Leigh v Michelin Tyre Plc

A costs estimate under the Civil Procedure Rules 1998 is not a costs cap. A substantial difference between an estimate and the costs claimed calls for an explanation and may evidence unreasonable costs. The court may also consider whether the paying party relied on the estimate or whether a realistic estimate would probably have produced different case-management directions.

It is wrong, however, to reduce otherwise reasonable and proportionate costs solely to penalise a party for an inadequate estimate. The assessment court should first decide what effect, if any, the estimate has before considering unrelated objections to the costs claimed.

The claimant brought an employment-injury claim against his employer. His solicitors estimated overall profit costs of £6,000 at the allocation stage but did not revise the estimate. The claim later settled for £48,000, less CRU benefits, with costs to be paid by the defendant. The claimant then claimed costs substantially exceeding the estimate.

A district judge assessed the claimant’s costs at £20,488.83 and declined to reduce them for the inaccurate estimate. Judge Mitchell, sitting in Telford County Court, dismissed the defendant’s appeal. The defendant appealed again, raising the proper effect of a costs estimate under CPR 43 PD paragraph 6.6 when costs are assessed.

1. Appeal dismissed. CPR 43 PD paragraph 6.6 validly permits an assessment court to take an earlier costs estimate into account. It does not add criteria inconsistent with CPR rule 44.5 or fetter the court’s discretion. It makes explicit a consideration already implicit in the requirement to have regard to all the circumstances.

2. Costs estimates are mandatory case-management tools. They inform parties of potential costs exposure and enable the court to make proportionate directions. An estimate of overall costs must assume that the case will proceed rather than settle at an anticipated earlier stage. Where an earlier estimate becomes inaccurate, an updated estimate should be filed with the listing questionnaire.

3. A substantial divergence between the estimate and the final claim requires an explanation. An unsatisfactory explanation may itself support a finding that the costs claimed are unreasonable. The court may also take account of a paying party’s reliance on the estimate, or of the likelihood that realistic figures would have led to different case-management directions which reduced costs.

4. Those matters do not make the estimate a costs cap. If the paying party did not rely on it, realistic figures would not have altered case management, and the costs are otherwise reasonable and proportionate, the court must not reduce the recovery merely as a penalty for an inadequate estimate. Any effect of the estimate should be determined before unrelated items are assessed, to avoid double recovery against the receiving party.

5. Here, the defendant did not rely on the estimate and did not contend that different directions would probably have been given. It also accepted that the assessed costs were reasonable and proportionate apart from the estimate. Even though the estimate was hopelessly inadequate and not satisfactorily explained, that alone did not justify a reduction. The appellants were ordered to pay the respondent’s appeal costs in the agreed sum of £13,032.51, and the stay of execution was removed.

• Court of Appeal (Civil Division). The defendants’ appeal was dismissed: [2003] EWCA Civ 1766.
• Telford County Court. Judge Mitchell dismissed the defendants’ appeal from the district judge on 27 February 2003.
• District Judge. The claimant’s costs were assessed at £20,488.83, without a reduction for the earlier costs estimate.