This judgment was handed down remotely at 10.30am on 2 April 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
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COSTS JUDGE NAGALINGAM
Costs Judge Nagalingam:
- Having considered and noted that Mr Wooldridge had pleaded his points of dispute across separate documents, I acknowledged that his skeleton argument represented a useful document which brings together all of the Claimant's main points.
- With the agreement of both Mr Wooldridge and Ms Kostova, the Claimant's skeleton argument was utilised as the core document for reference purposes with cross referencing to the points of dispute documents / bundle as necessary.
- Prior to hearing any submissions, I made it clear that the role of this court was not to consider allegations of negligence leading to damages, and that if Mr Wooldridge intended to pursue such a route then I would need to consider adjourning the hearing and staying these costs only proceedings.
- I also made it clear that I was not minded to hear arguments on reckless or negligent misrepresentation without Mr Kelly being present to answer for himself, especially in circumstances where there were currently no directions for witness statements or provision for cross-examination. However, I did make it clear that what Mr Wooldridge had termed "reckless / negligent misrepresentation" could otherwise be considered as conduct, and that I could proceed with today's detailed assessment hearing on that basis.
- Mr Wooldridge confirmed he was keen for the hearing to proceed today and understood the parameters set, absent any applications by him for further directions or a stay.
Mr Wooldridge's submissions
- Mr Wooldridge relies on his skeleton argument; which he effectively used as a speaking note, and has therefore been quoted from where necessary. I directed Mr Wooldridge to make his full submissions with regard to points 1 and 2, before inviting Ms Kostova to respond.
"Point 1 Points of Dispute"
- Mr Wooldridge explained that the Defendant was introduced to the Claimant by way of an e-mail from the Claimant's retained accountant. That introductory e-mail, dated 28 September 2023, referenced the "de-merger of a company" and attached a letter from 'Trident Tax' to HMRC's 'Clearance and Counteraction Team'.
- The letter attached to the e-mail, referred to by the parties in this hearing as the "Trident Tax letter", set out the six steps which the Claimant and their accountant needed to take. I have adopted the reference of 'Trident Tax letter' for the purpose of this judgment.
- The Claimant submits that the Trident Tax letter set out the background to Gallantgreen Ltd, its shareholders (including two trusts) and the process by which the demerger should take place.
- Step 6 of the Trident Tax letter was for Gallantgreen Ltd's assets to be transferred intra-group to 'Newco'.
- In an e-mail response dated 29 September 2023, the Defendant's Mr Kelly provided "A costs estimate for the demerger is £7,500 to £10,000 ex VAT", which was based on five assumptions. Those were: 1. No requirement to change the existing articles; 2. Model articles for Newco; 3. No requirements for a shareholder agreement; 4. The required steps mirror the clearance; 5. All necessary information is reasonably forthcoming."
- Mr Wooldridge cited Mr Kelly's e-mail of 29 September 2023 as important and said it was the terms of that e-mail which were accepted in order to create a liability to pay costs from 21 December 2023.
- Mr Wooldridge submits that the terms of the contract were agreed based on the events leading up to 11.48am on 21 December 2023. In this regard, I have observed that the served breakdown of costs is consistent with 21 December 2023 being the starting point in terms of recoverable costs, with the single entry pre-dating this having been conceded in the replies.
- Mr Wooldridge took care to outline the chronology leading to confirmation of his engagement of the Defendant to represent the Claimant.
- This started on 18 December 2023 when Trident Tax wrote to the Claimant to advise that "HMRC has given clearance to the proposed demerger" and attached confirmation as such.
- On 19 December, the HMRC confirmation was forwarded to the Defendant along with the question posed of "If we were to use you (BDP) to carry out this demerge what information would you require from us." Later that same day, the Defendant's Mr Kelly replied "All we would probably need is the tax structure paper (assuming there is one)."
- On 20 December 2023, Mr Wooldridge queried what Mr Kelly meant by "tax structure paper". Mr Wooldridge also stated "I will send you the further questions the HMRC asked after our initial application and our response to those to ensure your quote for the demerge wouldn't change."
- On 21 December 2023, Mr Kelly confirmed that "The latest correspondence [i.e. those between the Claimant and HMRC] does not alter our fee estimate". Mr Kelly also asked if Trident Tax had "prepared a "steps paper" or "tax structure paper"?", stating "It is not critical that there is one but if there is one, it would help to see it."
- Around 1 hour later, Mr Wooldridge responded and attached a number of documents. This included the "Gallantgreen Limited Report on potential merger" dated 1 August 2023, a document running to 21 pages. Also provided was a further copy of the Trident Tax letter (originally sent to the Defendant on 28 September 2023) and a copy of a letter from Trident Tax to HMRC's BAI Clearance & Counteraction Team dated 4 December 2023 which detailed responses to two questions HMRC had asked of the Claimant's accountant.
- Mr Wooldridge said that his instinct was to err on the side of caution when it came to providing documents, in that he would rather provide more than risk omitting something the Defendant needed to see in order to provide their costs estimate.
