The recent case of Harrison v Eversheds LLP  EWHC 2594 (QB) is an interesting one which emphasises the importance of cost estimates given by Solicitors to their clients. The client disputed the costs billed by his former Solicitor, Eversheds. Eversheds provided an initial estimate totalling £333,102.00 and a second estimate totalling £548,054.00 yet they ultimately invoiced £1.6 million plus VAT.
At first instance, Master Rowley held that the profit costs were limited to a maximum of £650,000 plus VAT (which was a sum up to twice as much as the profit costs contained within the initial estimate provided by the solicitor to his client) but did not limit the disbursements or Counsel’s fees. The client appealed and the appeal was heard by Mrs Justice Slade.
The decision of Master Rowley was appealed on three grounds. The first ground of appeal related to an argument that the Solicitor was not entitled to rely upon a second cost estimate provided to the client but that ground of appeal was dismissed.
The second ground of appeal was that Master Rowley had erred in principle in determining the sum that it was reasonable for the client to pay his solicitor. This was made with reference to the increase in his opponent’s costs in the litigation from the estimate they provided with their allocation questionnaire to the figures contained within their Precedent H form.
It was contended that the increase in his opponent’s costs were not relevant to the assessment of what it was reasonable for him to pay his Solicitor. Furthermore, it was submitted that there was a mistake in Master Rowley’s reference to the opponent’s costs, as he had failed to account for the fact that the costs contained within the initial estimate did not contain VAT, whereas the costs contained within the second estimate did, therefore the increase in the two figures did not reflect the real increase in costs. In determining which costs were reasonable for the client to pay, Master Rowley also referred to his findings in respect of the amendments to the pleadings, disclosure and other additional work. Whilst he had held that these matters did not warrant a substantial increase in costs, he had nevertheless taken them into consideration when assessing the amount that it was reasonable for the client to pay which was further contended to be an error on his part.
Mrs Justice Slade was of the view that an estimate could be distinguished from a quotation of fees which she said was an offer which is accepted. Slade J confirmed that an estimate is what it says. It gives an idea, which from a professional firm, can be taken as reasonably and carefully made taking into account all relevant considerations of what the future costs of work on a case is likely to be. A solicitor could not be held to be restricted to recovering the exact sum set out in an estimate. However, a client was entitled to place some reliance on the estimate and the nature.
She further held that a comparison of an opponent’s costs is a useful check for ascertaining whether costs are reasonable as being in the same ball park. However, the increases in the estimates of the opponent’s costs were not a reliable basis for judging the reasonableness of the increases in the costs the client was being asked to pay. This is because the assumptions and advice upon which they were based were not known.
Mrs Justice Slade also accepted that Master Rowley erred in his calculations of the increase in the profit costs of the opponent’s solicitors as he failed to take into account that the first allocation questionnaire figure was net of VAT and the second final figure included VAT. The increase was therefore wrongly inflated and Master Rowley had based part of his assessment of the figure it was reasonable for the client to pay on a mistake. Master Rowley therefore exceeded the broad measure of his discretion in considering a reasonable upper limit on profit costs as high as twice of that in the second estimate and this ground of appeal was therefore allowed.
As regards to the third ground of appeal, it was submitted that Master Rowley should have limited the recovery of disbursements with reference to the first and alternatively to the second estimate, as well as profit costs.
The disbursements in the second estimate amounted to £211,242.33 excluding VAT. Future Counsel’s fees were anticipated at £170,500 net of VAT, including £106,000 for the Trial. However, the total disbursements ultimately invoiced were £739,152.94, i.e. Counsel’s fees £476,576.48, experts’ fees £167,641.67, accountants’ fees £65,000.00 and various £29,934.79.
Master Rowley had accepted that the client had placed reliance on the second cost estimate as, based upon the estimate, he had continued with the litigation on CFA terms. However, the CFA did not cover Counsel’s fees and as a result Master Rowley had held that less reliance was placed upon the estimate by the client in relation to Counsel’s fees. As such, he did not feel that this warranted an overarching reduction to Counsel’s fees.
Mrs Justice Slade held:
“In my judgment the Master erred in relying upon the fact that the Claimant did not include counsel’s fees in the CFA as a reason for not making an overarching reduction in counsel’s fees. Master Rowley held at paragraph 125 that it would have been possible to seek counsel’s fees to be governed by a CFA if they were considered to be out of control. Master Rowley had held the Second estimate to be reasonable on the state of knowledge at the time. There would be no reason for the Claimant to think Counsel’s anticipated fees of £170,500 were out of control at the time. In my judgment the failure to include counsel’s fees in a CFA did not absolve the Master from considering whether it was reasonable for the Claimant to pay a total of £476,576.48 in counsel’s fees of which the Defendant is claiming £189,311.48, being £39,373 paid in respect of invoices not being assessed, plus £149,938.48 in respect of invoices being assessed.”
The third ground of appeal was therefore allowed and Detailed Assessment of the costs has been remitted to Master Rowley for determination.