The following case addresses how estimates provided by a firm of solicitors to their client during a property dispute claim effects the costs recoverable by that firm on a Solicitors Act assessment when the total costs claimed significantly exceed the estimates provided.
Mark Andrew Harrison –v- Eversheds LLP  EWHC 2594 (QB)
Mark Harrison (‘the Claimant) appealed an order made by Master Rowley, Costs Judge, on 11 November 2016 which dealt with a preliminary issue on the detailed assessment, pursuant to the Solicitors Act 1974 Section 70, of various invoices tendered by his solicitors, Eversheds LLP (‘the Defendant’).
The Claimant challenged the Defendant’s invoices and contended that the costs payable by him should be limited on the basis of estimates of costs given to him by the Defendant. The estimates provided to the Claimant during the claim were considerably lower than the costs sought.
This claim related to a property dispute in which the Claimant instructed the Defendant in proceedings against Lord Laidlaw. The dispute was settled part way through the trial.
The total costs invoiced by the Defendant solicitors to their client, the Claimant, were by then £1,602,436.66 net of VAT comprising £863,283.72 profit costs and £739,152.94 disbursements.
The total costs claimed within the invoices were in the region of 4.8 times more than an estimate net of VAT given by the Defendant to the Claimant on 2 October 2012 (‘the First estimate’). The overall first estimate was for £333,102.30 made up of £187,711 profit costs and £145,391.30 disbursements.
On 7 February 2013, the Defendant provided an Allocation Questionnaire which showed the Defendant’s anticipated total costs to be £548,054.13 made up of £336,811.80 profit costs and £211,242.33 disbursements (‘the Second estimate’). The actual costs being sought were in the region of 2.9 times more than the Second estimate.
In a reserved decision on 11 November 2016, Master Rowley made the following order:
“(1) The Defendant’s profit costs (at normal hourly rates) are limited to a maximum of £650,000.00 plus VAT.
(2) The disbursements, including Counsel’s fees, are not limited by this decision.”
On 7 March 2017, Mr Justice Langstaff gave permission to appeal on the following grounds:
“(1) The costs judge erred in taking the Second estimate as the starting point for what costs could be recovered;
(2) Having taken the Second estimate as his starting point the costs judge erred in holding that it was reasonable for the Defendant to recover profit costs of up to double the amount stated in that estimate (subject to the impact of the CFA); and
(3) The costs judge should have limited the recovery of disbursements with reference to the first alternatively the second estimate, as well as profit costs.”
The appeal hearing went before the Honourable Mrs Justice Slade DBE on 18 May 2017 when an order was made that:
Ground 1 be dismissed;
Ground 2 be allowed with the assessment to be remitted to Master Rowley; and
Ground 3 be allowed in respect of disbursements on Counsel’s fees.
The reasons for the Honourable Mrs Justice Slade’s decisions are as follows:
Ground 1 – The costs judge erred in taking the Second estimate as the starting point for what costs could be recovered
The Master held that the Claimant relied upon the First estimate in deciding to enter into litigation and on the Second as the foundation for continuing it. He held that it was not possible for the Claimant to have been relying on two different estimates at the same time. The Honourable Mrs Justice Slade agreed that the conclusion of Master Rowley that reliance upon the First estimate was superseded by the actions of the Claimant and the Defendant entering into the CFA after receipt of the Second estimate was unassailable. In the Honourable Mrs Justice Slade’s judgment, Master Rowley did not err in taking the Second estimate as the starting point for the assessment of fees which could be recovered.
Ground 2 – Having taken the Second estimate as a starting point, Master Rowley erred in holding that (subject to the impact of the CFA) it was reasonable for the Defendant to recover profit costs which were up to double the amount stated in that estimate
The approach of Mr Justice Morgan in Mastercigars was considered which illustrated the effect to be given to an estimate if the final bill exceeded it. The Judge explained that even if all work undertaken by a solicitor after an estimate had been given was reasonably undertaken and the costs reasonable in amount, nonetheless the resultant sum may exceed what it is reasonable in all the circumstances to expect the client to pay, The excess will not be recoverable.
Master Rowley relied upon two factors in deciding on a level of increase in fees which it would be reasonable to expect the Claimant to pay from the staring point of the Second estimate.
The first was the additional work subsequently estimated by the Claimant’s opponent. It was the Honourable Mrs Justice Slade’s view that increases in estimates of Lord Laid law’s costs were not a reliable basis for judging the reasonableness of the increases in the Defendant’s costs as the assumptions and advice upon which they were based were not known.
The other factor relied upon by Master Rowley to decide upon the amount of profit costs it was reasonable for the Claimant to pay was additional work carried out by the Defendant after the Second estimate. The Honourable Mrs Justice Slade’s felt that the impression given from Master Rowley’s findings was that the amount of costs attributable to the additional work carried out was not great.
In the Honourable Mrs Justice Slade’s judgment, the award of Master Rowley of an increased of more than £300,000.00 in profit costs above those anticipated in the Second estimate required explanation and justification. Master Rowley erred in principle in relying on the level of the increase in profit costs of his opponent’s solicitors when nothing was known about assumptions, advice and information on which it was based. Further Master Rowley erred in his calculations of the increase in profit costs of Lord Laidlaw’s solicitors as he failed to take into account that the first allocation questionnaire figure was net of VAT and the second final figure included VAT. The increase was therefore wrongly inflated. Master Rowley based part of his assessment of the figure it was reasonable for the Claimant to pay on a mistake.
Master Rowley reached a conclusion on the profit costs which it was reasonable for the Claimant to pay that was not supported by his findings of fact, was based on a mistake on the figures and erred in principle in relying on profit costs charged to Lord Laidlaw in departing so substantially from the Second estimate. Master Rowley therefore exceeded the broad measure of his discretion in considering a reasonable upper limit on profit costs as high as twice that in the Second estimate.
Ground 3 – The costs judge should have limited the recovery of disbursements with reference to the first alternatively the second estimate, as well as profit costs
The appeal in relation to experts’ fees was not pursued at the hearing.
Counsel acting for the Claimant on appeal contended that Master Rowley erred in failing to take into account the Second estimate of counsel’s fees. He erred in deciding that because the Claimant did not seek to include counsel’s fees in the CFA, less reliance was placed on that estimate. The Master erred in deciding that for that reason it was not appropriate to view the reliance placed on the Second estimate by the Claimant as meriting an overarching reduction of counsel’s fees.
It was the Honourable Mrs Justice Slade’s judgment that the Master erred in relying upon the fact that the Claimant did not include counsel’s fees in the CFA as a reason for not making an overarching reduction in counsel’s fees.
Whilst the additional work referred to by Master Rowley in his judgment and the increased length of trial from four or five days to ten days warranted an increase in counsel’s fees from £170,500.00 in the Second estimate, in the Honourable Mrs Justice Slade’s judgment in the absence of additional reasons being found by him to satisfy the increase to £476,576.48 it was not open to Master Rowley to assess counsel’s fees in that sum. His decision to assess counsel’s fees in the sum of £476,576.48 was set aside.
The detailed assessment of the Defendant’s profit costs and counsel’s fees was remitted to Master Rowley for determination.