- Later on 21 December 2023, the Defendant's Mr Kelly replied to simply state "Thanks John. This is sufficient. Do you want us to make a start?" to which Mr Wooldridge responded "Yes please make a start".
- With reference to Mr Kelly's "This is sufficient" comment, Mr Wooldridge relies on page 3 of his skeleton argument, where he sets out:
"I understood by that statement, that having provided Oliver Kelly with the 3 attachments on the 21 Dec' 2023 that he would not require any further information from Trident tax regarding the 6 step process although he would require information from our accountants Pandey & Co where necessary as described in the Clearance letter."
- When Mr Wooldridge responded with "Yes please make a start", he considered a contract had been formed between the Claimant and the Defendant on 21 December 2023.
- Mr Wooldridge cites the Defendant's time sheet (at page 1623 of the hearing bundle) which details work from 21 December 2023 (the single item of work on 20 December 2023 having been conceded), and the breakdown of costs produced for this assessment (which also outlines work done from 21 December 2023). Mr Wooldridge argues that based on those two documents the Defendant must also have understood the retainer to have commenced on 21 December 2023.
- It is against that backdrop that Mr Wooldridge was confused by the stance adopted by the Defendant in their e-mail of 30 January 2024. This began with an update but went on to state:
"You will appreciate that we have carried out some work which is outside of the scope of work set out in our retainer letter which related strictly to the preparation of the legal documentation."
- The 'out of scope' work is listed as including: 1. Raising enquiries for Trident or others in respect of outstanding information or detail not provided in the tax clearance (as discussed previously the tax clearance is normally in addition to a steps paper which sets out in detail all of the steps needed to be taken (for tax compliance); 2. Preparing for and attending the all parties call (trainee time has not been recorded as chargeable time); and 3. Reviewing the trust documents/Companies House to verify the trustees of the shareholder trusts.
- The Defendant's e-mail went on to advise that the value of fees incurred as at 30 January 2024 was £9,753 plus VAT (against which £8,750 plus VAT was to be billed as an interim invoice), and there was "further work to be carried out to complete this matter."
- Mr Wooldridge's prompt response expressed unhappiness on behalf of the Claimant and reminded the Defendant of Mr Kelly's quote of "between £7.5 and £10k." After responding to some numbered queries raised by the Defendant, Mr Wooldridge stated:
"I do not consider any extra work has been done on this and still expecting the costs to be in the range quoted. In any event if you consider extra work is being carried out you should advise me prior than after the event."
- The Defendant's response (also dated 30 January 2024) caused particular frustration for the Claimant, where, when referring to the "tax clearance" documentation, the Defendant describes the same as "..very much an overview document and not a document containing all necessary detail to draft documents..". Mr Wooldridge queries why, if that was the case, had Mr Kelly previously stated that the Tax Clearance document was "sufficient".
- Mr Wooldridge contends there is a lack of cohesion across varying comments made by staff of the Defendant. He cited an exchange of e-mails with Mr Langley of the Defendant on 27 March 2024.
- In an e-mail from Mr Langley, at bullet point 2 of the same, Mr Langley states:
"..we were lacking some critical information around how certain aspects of the demerger would be structured. To my mind, the fact that we were seeking this information implies that we did have an understanding of what we are being asked to do".
- However, Mr Wooldridge considers the most telling comment to be Mr Langley's view that:
"..if anyone was to regard the Trident Tax document as providing all that was needed, then that would indicate a lack of understanding as to what we were required to do."
- Mr Wooldridge submits such views contradict Mr Kelly's pre-retainer comments as to what documentation was "sufficient" in order to provide an accurate fee estimate.
- Mr Wooldridge also cited an e-mail from Trident Tax, dated 12 January 2024, which sets out various responses to queries which had been raised by the Defendant's Leah Houghton. He submits the fact these questions were posed after the retainer had commenced further demonstrates that what Mr Kelly said was "sufficient" obviously wasn't sufficient.
- In addition, Mr Wooldridge drew my attention to page 15 of the breakdown of costs, and various entries on 24 January 2024 which related to discussions Ms Houghton arranged with the Claimant, their accountant and Trident Tax. He again asks why was this necessary if only a month or so earlier Mr Kelly had advised all the documentation provided pre 21 December 2023 was "sufficient" (for the purposes of providing a reliable estimate).
- Mr Wooldridge says he is concerned that he was never given an opportunity to provide more information (so the estimate could be more accurate) until it was too late / i.e. costs had already been incurred.
- Mr Wooldridge also advised the situation had been compounded by the Defendant sending the formal client care letter on 3 January 2024, from a trainee solicitor's e-mail account. The trainee in question was not a fee earner Mr Wooldridge had been advised of and so his e-mail settings treated e-mails from the trainee as spam.
- It was not until 30 January 2024 that Mr Wooldridge even became aware that a client care letter had been sent to him. This meant that costs were incurred during January 2024 under the terms of a client care letter the Claimant had not yet seen.
