Costs News

08 August 2019
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Pledge to “honour” budget was not a binding agreement to cap liability

An agreement by solicitors to “honour” a costs budget did not amount to a binding agreement to limit their clients’ overall liability in costs, the High Court has ruled in upholding a costs judge’s decision.

Blyth and Anor v Nelsons Solicitors Ltd [2019] EWHC 2063 (QB) concerned work done by the defendant solicitors for the claimants in a contentious probate dispute. After a short, private instruction, the parties agreed a conditional fee agreement (CFA) in November 2013.

The claimants alleged that, in June 2014, shortly before a case management hearing, they agreed with Nelsons to cap their costs liability to the sums set out in the costs budget. The litigation settled at a mediation in March 2015. Nelsons sought costs of £400,000, inclusive of success fee and VAT, plus disbursements, which it said was the sum agreed at the mediation.

The claimants sought a Solicitors Act assessment. The bill was £609,000, comprising £290,000 profit costs and a 75% success fee, plus VAT, but Nelsons accepted that the claimants' actual liability could not exceed £400,000.

The part of Master Whalan’s ruling at the detailed assessment under appeal focused on his finding that there was no concluded contractual agreement that the costs payable by the claimants to the defendant would be limited to the sum set out in the costs budget.

The case turned on a key email from Nelsons partner Jonathan Roberts following a discussion about costs, which Master Whalan found went no further than an agreement that, should the case proceed to trial, the claimants would not brief counsel but rely instead on Mr Roberts’ advocacy, as a way to limit disbursement spend.

Master Whalan said that, though Mr Roberts had confirmed that Nelsons "would honour the original budget", subject to the trial over-running – indicating his intention to work within a Precedent H budget he expected to be adequate and the court to approve, although neither proved to be the case – this was not a binding agreement to limit the claimants' overall liability in costs.

As it turned out, the court dispensed with costs budgets, but this was not relevant for the issues under appeal.

Mr Justice Stewart ruled that the master was entitled to find that both claimants "exhibited a fundamental confusion" about the "original budget" which was to be honoured. “This of itself undermines any possible finding of a binding agreement,” he said.

He continued: “As to the word ‘honour’, this is capable of bearing the meaning that the original budget would not be exceeded by fulfilling a previous agreement.

“It is, however, also capable of the meaning that, apart from the revisions necessary because of the possible increase in trial length, the Precedent H would be respected in the sense that, as the master said: ‘the solicitors intended to work within a budget they expected to be adequate…’

“Although, absent context and the evidence as a whole, which the master took into account, and the findings he made, the former might at first blush seem the preferable construction, the latter is a permissible construction and the master was entitled to make it.”

Stewart added that written notes of the meeting formalised in the email – produced by the two Nelsons lawyers present – did not refer to any discussion or agreement to cap or limit the costs.

James Howlett (instructed by Cenpro Legal Limited) for the claimants, and Rupert Cohen (instructed by Nelsons Solicitors) for the defendant.

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