Mastercigars Direct Ltd v Withers LLP [2007] EWHC 2733 (Ch), [2007] All ER (D) 385 (Nov)
Chancery Division
Morgan J
23 November 2007
There is no legal principle to the effect that an estimate of costs involves the capping of the solicitor’s entitlement to costs by the use of a margin. Conversely, there is no principle the effect of which confers upon the solicitor a prima face entitlement to the full amount of a margin on top of the estimate. Each case depends on its facts.
Martin Farber and Simon Brown (instructed by Crane & Staples) for the claimant.
Jeremy Morgan QC (instructed by Withers LLP) for the defendant.
The defendant solicitors acted for the claimants in trade mark litigation. The letter of engagement written by the solicitors contained an estimate for the fees to be charged, and stated that it was based on the trial lasting between three and four days. It warned the claimant of the possibility of the fees ultimately being higher or lower depending on the course of the litigation. It also referred to the solicitors’ standard terms of business, which provided that fee estimates were not intended as fixed quotations.
In the event, the trial lasted 16 days and the final amount of costs invoiced by the solicitors exceeded the estimate. Subsequently, however, upon a detailed assessment, the costs judge, relying upon a passage from Cook on Costs 2007, held that unless the claimant had been notified of the further sums payable, preferably before they had been incurred, the solicitor would be unable to recover costs in excess of the estimated amount. He therefore made an order binding the solicitors to the amount in the estimate, save counsel’s fees and the profit costs of the solicitors for the extra days of trial. This case concerned, inter alia, the solicitors’ appeal against that ruling.
MR JUSTICE MORGAN:
His lordship referred to Leigh v Michelin Tyre plc [2003] EWCA Civ 1766, [2004] 2 All ER 175 and Garbutt v Edwards [2005] EWCA Civ 1206, [2006] 1 All ER 553. In a case where a solicitor did not give his client an estimate, the result would not generally follow that the solicitor was unable to recover any costs from his client. In a case where a solicitor did give his client an estimate but the costs subsequently claimed exceeded the estimate, it would not follow in every case that the solicitor would be restricted to recovering the sum in the estimate.
What the two decisions repeatedly stated was that the court might “have regard to” the estimate or might “take into account” the estimate and the estimate was a “factor” in assessing reasonableness. For the reasons given by Lady Justice Arden in Garbutt v Edwards at [50], the two cases did not themselves provide very much detailed guidance about how one should react on the facts of a particular case because it was felt by the Court of Appeal that it was impossible to foresee all the differing circumstances that might arise in any individual assessment.
There were, however, two questions of principle. The first was whether or not reliance by the client on the estimate was relevant and, if so, in what way. The second was whether there was any rule about the addition of a margin to the solicitors’ estimate and whether the solicitor was entitled to add a margin, or alternatively whether the client was entitled to cap his liability at the estimate plus such a margin.
Reasonableness of costs
Solicitors were entitled to reasonable remuneration for their services under the Supply of Goods and Services Act 1982, s 15.
The estimate was a useful yardstick by which the reasonableness of the costs might be measured. If there was a modest difference between the
estimate and the final bill, because an estimate was not a fixed price for the work, one might be little surprised by the modest difference. The greater the difference, the more it called for an explanation. If there was a satisfactory explanation for the difference, then the estimate might cease to be useful as a yardstick with which to measure reasonableness. Conversely, if there was no satisfactory explanation the estimate might remain a useful yardstick with which to measure reasonableness.
The solicitor did not have any kind of automatic entitlement to add a margin to the estimate nor was the client permitted to cap his liability at the estimate plus a margin.
His lordship then dealt with the appeals on the facts.