"Point 2 Points of Dispute"
- Mr Wooldridge briefly reiterated the events of September 2023 (as outlined above), including Mr Kelly's e-mail of 29 September 2023 and the five assumptions set out therein. It was those five assumptions which were effectively conditions of the estimate of "£7,500 to £10,000 ex VAT." for the demerger.
- Mr Wooldridge observed that Mr Kelly stated "bespoke articles or shareholder agreements.. ..would be outside of the above estimate".
- Mr Wooldridge also observed that Mr Kelly's e-mail of 29 September 2023 set out six steps, the sixth of which was named "Step 6 Asset transfer and dissolution of Gallantgreen and dormant subsidiaries". Mr Wooldridge submits that asset transfer included land and cash.
- In so far that land had to be transferred as part of the process of demerger, Mr Wooldridge could not recall Mr Kelly (or indeed anyone on behalf of the Defendant) asking questions regarding the transfer of land or how many transfers there would be prior to confirming the Defendant's estimate for the work to be done.
- Further, Mr Wooldridge cites the passage of time from 29 September 2023 to 21 December 2023 (when he provided written confirmation to start work) and the absence of any revised estimate.
- Still with the 29 September 2023 e-mail, Mr Wooldridge observed that the fourth assumption states "The required steps mirror the clearance". The reference to "the clearance" is the 20 September 2023 letter from Trident Tax to HMRC's Clearance and Counteraction Team. In this regard, Mr Wooldridge submits that Mr Kelly's e-mail of 29 September 2023 was intended to mirror Trident Tax's letter to HMRC dated 20 September 2023 (in terms of the steps to be taken within the limits of the estimate provided).
- Mr Wooldridge wished to stress that he placed great faith in Mr Kelly's e-mail dated 29 September 2023, and that it is important to compare the content of that e-mail with the subsequent client care letter dated 3 January 2024. This is because Mr Wooldridge thinks the Defendant incorporated subtle changes in the written client care letter which he would either have not agreed to, or sought new estimates for prior to authorising any further work.
- Mr Wooldridge's concerns stem from the period after he gave authorisation for work to start on 21 December 2023, and the client care letter dated 3 January 2024.
- With reference to page 171 of the bundle, Mr Wooldridge focused on an internal e-mail exchange dated 22 December 2023 between Mr Kelly (in his capacity as a Partner for the Defendant) and Mr Todd (a consultant for the Defendant). In that e-mail, Mr Todd seeks to clarify what work will be required and Mr Kelly's response (via the addition of comments in red) provides that clarification.
- Mr Kelly's response recognises that no formal client care letter has yet been sent to the Claimant, stating that "our CCL and our initial note to the client will (my emphasis added) address this" (regarding whether the Defendant will also be acting for NewCo).
- With regard to Mr Kelly's response to Mr Todd's query regarding sight of title details prior to transfer, Mr Kelly's response was to state:
"My understanding is the "property" is parcels of land (pre planning) that may be developed. However, I suggest Leah/Gemma set this out in our note to John along with a request for title details."
- Also on 22 December 2023 was an e-mail to Mr Todd (and a Ms Champion) which focused on 'step 6'. The e-mail in question sets out:
"You will note in the step 6 land is transferred to Newco intra-group. We will need your help with this I do not expect this to be hugely involved or complicated unless you tell us otherwise".
- Mr Kelly then proceeds to enquire what documents and steps (if any) are needed, any factors which might impact on timing, and if there was anything that needed to be flagged "to the clients".
- The next exchange of internal e-mails Mr Wooldridge invited me to consider were those dated 2 January 2024 between the Defendant's Ms Houghton, and consultant Mr Todd, which begins with Ms Houghton stating "We have received some responses from the client re the property aspects of the demerger as follows which may impact your fee estimate".
- That e-mail proceeds to confirm there are "8 or 9 parcels of land under separate title numbers", all of which were freehold and untenanted.
- Mr Todd's response, also dated 2 January 2024, was:
"Noted there are 8 or 9 properties so a better estimate would perhaps be £5000 - £7,500 based on current information."
- Mr Wooldridge submits this indicates that the Defendant had not in fact properly accounted for the property transfer costs when providing the estimate that led the Claimant to engage the Defendant in the first place.
- The information that Ms Houghton provided to Mr Todd on 2 January 2024 was the consequence of Ms Houghton raising various questions of Mr Wooldridge on 22 December 2023, including whether there was "one piece of land under one title or several parcels of land under several title numbers?".
- Mr Wooldridge submits the various queries raised in Ms Houghton's e-mail should have been asked at the outset, and certainly before entering into an agreement with a fees estimate the Claimant had relied on.
- Mr Wooldridge cited his response to that e-mail, also on 22 December 2023, in which he confirmed there were "about 8 or 9 parcels of land" which were all freehold and untenanted. This response was the source of the information Ms Houghton provided to Mr Todd after the new year.
