Am I being overcharged? That is the question that many business and private clients are now asking. There is an increasing demand for advice from costs lawyers, solicitors and barristers specialising in costs law, with the aim, in this time of austerity, to challenge solicitors’ claims for costs and hopefully secure a saving. All solicitors should be aware of the obligations imposed on them under the SRA Code of Conduct with regard to costs advice.
The need to establish a system of regular monitoring and review of costs was recently highlighted by Slade J in Harrison v Eversheds LLP. The case demonstrates that even large law firms are not immune to challenges.
It has long been established that the ultimate question in these circumstances is: what sum is it reasonable for the client to pay, having regard to the estimate and any other relevant matter (per Mastercigars Direct Ltd v Withers LLP)? In addition, it was accepted by Slade J that:
- A solicitor is not restricted to an estimate.
- An estimate of cost is not a quotation.
- A client is not required to establish an estoppel before reliance on an estimate is to be taken into account in assessing costs.
In Harrison, the solicitors had, during the course of the matter, provided four costs estimates following the initial retainer. Insofar as profit costs were concerned, the first estimate was for £162,711. This was to cover “all stages to the end of the trial”. The solicitors included caveats in order to illustrate that the figure provided was in fact an estimate. A second estimate was provided later, which included profit costs of £336,811.
The court upheld Master Rowley’s finding that the claimant had relied upon the first estimate in deciding to enter into litigation and on the second estimate as the foundation for continuing it. Consequently, the second estimate was taken as a starting point for the assessment of fees which could be recovered by the solicitors.
The principal difficulty that arose was deciding what amount, over and above the second estimate, it would be reasonable for the client to pay. Slade J emphasised that this was an estimate in predicting what the future costs of work on the case was likely to be, with the assumption that, as it was from a professional firm, it could be taken as reasonably and carefully made, taking into account all relevant considerations.
A solicitor cannot be held to recovering the exact sums set out in an estimate, but the client is entitled to place some reliance upon an estimate. The nature, degree and reasonableness of that reliance will be one factor taken into account on assessment under section 70 of the Solicitors Act 1974, in order to determine how much more than the estimate it is reasonable for the client pay.
Unfortunately, Master Rowley, when making his decision to award more than £300,000 in profit costs above the amount of the second estimate, did not provide an explanation and justification for this. In the substantive case, it also appeared that the master had based his assessment of the figure on a mistake arising from the comparison between the claimant’s costs and those of the defendant’s solicitors. For these reasons, his decision was overturned by Slade J and the matter has been remitted back to him for assessment.
The master’s decision not to reduce counsel’s fees has also been referred back to him for assessment in the absence of reasons justifying an increase from £170,500 to £476,576.
The failure of the solicitors in this case properly to estimate the work required and time to be expended highlights the importance of proper case planning and case management at all stages. Equally important is the requirement to ensure that there is a record of the reasons and justification for any increases.
It should also be remembered that while estimates do help to inform the client as to the costs implications, in a contractual environment it is highly recommended that a clear and unequivocal agreement, in writing, is obtained from the client to any expenditure that may be required or contemplated.
It might not be possible to avoid any challenge whatsoever to a claim for costs, but there are many straightforward steps that can be taken which can improve the solicitors’ chances of recovering the proper cost of the work undertaken, after the case has been concluded.
Whilst Harrison will require further consideration by Master Rowley, it seems likely that Eversheds’ bill will ultimately be reduced by several hundred thousand pounds.