costs may run from the date of the order or the certificate, depending on the jurisdiction. The firm should diarise the date by which costs proceedings must be commenced and the date on which payment is due, and should follow up promptly. Delay in commencing taxation, where time limits apply, may result in reduced interest or in the loss of the entitlement. Where the paying party is impecunious, the receiving party must consider whether the costs of enforcement are likely to exceed the recovery.

Practical next steps

Identify, for each matter type the firm handles, the applicable costs regime in its jurisdiction: prescribed costs, assessment or taxation, and the relevant practice direction and scale.
Revise the engagement letter template so that it explains the basis of charging, the difference between fees and recoverable costs, and the likelihood of a shortfall.
Require time to be recorded contemporaneously, with a meaningful narrative, and review a sample of entries each month.
Keep disbursement vouchers and counsel and expert fee notes on the matter file as they arise, not at the end.
Diarise all costs related deadlines, including time limits for commencing taxation and for responding to points of dispute.
Review each draft bill against the principles of reasonableness, proportionality and indemnity before service, removing duplication and unsupported items.
Establish a procedure for responding to client complaints about fees, including a prompt review by a partner not involved in the matter.
Keep an up-to-date note of the leading local decisions and practice directions on costs for reference by the team.

How practice management software supports costs recovery

Contemporaneous time entries, matter-linked disbursements, stored engagement letters and a complete record of correspondence are the raw materials of a bill that survives scrutiny, and they are easiest to maintain when held in one system rather than assembled at the end. Legalytech provides matter, document and billing management as software for law firms, so that the records on which taxation depends are captured as the work is done.

This article is provided for general information only and does not constitute legal advice. Practitioners should consult the rules of their own jurisdiction and regulator.