Costs award — Failure of receiving party’s solicitor to provide estimate of costs — Effect upon costs liability — Appropriate procedure for dealing with failure — Whether costs to be disallowed or reduced — Appeal dismissed
The appellants were ordered to pay the costs of a failed appeal that they had brought against an earlier costs assessment. At a hearing for summary assessment of the appeal costs, they argued that no liability arose because the respondents’ solicitor had failed to provide its clients with an estimate of the likely costs of the application in accordance with the solicitors costs information and client care code, as required by the solicitors’ practice rules 1990. The judge rejected that argument and awarded costs, albeit at a reduced rate from the one charged by the solicitor.
The appellants appealed that decision. The appeal was conducted on the basis that the respondents’ solicitor had provided hourly rates, but not estimates. Dismissing the appeal, the judge held that since a client was aware that he or she would be charged by his or her solicitor, a solicitor who failed to give an estimate should not, on that account, be disentitled from receiving any fees.
The appellants brought a further appeal. They argued that the breach of the obligation to give an estimate rendered the contract of retainer unlawful, or performed in a way that was forbidden by law, since that obligation was at the heart of the code and its force would be undermined if no sanction were to be imposed where a solicitor failed to comply. Alternatively, the appellants argued that costs should be reduced to take account of the failure.
Held: The appeal was dismissed.
A breach of the code did not render the contract of retainer unlawful and unenforceable. Accordingly, the failure to give a costs estimate did not have that effect. It was not appropriate to make a deduction from the costs awarded on account of the failure. To do so would not accord with the indemnity principle upon which costs were awarded, and would cause unfairness to the receiving party because that party would not have received a corresponding reduction in the solicitor’s bill.
The appropriate way of dealing with a failure to give a proper estimate as to costs was through the development and adaptation of the established processes and principles for assessing costs, reflecting the fact that, consistent with the indemnity principle, the receiving party should be reimbursed by the paying party for the costs that he or she had properly incurred. It would generally be unnecessary to resort to the power, under CPR 44.14, to disallow costs. The appropriate procedure was to allow the paying party to submit, if he or she had grounds to do so, that a lower amount of costs would have been incurred had the receiving party’s work been estimated in accordance with the code. He or she could then ask the costs judge to require the receiving party to prove that an estimate had been given. The judge would have to be satisfied that: (i) the dispute was not a sham, or fanciful, and there was some real basis for the paying party’s contention that proof should be required; and (ii) the absence of an estimate, or a proper estimate, as to costs could have had a calculable, and material, effect upon the costs claimed: Pamplin v Express Newspapers Ltd (Costs) [1985] 1 WLR 689 applied. If that stage were reached, the judge should, where there was no estimate, consider whether, and to what extent, the costs claimed would have been significantly lower had an estimate been given. Where an estimate had been given, but not updated, the estimate should be used as a useful yardstick by which the reasonableness of the final costs claimed could be measured, and any substantial difference would call for an explanation: Leigh v Michelin Tyre plc [2003] EWCA Civ 1766; [2004] 1 WLR 846 applied. In the instant case, no reasons had been advanced as to why the presence of an estimate would have made any difference to the amount of costs that the paying party should be required to pay.
Jeremy Morgan QC (instructed by Whiskers, of Harlow) appeared for the appellant; Clive Pithers (instructed by Vanderpump & Sykes, of Enfield) appeared for the respondents.
Sally Dobson, barrister