- Mr Wooldridge stressed these were internal e-mails that he hadn't seen until disclosure took place, but that they indicate Mr Kelly erred when providing a costs estimate. He submits it is not the Claimant's fault that they placed reliance in that estimate when agreeing to instruct the Defendant.
- Mr Wooldridge observed that, as per his skeleton argument, "Perhaps. The sensible thing to correct that mistake at that time would have been for Oliver Kelly to come clean have a word with me and say they had made a mistake with the price as he hadn't included the cost of the step 6 land transfers in the price and try renegotiating the contract. Unfortunately, he didn't do that."
- Mr Wooldridge then turned to the client care letter (CCL) dated 3 January 2024 and the associated terms of business. As outlined above, the Claimant accepts this document was sent on 3 January 2024, but avers that it sat in Mr Wooldridge's junk folder because the e-mail attaching the CCL came from an e-mail account that Mr Wooldridge did not have saved as a recognised contact.
- It is fair to note that the trainee in question was not listed as one of the contact points for Mr Wooldridge and the Defendant does not challenge the veracity of the e-mail being filtered into a junk folder. Similarly, Mr Wooldridge does not dispute when the Defendant sent the client care letter via e-mail.
- However, the fact is that it was not until Ms Houghton sought to raise an interim bill which was in excess of the lower end of the estimate Mr Wooldridge had been advised of did it become clear that Mr Wooldridge hadn't seen the client care letter.
- In terms of work done prior to the client care letter being sent, Mr Wooldridge observes various time history printout entries which post-date his 22 December 2023 response to Ms Houghton, and pre-date the date of the client care letter. Those entries include work on the demerger and Mr Kelly engaged for 18 minutes in "adjusting the client care letter".
- Mr Wooldridge takes issue with the 'adjustments', in particular regarding matters relevant to the estimate of costs. In that regard, he observed that the "Terms of business and fees" section of the CCL provides "the likely overall cost of this matter will be £7,000 - £10,000 plus VAT" to "cover the steps you have instructed us to take as outlined above".
- Mr Wooldridge then referred me to the "Terms of business and fees" section of the CCL, which outlined that the estimate was now based on 7 assumptions. He submits that this was an attempt to change the previous 5 assumptions which had until that point provided the basis for the estimate of costs that the Claimant agreed to.
- Mr Wooldridge expressed concern as to the apparent lack of any effort to draw his attention to the altered assumptions before inviting him to sign the CCL on behalf of the Claimant, i.e. that the CCL was not accompanied by an e-mail or letter which explained the changed assumptions, nor was there any call to discuss such changes.
- Mr Wooldridge cited assumption number 5 of the CCL, which provides "Trident Tax are undertaking all necessary SDLT submissions (we can help as required but this would be under a separate quote/engagement)", as an example of work that had been within scope as at 21 December 2023 but was deemed out of scope as at 3 January 2024 (for the purposes of what the costs estimate would cover).
- Responding to a question from the bench, Mr Wooldridge confirmed he never signed the client care letter because prior to 31 January 2024 he had not even seen it. He explained that by 31 January 2024, time costs had been incurred on the basis of a client care letter he hadn't seen, and an interim bill had been raised.
Ms Kostova's submissions
- Ms Kostova submits that Mr Wooldridge is placing too much reliance on Mr Kelly's "This is sufficient" comment in his 21 December 2023 e-mail to Mr Wooldridge.
- Ms Kostova observed that the Trident Tax letter didn't set out how many properties / parcels of land would be subject to transfer, and therefore questions how could the Defendant factor the transfer of the same into their estimate of costs.
- Ms Kostova referred to page 3 of Mr Wooldridge's skeleton argument, where he states:
"I understood by that statement, that having provided Oliver Kelly with the 3 attachments on the 21 Dec'23 (1396) that he would not require any further information from Trident tax regarding the 6 step process although he would require information from our accountants Pandey & Co where necessary as described in the Clearance letter."
- Ms Kostova also cited an e-mail from Mr Wooldridge to a Mr Evan Tilley of Harper James solicitors dated 19 March 2024 (when the Claimant was seeking alternative representation) in which Mr Wooldridge posed the following question:
"One question that I would like to ask with regards to the Trident tax HMRC clearance letter and 6 steps included in it.
Is that document clear to you practice and can you confirm there would be no points of clarification required to carry out the legal aspects of the demerger."
- Mr Tilley's response dated 20 March 2024 was that ".. - it's inevitable that we will need to ask questions of you and accountants at some stage. To add, at this stage we haven't quoted for any property related work".
- Mr Kostova submits this exchange (with the new firm of solicitors the Claimant was looking to engage) demonstrates further work was always going to be required to clarify what was in the clearance letter.
- Next, Ms Kostova cited an e-mail from the Defendant's Mr Langley to Mr Wooldridge of the Claimant dated 27 March 2024, and in particular paragraph 2 of the same (which is quoted above).
