Costs News

18 June 2020
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Firm “failed to update” original limited costs estimate

A London law firm was in breach of its professional and contractual obligations to a client by failing to update an estimate for initial work on a matter after it escalated far beyond what was agreed, a costs judge has ruled.

But Master Leonard said that, although this deprived the client of the opportunity to make an informed choice on whether to seek alternative, less expensive representation, his liability to Gordon Dadds (now Ince) could not be limited to the £10,000 estimate.

“[It] could never reasonably have been relied on by the claimant for the purposes of anticipating the cost of the litigation that followed,” he found.

And though there was a case for limiting the costs recoverable by Gordon Dadds for the last four months of its retainer to the likely expenditure that the client would have incurred on another solicitor. the evidence was not sufficient to identify “a reliable and fair figure”.

In Newman v Gordon Dadds LLP [2020] EWHC B23 (Costs), the claimant was seeking assessment of six bills, worth £85,000, rendered between 31 January and 31 May 2018 – at which point the claimant moved firms. The client has already paid £76,000 on previous bills, and there is one more unpaid bill, not included in the application, for £61,000.

Master Leonard was ruling on the preliminary issue of whether the recoverable fees should be limited to the £10,000 estimate contained in the August 2017 retainer. This said the work would use the possibility of litigation to resolve the family business dispute by way of mediation at relatively low cost.

When this failed, the firm did not update its estimate, but it relied to an extent on the fact that its monthly bills kept the claimant informed on accruing costs.

Master Leonard said “the ultimate aim” in this exercise was “to identify the sum that, in all the circumstances, it is reasonable for the client to pay”.

He said Gordon Dadds should have been “preparing careful advice on future costs” at least from the point of an unsuccessful roundtable meeting in November 2017. “The original estimate had already been exceeded by then, and there was every indication that matters were likely to progress (as they did) far beyond the very limited scope of the 21 August 2017 retainer letter and into very substantial, and very costly, litigation.

“Failure to give any further estimate of costs after the beginning of November 2017 was a breach of the defendant's professional and contractual obligations to the claimant.”

But he went on to rule that it could not be right to limit reasonable recoverable costs to the initial £10,000. By the time of the roundtable meeting, “it would however have been clear to everyone concerned that the strategy upon which the £10,000 estimate had been based had failed” – indeed, the claimant had already paid the firm £15,500 by the end of October.

“The estimate could have no bearing upon the potential cost of the multiple litigation that was to follow and the claimant could not reasonably have relied on it as such. By the time the first of the bills which I am assessing was rendered, it was no more than an historical footnote.

“The other obvious objection to holding the defendant to a figure of £10,000 is that it takes no account of the expenditure that the claimant would inevitably have incurred if he had gone to other solicitors, as he says he would.”

But the master said that, although “there might well be a case for limiting the costs recoverable by the defendant between January and May 2018 to the likely expenditure that the claimant would have incurred on choosing another solicitor to represent him in that litigation”, the evidence provided by the claimant was insufficient to identify a figure.

“Mr Dunne [for the claimant] points out, rightly, that billing a client in arrears, even monthly (or more frequently) as in this case, is no substitute for the provision of the best possible estimate of future costs. When considering the appropriate response to the failure to provide such an estimate, however, the claimant's knowledge and understanding of the extent to which costs had been accruing, and were likely to continue to accrue, has some bearing on the contention that he would, if properly advised, have gone elsewhere.

“Nor was cost the only consideration in the claimant's choice of solicitor. Under cross-examination, he indicated that he instructed the defendant because he thought that it was a large, strong firm. Despite his stated acquaintance with other firms that he might have chosen to represent him at lower cost, the claimant chose the defendant as the right representative for the task in hand.”

Master Leonard added that it was unclear whether and when, given a reasonable estimate of future costs, the claimant would have disinstructed Gordon Dadds on costs grounds alone: “His evidence in that respect seems to me to be tainted by his ultimate dissatisfaction with the service he received.”

He concluded: “The evidence he has produced in order to demonstrate that he would, if properly advised on future costs, have instructed other solicitors at lower cost also seems to me to be inadequate to allow me to reach a firm conclusion on what that lower cost might have been…

“For those reasons, it seems to me that would be wrong for me to conclude, on Mastercigars principles, that the costs that the defendant can reasonably recover from the claimant should be limited to any specific figure.”

Robin Dunne (instructed by Fahri) for the claimant. John Churchill (instructed by Gordon Dadds) for the defendant.

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