A CASE THAT SHOULD BE READ BY EVERY LAWYER WHO BILLS CLIENTS: CLAIM £84,000 – GET £8,000: PROVIDE ADEQUATE ESTIMATES OF COSTS OR ELSE…

The judgment of Master Leonard Dunbar v Virgo Consultancy Services Ltd [2019] EWHC B12 (Costs) provides an object lesson as to why lawyers must give a full and proper estimate of costs to their clients.  The defendant solicitor sought £84,ooo in costs. The Master ordered that the claimant need only pay a balance of £8,000.

 

“If, on the assessment of costs between a solicitor and a client, it is found (a) that the solicitor has never provided the client with an estimate of the costs that the client was likely to pay and (b) that if a proper estimate had been given, the client would have paid less than the solicitor is claiming, it may be appropriate to limit the amount payable by the client to the solicitor to an amount that it is reasonable, in all the circumstances, to expect the client to pay. That may be less than would otherwise be payable for work reasonably done by the solicitor at a reasonable rate.”

THE CASE

The claimant sought a Solicitors Act assessment of a bill of costs rendered by the defendant, its former solicitor.  A previous hearing had led to  a determination that there was a retainer between the parties. However the terms of that retainer were never clearly defined. No specific fees were  specified or agreed for the work to be done, whether fixed or on an hourly rate basis.  The current hearing was to assess the sum that it would be reasonable for the claimant to pay the defendant.

THE SUMS INVOLVED

The bill of cost totalled £84,000, including VAT.  An accompanying breakdown showed that the value of the work done totalled £95,982.96.  The defendant adduced evidence that the value of the work done was even higher than that.

THE LEGAL PRINCIPLES

The Master carried out a detailed review of the  cases where a solicitor had failed to provide adequate cost estimates.

THE MASTER’S SUMMARY OF THE PRINCIPLES
  1. From those authorities I can distil the following principles which have a bearing on this case.
  2. If, on the assessment of costs between a solicitor and a client, it is found (a) that the solicitor has never provided the client with an estimate of the costs that the client was likely to pay and (b) that if a proper estimate had been given, the client would have paid less than the solicitor is claiming, it may be appropriate to limit the amount payable by the client to the solicitor to an amount that it is reasonable, in all the circumstances, to expect the client to pay. That may be less than would otherwise be payable for work reasonably done by the solicitor at a reasonable rate.
  3. In order to demonstrate that it is right to limit the solicitor’s recoverable costs in that way, it is not necessary for the client to prove on the balance of probabilities that he or she would, if adequately advised, have acted in a different way which would have turned out more advantageous to him or her. It may be sufficient that the failure to provide adequate advice deprived the client of an opportunity of acting differently, though that is likely to carry less weight, particularly where it is not possible to do more than speculate as to the way in which the client might have acted, if properly advised.
  4. The ultimate aim will always be to identify the sum that, in all the circumstances, it is reasonable for the client to pay.