- Dealing head on with Mr Langley's comment that "..if you will forgive me for being direct, if anyone was to regard the Trident Tax document as providing all that was needed, then that would indicate a lack of understanding as to what we were required to do", Ms Kostova submits this is not a criticism of Mr Kelly.
- In stark contrast, Ms Kostova submits that the candour of the 24 March 2024 e-mail should be inferred as demonstrating Mr Langley's full support of Mr Kelly, and that the reference to "anyone" was either a hypothetical 'anyone' or otherwise a reference to Mr Wooldridge himself.
- Ms Kostova then referenced Ms Houghton's e-mail to the Claimant, dated 22 December 2023, and observed this was just one day after Mr Wooldridge had confirmed instructions. Ms Kostova also referenced Mr Wooldridge's response of 2 January 2024 in order to demonstrate his awareness of the issues Ms Houghton had raised.
- Ms Kostova seemed to accept that the initial estimate did include and/or account for some element of transfer of land but submits there was not enough information as at 21 December 2023 to properly cost that element of the work, hence the 22 December 2023 e-mail asking for more information, which in turn led to Mr Wooldridge's 2 January 2024 response.
- Ms Kostova submits it was that response which led to the internal communications referenced by Mr Wooldridge, in which the true cost of the transfer of land work was quantified.
- With respect to Mr Wooldridge's provision of responses (in red) in his 2 January 2024 e-mail, Ms Kostova submits that demonstrates there were still matters to be clarified.
- In so far as the internal e-mails between Mr Todd and Mr Kelly dated 22 December 2023 referenced what the CCL "will" address, Ms Kostova submits this demonstrates that the estimate provided on 21 December 2023 was subject to alteration dependent on what further information and documents that might have been required.
- With regard to work not deemed to be covered by the estimate Mr Kelly provided on 21 December 2023, the issue of fees relating to Stamp Duty Land Tax (SDLT) were discussed internally, via e-mail on 22 December 2023.
- Ms Kostova observed that the Defendant's assumed position was that Trident Tax would deal with any SDLT submissions but that if the Defendant was required do this, it would add £1,500 to £1,750 to the Defendant's fees.
- Ms Kostova also observed, in the very same internal e-mail, that an estimated fee of £3,000 to £5,000 (inclusive of the SDLT fees referenced above) would cover the transfer of 5 or less properties.
- The next point of client communication regarding any additional costs was the CCL dated 3 January 2024, which from the Defendant's perspective was a document sent to the Claimant on 3 January 2024, i.e. relatively swiftly after the enquires made of the Claimant on 22 December 2023 (when one takes into account the festive period).
- In terms of the work done by the Defendant, Ms Kostova submits that it is only in relation to step 6, i.e. the work and costs regarding the transfer of land, from which the disagreement between the parties has arisen. Steps 1 to 5 were otherwise undertaken by the Defendant.
- Ms Kostova submits that the Defendant openly acknowledged carrying out work "Outside of the scope" of the retainer in an e-mail from Ms Houghton to Mr Wooldridge dated 30 January 2024.
- Ms Kostova also referenced a second e-mail from Ms Houghton to Mr Wooldridge on 30 January 2024 regarding delays to the land transfers, citing that "it was not apparent until our call last week that this step may not take place as part of the current demerger until further down the line various planning applications are granted".
- With regards to the CCL, Ms Kostova wished to ensure that the court had recorded there was no dispute as to when the CCL was sent, i.e. 3 January 2024, or when it was first seen by the Claimant, i.e. 30 January 2024. Both dates are recorded and accepted.
- Ms Kostova then referred me to an e-mail dated 6 February 2024 from Mr Kelly to Mr Wooldridge in which what appears to be a cordial discussion on 5 February 2024 is referenced.
- That e-mail sets out to summarise the "next steps, scope of work and costs". Within the 'Assumptions' section of the same, Mr Kelly states:
"If you will permit me to remind you of the general assumptions we applied in our fee estimate (not a fixed/capped fee)".
- The 6 February 2024 e-mail proceeds to highlight that the Defendant had "already written off over £1,000 worth of time/WIP" and that the Defendant could "stick to the upper end of [their] estimate (being £10k ex VAT) if:
", after which 5 "continuation" conditions were set.
- Briefly, those conditions were the prompt supply of figures (and in a manner leading to no amendments to documents already drafted), completion on or before 15 February 2024, that the "property extraction step" be put on hold, that no "project management or chasing others" would be required, and that there be physical signatures in the presence of the Defendant in the case of all trustees and directors of Gallantgreen Capital.
- Ms Kostova explained that the purpose of the 6 February 2024 e-mail was to clarify what had or hadn't been said, and a genuine attempt by the Defendant to stick to an upper level of £10,000 plus VAT.
- Ms Kostova invited me to consider pages 204 to 209 of the bundle, being various e-mails across 12 and 13 February 2024.
- Starting on 12 February 2024, Mr Kelly discussed a "roadmap to completion" based on what the Defendant would and wouldn't do, and the associated costs. Mr Kelly advised time had been written off, that work had been done which was out of scope, plus work not envisaged as being within the terms of the retainer. He said this was "in part" due to the "lack of a steps paper".
