Mastercigars Direct Ltd v Withers LLP

A solicitor’s estimate, where it is expressly neither a fixed quotation nor an agreed upper limit, does not define the work within the retainer or automatically cap the solicitor’s reasonable remuneration. On a detailed assessment, however, the estimate is a material yardstick for reasonableness. A substantial divergence calls for explanation, and the court must also consider any reliance which the client placed on the estimate when deciding what it is reasonable for the client to pay.

There is no automatic percentage margin above an estimate. Nor does a duty to update costs information under the Solicitors’ Costs Information and Client Care Code 1999 create an implied contractual condition barring recovery of fees. A charging-order application under section 73 is not an action on a solicitor’s bill.

Mastercigars Direct Ltd had instructed Withers LLP in substantial trade mark litigation. Following the later success of Mastercigars’ appeal in that litigation, reported at [2007] EWCA Civ 176, disputes arose concerning Withers’ bills, a May 2005 costs estimate, and Withers’ entitlement to a charge over costs recovered by Mastercigars.

The Costs Judge ordered detailed assessment of certain bills and held that Withers was bound by the amount of its estimate, subject to limited additional trial costs. He also made a charging order under section 73 of the Solicitors Act 1974. Withers appealed the estimate ruling. Mastercigars sought to challenge the charging order and a later variation. The central issues were the legal effect of a solicitor’s costs estimate and the Costs Judge’s jurisdiction to make the charging order.

1. The third appeal was allowed. The Costs Judge’s order that Withers was bound by the sum in its 6 May 2005 estimate was set aside. The estimate was not a fixed quotation or an agreed costs limit under the express retainer. Withers was retained to undertake work reasonably necessary as the litigation evolved and was entitled to reasonable remuneration for work within that retainer.

2. The estimate nevertheless had potential limiting relevance on detailed assessment. It was a yardstick against which the reasonableness of the final bill could be measured. The greater the divergence, the more cogent the explanation required. A client’s actual reliance on an estimate could also affect what it was reasonable to expect the client to pay, even if the client could not establish an estoppel. That factual reliance issue had not been fairly investigated or determined.

3. Neither authority nor principle created an automatic entitlement to add a percentage margin to an estimate, or an automatic cap at the estimate plus such a margin. A margin could assist as a practical cross-check, but the eventual allowance had to be decided on detailed assessment in light of the evidence, including any additional work and any reliance on the estimate.

4. The promised updating of estimates was capable of being a contractual promise, breach of which might sound in damages. It was not a condition precedent to recovering charges beyond an estimate. No term requiring compliance with the Solicitors’ Costs Information and Client Care Code 1999 was necessary to give the retainer business efficacy, and such a term would impose consequences inconsistent with the regulatory scheme.

5. Permission for the second appeal was granted, but that appeal was dismissed. CPR Part 67 permitted a Costs Judge to determine a section 73 charging-order claim. An unassessed costs order could constitute property for that purpose. The restraint in the detailed-assessment order, properly construed against section 70(2) of the Solicitors Act 1974, prevented an action on the bills; it did not prevent an application for a charging order.

6. The first appeal was conceded. The fourth appeal and the remaining private matters concerning the charging order were reserved for a separate private judgment.

• High Court (Chancery Division): allowed Withers’ appeal against the estimate cap and dismissed Mastercigars’ appeal against the charging order: [2007] EWHC 2733 (Ch).
• Supreme Court Costs Office: Costs Judge Rogers ordered detailed assessment, made a charging order under section 73 of the Solicitors Act 1974, and subsequently varied it. No neutral citations were stated.