Legal Budgets Limited – Newsletter December 2002

BUDGETS-ESTIMATES- COSTS ESTIMATES RETURN TO HAUNT

 

 

COMMENT: The following cases and article will have significant impact, on

how law firms bill their clients and attempt to recover any subsequent third

party costs. Costs information, updates and detailed legal budgets will now

take on even more importance. Happy Reading!

 

 

1. BEACHCROFT WANSBROUGHS -V-SHOREDITICH HOUSING ASSOCIATION (IHSA) –The Lawyer 28th October 2002

 

Beach has returned around £125,000.00 to a former client after its costs

estimate rose nearly six times above the level it had originally projected.

 

Costs Judge Wright stated "time and time again English Courts were dealing

with law firms failures to comply with statutory requirements for them to

update clients about their raising costs. Beach failed to comply with Rule

15 of the Solicitors Rules, which covers providing a client with costs

advice and also breached the Solicitor's Costs Information and Client care

code.

 

 

2. Long Eaton Plant Hire Ltd v Nelsons (a firm)

Supreme Court Costs Office - 28.08.02

 

The defendant solicitors acted for the claimant in a county court action. The

court ruled in favour of the claimant and awarded damages against the

unsuccessful litigant of £1,800 together with costs of £5,500. The

solicitors, however, claimed costs from their client, Long Eaton, of over

£20,000, although in January 2000, at the beginning of the action, they had

estimated costs at £6,000. Unsurprisingly, the claimant challenged the bill,

contending that the solicitors should be held to their original estimate on

the grounds that they had failed to warn the claimant that the figure of

£6,000 had been exceeded. The solicitors accepted that they had not revised

their estimate but submitted that their regular bills had provided the

claimant with an indication of costs as they were incurred. The court held

that as soon as costs exceeded the figure of £6,000, the solicitors should

have revised the estimate before incurring further costs. The work in

question was not urgent work

which had to be done at the last minute; on the contrary, it had taken

several weeks and the solicitors could easily have warned the claimant that

costs were 'running

away'. The bills were 'terse in the extreme' and gave no clue as to what

work had been done. The claimant should not be required to pay more than it

would have done had the estimate remained accurate and the solicitors could

recover only £6,000 plus VAT, together with a further 15%. It is, perhaps,

surprising that little mention was made of the commerciality of the entire

action and of the validity of incurring over £20,000 in costs in connection

with a claim worth only £1,800. Nevertheless, this case is a salutary

reminder to lawyers of the need to keep their clients equally advised of

both costs and new developments in a case as part

of their general duties.

 

3. Ralph Hume Garry -v Gwillim CA 22nd October 2002.- The Law Society's

Gazette 21st November 2002

 

The Defendant applied for the claim (for costs) to be struck out on the

grounds that the bill contained insufficient description of what was being

charged for, were not in proper form as required by section 64 of the

Solicitors Act 1974 and did not comply with the strict requirements for

remuneration in respect of contentious business in section 69 of the Act.

"After an examination of how the law relating to solicitors costs has

developed over 300 years, Lord Justice Ward, decided that, under the

Solicitors Act 1974, a client could successfully challenge an action to

enforce a bill if "There was insufficient narrative in the bill to identify

what he is being charged for, and (if) he does not have sufficient knowledge

from other documents in his possession from what he has been told reasonably

to take advice whether or not to apply for that bill to be taxed." The CA

also went on to say that the computer print out could be given to the

client.

 

4. Summary Assessment - Article by Chris Lethem District Judge- Law

Society's Gazette- 21st November 2002

 

"Costs estimates return to haunt!"

 

"It is my experience that litigators at trail have fail to grasp the

significance of CPD 6.4 and 6.6, which permits the court to have regard to

the costs estimates filed in deciding the reasonableness of the bill. If

the statement of costs is at variance with the estimates, then the receiving

party must be in a position to justify this.