- He referenced a "£10k estimate" but that the estimate excluded "work in relation to the property extraction step". Mr Kelly also confirmed that if some trustees needed to sign documents remotely then DocuSign could be utilised; it was just important to secure all the required signatures on the same date.
- Mr Wooldridge's response of the same date recalled the original quote of £7.5k to £10k and what he considered the same to include. He referenced the original six step HMRC clearance letter provided from the Claimant's accountant, and that step 6 of the same concerned property extraction.
- On 13 February 2024, Mr Wooldridge wrote to Mr Kelly, essentially setting out why he considered the property transfer element was included in the original estimate provided, and querying why the costs of that step should be charged separate to the estimate.
- Mr Kelly's response of the same date was to stress that the figures provided in September 2023 were an "estimate" and "not a fixed fee or a cap", that time had been written off as a "gesture of goodwill", and arguing that the Claimant had in fact agreed the property extraction step would be charged for separately.
- Mr Kelly sought to distance the Defendant from any notion that they had effectively entered into a" £10k ex VAT "all in" fee".
- On 22 February 2024, Mr Wooldridge raised the prospect of agreeing a capped fee "to complete all the legal aspect of the demerger". Mr Kelly's response of the same date indicated a willingness to explore a "fixed fee" but dependent on factors including from what date, and based on which documents. He also set out what would be excluded from any such arrangement.
- The final bundle document Ms Kostova invited me to have particular regard to was an e-mail from Mr Kelly to Mr Wooldridge dated 28 March 2024. That e-mail contained an estimate to cover the minimum work required to bring all matters to a conclusion. It also explains that the Defendant has already applied discounts of around 35% to their time costs and why the Defendant cannot offer further discounts.
- Ms Kostova submits that as at the end of January 2024, Mr Wooldridge did not raise any issue regarding the change in assumptions, i.e. the CCL assumptions. She suggest that the CCL assumptions are only a "slight build up" on the earlier assumptions, but they still reflect the original contract agreed.
- Ms Kostova observed that this was not a case of a solicitor exceeding an estimate before they had told their client. The 30 January 2024 e-mail gave the Claimant a frank appraisal of the costs which had been incurred to date, and further costs likely to be incurred, before the estimate was exceeded.
- Ms Kostova argues this is also not a case of a client who fell silent at that point. She says that Mr Wooldridge, in the full knowledge of the CCL as at 30 January 2024, continued to engage the Defendant. This was in addition to instructions and solicitor/client liaison throughout January 2024, meaning the Claimant cannot claim to have been unaware of the work being done on their behalf.
- Ms Kostova submits the Claimant simply became confused as to what their retainer did and didn't cover, and that to now claim it would cover all of the work required for less than £10,000 plus VAT is completely unrealistic.
Mr Wooldridge's response
- Mr Wooldridge's closing summary was that by early February 2024, he and Mr Kelly had established a fundamental difference as to whether Step 6 was accounted for or not in the initial estimate provided. The Defendant says no. The Claimant says yes.
- The assumptions set out in the 6 February 2024 e-mail (at bundle page 194) are different to those discussed on 29 September 2023 and in December 2023.
- Mr Wooldridge also said that as at 6 February 2024, the Claimant hadn't seen a single document produced by the Defendant on the Claimant's behalf, yet he was then placed in a position where he and his family were expected to sign 57 documents at the Defendant's offices by a deadline of 15 February 2024.
- I will say now that whilst Mr Wooldridge may have been under the impression that the Defendant was seeking personal attendance for the signing of documents, the correspondence I have seen lead me to conclude that the Defendant was content for DocuSign to be used. The Defendant was in fact more concerned with coordinating the date on which signatures were obtained, rather than coordinating locations.
- With regards to the 'property extraction step' being excluded, Mr Wooldridge referred me to the attendance note of the "all parties" meeting on 24 January 2024. It must be recalled this was before the Claimant was aware of the CCL.
- Mr Wooldridge submits there is no record, from this meeting, of the property extraction step being excluded. For example, point (11) of the note refers to the "Transfer at step 6 (cash and property) subject to planning permission point". There is also a distinct section of the note, under the heading "Step 6: property transfers (transfer from Gallantgreen to Newco)" which details ten sub-paragraphs including seeking clarity as to the number of parcels of land to be transferred.
- Mr Wooldridge wished to draw my attention to the fact that at the 24 January 2024 meeting, there was also no record of the costs of property extraction / land transfer not forming part of the estimate of costs provided.
- Mr Wooldridge was keen to stress that he did not necessarily have an issue with an estimate for costs being revised. His issue was with the Defendant's failure to either be realistic in the first place, or otherwise communicate changes such that the Claimant could make an informed choice. That includes the choice whether to instruct the Defendant at all, and the choice whether to continue with the Defendant.