THE FINDINGS IN THE CURRENT CASE

The defendant had, without the claimant’s knowledge or consent, dismissed a legal team appointed by the claimant to represent his son in proceedings  in Greece. The Greek legal team had agreed to work to trial, and provide representation at trial, for a fixed fee of €30,000.  This, coupled with the defendant’s failure to give any warnings as to the costs being incurred, led the Master to conclude that the claimant only need pay a balance to the defendant of £8,000.
  1. It seems to me however that the conduct of the Defendant in the course of this litigation has no bearing upon the amount which it is reasonable for the Claimant to pay for work undertaken between July and November 2014. One must look at what was happening at the relevant time.
  2. As to that, I am unable to accept the Defendant’s attempted justifications for failing to give any estimate of costs. It would have been perfectly possible to give estimates based upon the information known to the Defendant from time to time. That is what the Code of Conduct requires. In any case, it would not have been difficult to make enquiries with the Greek lawyers as to, for example, the likely length of trial.
  3. The fact is that the Defendant never tried to give an estimate, or any other advice on costs, until the retainer had concluded. As I have already found, Ms Brown avoided the subject of costs in her dealings with the Claimant. If she attempted any cost planning at all (and the evidence indicates that she did not) she did not share it with the Claimant.
  4. The Claimant first met Ms Brown on 30 July 2014. By 4 August, the Claimant had a plan for, and some control over, legal costs. He had secured the agreement of the original Greek legal team to take matters through to trial for an inclusive fee of €30,000. On the evidence that was an agreed fee, not an estimate. Even if the figure given were only an estimate, it remains the best guide to what he would have paid for their services had they continued to represent Mr Litchmore-Dunbar through to the trial.
  5. He had also raised and paid to the Defendant £10,000 on the understanding that it would be sufficient to secure the services of the Defendant to play a secondary, supporting role in the UK.
  6. Ms Brown’s actions completely undermined the Claimant’s financial planning. Had she not sacked the original Greek legal team without the Claimant’s knowledge or consent they could, and probably would, have continued to represent Mr Litchmore-Dunbar through to trial, with the Defendant playing the supporting role that the Claimant had asked for. Costs could have been managed accordingly.
  7. I need, in this context, to address Mr Paxi-Cato’s criticism of the original Greek legal team. That is I understand based on an allegation of a breach of confidentiality, made in a witness statement by Ms Brown for the Defendant, itself based upon an alleged statement made by a witness during Mr Litchmore-Dunbar’s trial. I can attach no evidential weight to it.
  8. Even if I could, it would be beside the point. Had Ms Brown, at the relevant time, had either authority or justification for sacking the original Greek legal team (which she did not) the Claimant could have replaced them with another Greek legal team at, on the available evidence, comparable cost, rather than having the Defendant replace them at over three times the cost plus the new advocate’s fees.
  9. Having sacked the original Greek legal team and stepped into the shoes of Ms Lama, it was incumbent upon the Defendant at the very least to assist the Claimant in identifying and managing any additional costs likely to be incurred as a result. The Defendant made no attempt to do so and now claims costs far in excess of any figure quoted by any Greek lawyer and far beyond any figure that the Claimant would ever have agreed to pay.
  10. The Claimant did not know that the Defendant would do that until it was too late for him to prevent it. That is because the Defendant did not comply with its professional obligations to give him adequate costs advice, even though the Defendant knew that the Claimant was struggling to raise even the €30,000 he had agreed to pay the original Greek legal team.
  11. At no time during the currency of the Defendant’s retainer with the Claimant was he aware of any obligation to pay, for Mr Litchmore-Dunbar’s defence, more than the combination of the €30,000 he had agreed to pay to the original Greek legal team, and the additional £10,000 he had agreed to pay the Defendant. He did not authorise, expressly or impliedly, any expenditure above that level and the Defendant did not give him the opportunity to do so.
  12. It seems to me that the proper conclusion to draw is that any costs claimed by the Defendant which would oblige the Claimant to pay more than that total amount, have been unreasonably incurred.
  13. I do not doubt that the Defendant did a great deal of work on behalf of Mr Litchmore-Dunbar. The point is however that the Claimant did not give informed consent either to the Defendant’s sacking the original Greek legal team, or to the increased cost attendant upon the Defendant then acting in Ms Lama’s place. That is exactly the sort of circumstance in which what is reasonably payable by a client to a solicitor may be much less than what would otherwise be payable for the value of the work done.
  14. I turn to the figures. The proposition that the Claimant, who at the relevant time was instructing Greek lawyers and attempting to raise funds for his son’s defence, would have been so economically illiterate as to fail to understand the difference in value between euros and sterling seems to me to be rather insulting. I reject it. Mr Edwards’ approach of converting figures in euros to sterling at contemporary exchange rates seems to me to be right.
  15. This is my calculation. The Claimant’s total exposure to legal costs should, for the reasons I have given, first be limited to the sum he had agreed to pay the original Greek legal team, which at then-current exchange rates I have rounded up from £23,809 to £24,000, plus the £10,000 that the Claimant understood and accepted that he would, in addition, have to pay to the Defendant for its assistance with the case.
  16. That comes to £34,000. I agree with Mr Edwards that VAT should not be added to that figure, because VAT was never mentioned.
  17. From that £34,000 one must deduct what the Claimant has already paid. That is first the £10,000 he has paid to the Defendant, and second the €20,000 he has paid to the Greek advocate who replaced Mr Dalakouras which at then-current exchange rates comes to £15,873. I have again rounded that figure up, to £16,000.
  18. The Claimant has, in summary, paid £26,000 of a total of £34,000 that it is reasonable for him to pay for Mr Litchmore-Dunbar’s defence. Any costs in excess of that £34,000 have been incurred because of the Defendant’s breaches of duty, were not authorised and were not reasonably incurred. They exceed what it is reasonable for the Claimant to pay. It follows that any further costs payable by the Claimant to the Defendant should be limited to (£34,000- £24,000): £8,000 inclusive of VAT.