PASK -v- MCNICHOLAS CONSTRUCTION SERVICES LTD

The Claimant, a leading miner, had suffered severe injury following an accident at work in April 2002. His claim for special damages was substantial. Proceedings were hostile throughout, the costs of the case in February 2004 had been estimated at £40,000 and by December 2004 the estimate had increased to £269,000 with steps not being taken to settle the claim until October 2005. The case eventually settled at a mediation hearing at which the Claimant accepted the Defendants increased offer in the sum of £678,500, with the Defendant to pay the Claimant’s costs on the standard basis.

The case with regard to the costs in this matter was heard in the High Court of Justice Supreme Court Costs Office before Costs Judge Simons, who handed down his judgement on 31 May 2006.
Taking all the factors into account in deciding the amount of costs under CPR 44.5(3), Costs Judge Simons had to consider whether the net amount of costs claimed in the sum of £269,000 were proportionate in a case where £678,500 damages were recovered, where liability was not in issue and the case was settled before trial. Following a detailed consideration of the file and a review of the bill on an item by item basis, the costs were found to be disproportionate, not on the basis of the amount of costs claimed against the damages received but due to a lack of forward planning. The decision in Home Office v Lowndes was applied, with particular reference made to paragraph 23 of the judgement of Lord Woolf:

“In modern litigation, with the emphasis on proportionality, there is a requirement for parties to make an assessment at the outset of the likely value of the claim and its importance and complexity, and then to plan in advance the necessary work, the appropriate level of person to carry out the work, the overall time which would be necessary and appropriate spent on the various stages in bringing the action to trial and the likely overall cost.”

For the estimated costs to have risen from £40,000 to £269,000 over a period of only ten months indicated to Costs Judge Simons “a total lack of planning about the costs and a failure to carry out this litigation in an economic and proportionate manner.”

LEIGH -v- MICHELIN TYRES

This was a case where the Court of Appeal gave guidance on the application of para.6.6 CPR PD 43 which permitted the court assessing costs to take into account any estimate previously filed by the parties. An appeal had been lodged by the defendant following a decision of His Honour Judge Mitchell, who had dismissed a previous appeal from the district judge's initial assessment of costs. The claimant had issued proceedings against the defendant, his employer, in respect of injuries sustained at work. The injuries were allegedly sustained as a result of the defendant's breach of statutory duty. Both parties completed and filed an allocation questionnaire and the claim was allocated to the multi-track. The claimant’s allocation questionnaire estimated his costs to date as being £3,000 plus VAT, and the overall costs likely to amount to £6,000 plus VAT. These estimates were never revised, and neither party filed or served an updated estimate, as required by CPR 43 PD para.6.4(2) at the listing questionnaire stage. The case was settled before trial, and the claimant submitted a bill of costs in excess of £21,000. In points of dispute, the defendant argued that the claimant should not be entitled to recover more than the initial estimate, and the district judge assessed reasonable and proportionate costs at a little over £20,000, having found that the claimant should not be bound by the estimate provided, in the absence of any evidence that the defendant had relied on them. The appeal was dismissed, resulting in a further appeal, where it was held that it would not always be possible at the allocation stage to provide a reasonably accurate estimate of the likely overall costs but it should usually be possible to do so even at that stage. Where it became clear that the allocation estimate was inaccurate, it was all the more important to comply with the obligation in para.6.4(2) CPR PD 43 to file an updated estimate at the listing stage. The practice direction was expressed in clear mandatory terms: costs estimates must be provided, and if, as in this case, there was a substantial difference between the estimated figure and the costs ultimately claimed, that difference called for an explanation. In the absence of a satisfactory explanation the court might conclude that the difference itself was evidence from which it could conclude that the costs claimed were unreasonable. Further, the court might take the estimated figure for costs into account if the other party showed that it relied on the estimate in a certain way, as well as taking it into account when or if it decided that it would probably have given different case management directions if a realistic estimate had been given.
However, the judgment also made it clear that it would be wrong to hold a party to its estimate simply to penalise it for providing an inadequate one, and that the costs judge should determine how, if at all, to reflect the estimate in the assessment before going on to decide whether there were elements of the costs claimed which were unreasonably incurred or unreasonable in amount. In this regard, on the current case, the defendant did not rely on the estimate in the allocation questionnaire and the court could not find that it would have managed the case differently if a more realistic estimate had been given. As a result, the appeal was dismissed, on the grounds that the claimant should not be penalised because the estimate was seriously inadequate.

REYNOLDS -v- STONE ROWE BREWER

A Claimant in a building dispute was given an estimate by her Solicitors that if the matter were to proceed to trial the estimate of costs would be between £10,000 to £18,000 plus VAT.  As the litigation progressed, increased estimates were given.  Upholding the decision of the Costs Judge, in assessing the invoices raised by the Solicitors the High Court limited the Claimant’s Solicitors to the original costs estimate plus 15% representing a reasonable margin of error.  The Court held that on assessment of Solicitor/Own Client bills, before the Court considers the reasonableness of the costs, it must consider what, in all the circumstances, is it reasonable for the client to pay.  It the circumstances of this matter, the Costs Judge was  entitled to have regard to the estimates and decide the amounts in excess of estimates were not recoverable.

WONG -v- VIZARDS

In this matter, the Court found that on a Solicitor/own client assessment, where the Solicitor gives his client an estimate of the likely gross costs, those costs should not exceed that estimate with good reason.  The Solicitors had given the client an estimate of costs and the Court capped the Claimant’s costs liability at 15% above the estimate owing to the inadequacy of the estimate.