- He cites a communication from Harper James Solicitors dated 5 March 2024 in which they provide an estimate of costs, which thereafter sets out much more detailed assumptions than those of Mr Kelly, and figures which were in excess of those quoted by Mr Kelly.
- Mr Wooldridge also referred to me follow up e-mails with Harper James Solicitors in which he submits they were clear their estimate didn't include a quote for "any property related work".
Point 3 Points of Dispute
- For the sake of completeness, I recognise that this point sets out what I have already acknowledged above, i.e. that the Claimant's objections are spread across a number of documents hence my direction to treat Mr Wooldridge's skeleton argument as a 'master' document for the purpose of the matters to be addressed in this judgment.
- Any criticism of the costs of adopting such an approach may be addressed when the costs of assessment fall to be considered.
Point 4 Points of Dispute
- Rates - I have also resolved to give a decision as to rates, based on the pleaded objections and responses. My decision in that regard is set out below.
Decision
- I begin by issuing a reminder, directed mainly at the Claimant, that whilst Mr Wooldridge's written arguments are made out on the basis of allegations of reckless or negligent misrepresentation, that was not the prism through which I would be considering the Claimant's submissions.
- In effect, the arguments have morphed into a question of what importance (if any) I ought to attach to the estimates provided when assessing these costs, and general arguments as to conduct.
- Points 1 and 2 are sensibly addressed together. In the pleaded points of dispute. The objection to Point 1 is set out as:
"The Claimant would like the Courts to consider recission of the contract and/or damages, if the Defendant made a Reckless Misrepresentation in their e-mail on 21 December 2023 at 11.40 when they said the Trident Tax clearance letter and 6 step plan within it (Clearance Letter) was sufficient to carry out the legal work in the demerger, which the Claimant then relied upon when entering the contract."
- Point 2 sets out:
"The Claimant would like the Courts to consider recission of the contract and/or damages, if a Negligent Misrepresentation was made and the Defendant substantially underestimate the costs of carrying out the legal work in the demerger of between £7,500 and £10,000, which the Claimant then relied upon when entering the contract."
- The net effect that the Claimant seeks is set out in the Claimant's expanded points of dispute, which also descend into line by line objections (rather than the preliminary 'misrepresentation' points summarised above).
- At paragraph 11 of the Claimant's expanded points of dispute they seek, in the first instance, that this court rules there has been a reckless or negligent misrepresentation, with the sanction/outcome being that the Claimant be required to pay no costs at all. Whilst not explicitly stated, it is assumed the Claimant would seek entitlement to a refund of any monies paid on account to date.
- I decline to effectively reduce the Defendant's costs to nil. I do not consider that the Defendant is guilty of misrepresentation, and as I explained to Mr Wooldridge I would not be prepared to make such a finding absent directions for witness evidence and cross examination of the Defendant's key staff. Mr Wooldridge comprehended the delay and additional expense that would entail, and was content for this assessment to proceed based on the evidence already before me and considerations as to conduct.
- I have considered the conduct of the parties, based on that evidence, and considered how that conduct should sound in the assessment proceedings.
- The Claimant's alternative position is sub-divided into 5 categories.
- The first is to seek disallowance of any costs pre 21 December 2023. As far as I can see, the Defendant concedes any pre 21 December 2023 costs in any event. I therefore comment no further in that regard, save to observe that it seems right to me that the Claimant should not be charged for any costs incurred pre 21 December 2023.
- The second is to seek that the Defendant is not permitted to charge for duplication of work. This line of argument is not directly linked to issues relevant to the retainer and estimates. However, I am prepared to accept the notion that if time has been incurred addressing ambiguities with regards to the retainer and estimates then that may give rise to some duplication and the Defendant ought to consider suitable concessions where relevant.
- The third is to seek a ruling that the Defendant is not entitled to charge "Any amount above the Government guidelines of solicitors hourly rates". That argument is addressed below in the 'rates' section of this judgment.
- The fourth is to seek a ruling that the Defendant cannot charge for work claimed that is "out of scope", with specific reference to Ms Houghton's e-mail of 30 January 2024. I have taken that argument to mean that the Claimant contends none of the work was "out of scope" such that there ought to be no charges for fees outside of the original estimate.
- Fifth is to seek that the Defendant cannot charge for any time which relates to the complaints process with regards to the Claimant's dispute as to billing. This is not a line of argument that was specifically addressed at the hearing and the Defendant should therefore be given an opportunity to respond, save for where I am otherwise informed the complete response to that is contained in the replies.
- At this stage, I would simply comment that the costs associated with dealing with the dispute over fees ought to form part of the costs of assessment rather than be treated as cost of the primary service for which the Defendant was retained. In that regard. the Defendant ought to consider concessions where appropriate, or the transfer of time to the costs of assessment.
- Turning to the central dispute surrounding estimates, Ms Kostova argued her client's case strongly but ultimately neither she, nor this court, can ignore the fact of what was contemporaneously done and said. In that regard, I reject any invitations (if indeed made) to downplay the importance of Mr Kelly's words and his interactions with Mr Wooldridge up to and including 21 December 2023.
