Harrison v Eversheds Llp

On a detailed assessment under section 70 of the Solicitors Act 1974, a costs estimate is not a quotation and does not confine recovery to the estimated sum. However, the client is entitled to place reasonable reliance on it. The court must determine the sum it is reasonable for the client to pay, having regard to the estimate, the nature and degree of reliance, and other relevant circumstances. A later accurate estimate does not necessarily cure an earlier inadequate estimate on which the client relied. Any substantial departure from a reasonable estimate requires explanation and justification. Comparisons with an opponent’s costs may provide a useful check, but are not a reliable basis for assessment where the assumptions underlying those costs are unknown. Reliance on an estimate of counsel’s fees must also be considered, even where those fees are not included in a conditional fee agreement.

The appellant appealed from an order of Master Rowley, Costs Judge, on a preliminary issue in the detailed assessment of invoices rendered by his former solicitors, Eversheds LLP. The underlying property dispute settled during trial. The solicitors’ profit costs and disbursements substantially exceeded successive estimates, and the Costs Judge limited profit costs to £650,000 plus VAT but did not limit disbursements.

The appellant challenged the use of the second estimate as the starting point, the allowance of profit costs up to twice that estimate, and the failure to limit disbursements, particularly counsel’s fees. The central issues were how reliance on estimates should affect reasonable remuneration under section 70 of the Solicitors Act 1974, and whether the Costs Judge’s assessment was supported by his findings.

The appeal was allowed in part. Ground 1 was dismissed. Grounds 2 and 3 succeeded to the extent stated, and the detailed assessment of profit costs and counsel’s fees was remitted to Master Rowley.

1. Starting point. The Claimant initially relied on the first estimate, but that reliance was superseded by the parties’ subsequent conduct in entering into a conditional fee agreement after the second estimate. The second estimate was therefore the proper starting point.
2. Effect of an estimate. An estimate is distinct from a quotation. It indicates, if carefully and professionally prepared, the likely future cost of the work. A solicitor is not restricted to recovering the exact estimated sum, but the client is entitled to place some reliance on it. The nature, degree and reasonableness of that reliance are relevant to the sum it is reasonable for the client to pay under section 70 of the Solicitors Act 1974.
3. Profit costs. The second estimate was reasonable on the information available and included a cushion for contingencies. The Costs Judge erred by relying substantially on the increase in the opponent’s costs without knowing the assumptions, advice or information underlying them. He also miscalculated that increase by comparing figures that treated VAT differently. His findings did not support an increase of more than £300,000 above the second estimate, and he exceeded the broad measure of his discretion by allowing profit costs up to twice that estimate.
4. Counsel’s fees. The Costs Judge also erred by treating the absence of counsel’s fees from the conditional fee agreement as reducing the significance of the estimate. The Claimant had placed some reliance on the estimate of counsel’s fees, and the court was required to assess whether the total claimed was reasonable. Although the longer trial and additional work justified some increase, the sum of £476,576.48 was not open to the Costs Judge on his findings without further reasons.

• High Court (Queen’s Bench Division): appeal from the order of Master Rowley, Costs Judge, dated 11 November 2016. Ground 1 dismissed; Ground 2 allowed; Ground 3 allowed in respect of counsel’s fees. The assessment was remitted to Master Rowley.