Reynolds v Stone Rowe Brewer (a firm)

In a solicitor-client costs assessment, a costs estimate is not ordinarily a fixed quotation or automatic cap. It is a yardstick for deciding what remuneration is reasonable and what it is reasonable in all the circumstances to expect the client to pay. The greater the divergence from the estimate, the more explanation is required. Solicitors must provide realistic overall cost information, update it and warn promptly of likely excess. Where early estimates were materially understated, later warnings may carry little weight. The relevant question is what the client would have done had accurate information been given at the proper time. No particular percentage margin applies automatically.

Stone Rowe Brewer (a firm) appealed from an order of Master Rogers, the Costs Judge, dated 4 July 2007. The order assessed the solicitors’ invoices, limited profit costs to £20,700 by reference to an earlier £18,000 estimate and a 15% margin, allowed specified disbursements, and required repayment of an overpayment.

The solicitors argued that the Costs Judge had treated an estimate as a fixed cap, and had failed to account for later revised estimates and unexpected developments. The claimant argued that the early estimates were materially understated and deprived her of the opportunity to make an informed decision about continuing the litigation. The central issues were the legal effect of costs estimates in a solicitor-client assessment and whether the Costs Judge’s decision was wrong or unjust.

Appeal dismissed. The Costs Judge’s reasons were inadequate, but the available transcript, bills and correspondence enabled the High Court to review the decision and reach the same conclusion on the merits.

1. Appellate review and reasons. Under CPR r.52.11(1) and (3), the appeal was ordinarily a review, and could succeed only if the decision was wrong or unjust because of a serious procedural or other irregularity. The parties were entitled to a reasoned judgment, as recognised in Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377. The absence of adequate reasons justified examination of the merits but did not itself require the appeal to succeed.
2. Effect of estimates. The governing question was what remuneration was reasonable and, in all the circumstances, what it was reasonable to expect the client to pay. An estimate was a yardstick, not a fixed-price warranty or automatic cap. The greater the divergence from it, the more explanation was required. The approach in Mastercigars Direct Ltd v Withers LLP [2007] EWHC 2733 was applied. Wong v Vizards [1997] 2 Costs LR 46 did not establish an automatic 15% margin, and no particular percentage margin was applied.
3. Application. The earlier estimates were expressed as overall costs through trial and would have been understood by a lay client to include disbursements. The November 2005 revision was principally a correction of an earlier under-estimate, rather than a warning caused by changed facts. Explanations concerning correspondence, applications and later procedural events did not account for the substantial discrepancy. The solicitors’ work and charging rate were assumed reasonable, but the total still exceeded what it was reasonable for the claimant to pay. Her financial circumstances and what she would probably have done if accurately informed at the outset were relevant. Her decision to continue after later warnings was not determinative.
4. The sum certified by the Costs Judge, £20,700 for profit costs together with the allowed disbursements, was within the range of a reasonable assessment. The appeal was therefore dismissed.

• High Court (Queen’s Bench Division): In Reynolds v Stone Rowe Brewer (a firm) [2008] EWHC 497 (QB), the solicitors’ appeal was dismissed.
• Costs Judge: Master Rogers made an order dated 4 July 2007 assessing the invoices, limiting profit costs to £20,700, allowing specified disbursements and ordering repayment of an overpayment.