- In my view, it is difficult to be critical of the Claimant's conduct. Mr Wooldridge is an intellectual individual, but still a layperson. Even then, he was alive to the importance of providing information and documentation to his solicitors, and the potential impact that may have on a fees estimate.
- Mr Wooldridge's e-mail to Mr Kelly dated 20 December 2023 demonstrates the Claimant was conscious that the fees estimate might be subject to change. However, because Mr Wooldridge was aware of that risk he was also keen to "..ensure [the] quote for the demerger wouldn't change." In this regard, Mr Wooldridge is able to demonstrate a contemporaneously expressed concern for costs before choosing to commit to the Defendant.
- The Defendant's adopted stance in these assessment proceedings is that the documents provided at the outset were "sufficient to commence work on the transaction". That is suggestive of a practice by which the lay client is expected to treat an estimate as covering the initial stages of an instruction but not the whole instruction.
- This court is certainly familiar with cases where an estimate is provided to undertake certain initial steps, or is subject to future alterations. However, as at 21 December 2023, I consider the Claimant had done all they could reasonably be expected to do in terms of provision of documents and seeking clarity as to costs estimates.
- In other words, I consider that when the Defendant gave the Claimant an estimate with an upper bracket of £10,000 (excluding VAT and disbursements), there was nothing in the words expressed (by 21 December 2023), whether verbally or writing, which would have reasonably led the Claimant to think that estimate was for the initial stages only. The Claimant was reasonably entitled to assume the estimate covered the entirety of the instructions.
- The notion of "sufficient to commence work" is an argument constructed in these assessment proceedings, not words used prior to the instructions being agreed.
- I accept that Ms Houghton's e-mail to Mr Wooldridge of 22 December 2023 was comprehensive in terms of the information requested. However, Mr Wooldridge's response to the same would have been in the context of the estimate he had received from Mr Kelly, and where nothing in Ms Houghton's e-mail would reasonably have given rise to the consideration that the estimate might alter dependent on Mr Wooldridge's responses.
- In circumstances where the Defendant's argument is they had received limited documentation at the time of providing an estimate of up to £10,000 plus VAT and disbursements, why would the Claimant think that answering a few questions would automatically mean the estimate was no longer capable of being relied upon?
- With regards to the probative value of the documents provided by the Claimant up to and including 21 December 2023, and taking into account that the main point of contact up to that point was Mr Kelly, and given Mr Kelly's status as a Partner in the Defendant firm, I consider there was nothing to reasonably lead Mr Wooldridge to conclude that the Claimant could not rely on the estimate provided.
- It also assists to consider the language used by Mr Kelly prior to the 21 December 2023 agreement being struck. For example, Mr Kelly's comment that "bespoke articles or shareholder agreements.. ..would be outside of the above estimate" further strengthens the Claimant's case, in terms of reliance on the estimate.
- That is because this demonstrates that Mr Kelly had turned his mind to at least one category of work that sat outside of his estimate, and informed the Claimant as such. If the transfer of land was also an excluded category of work from the estimate, why did Mr Kelly not state as such.
- I also consider it telling that Mr Kelly's e-mail of 29 September 2023 included a step for asset transfer, and I agree with Mr Wooldridge that it was reasonable for the Claimant to take this to include transfer/s of land.
- In any event, the fact that further documentation may have fallen to be considered would not necessarily equate to alterations to the estimate. Indeed, if one adopts the Defendant's stance, i.e. that the documents provided as at 21 December 2023 were limited, then one questions how the Defendant settled on an estimate of up to £10,000 plus VAT and disbursements?
- In my view, Mr Kelly's estimate was given in anticipation of receiving further documents. It is only if something unusual arose that one might expect an alteration to the estimate. In this regard, the Defendant might point to the transfer of several "parcels" of land as opposed to a single land or property transfer. However, the Defendant would still have to demonstrate how such an outcome would impact the profit costs incurred.
- With regard to the transfer of land, and Mr Kelly's exchange of internal e-mails with Mr Todd on 22 December 2023, I consider Mr Kelly's comment that "I do not expect this to be hugely involved or complicated unless you tell us otherwise." to be telling, in that it is consistent with an expectation that the estimate provided would not be altered with respect to work regarding any land transfer.
- I also consider Ms Houghton's exchanges with Mr Todd of 2 January 2024 to be telling, in that they explicitly demonstrate a need to revise the fee estimate. Recall this exchange was one day before the client care letter.
- In this regard, and even I were to ignore my conclusion that the Claimant did not see the client care letter until 30 January 2024, one would expect the Defendant to have explicitly set out that the fee estimate had altered and explain why, before undertaking any further work. I.e. the Claimant's express approval should have been sought, and the mere sending of the CCL was not sufficient to undertake work or incur fees outside of the parameters of what had been agreed between Mr Kelly and Mr Wooldridge, without drawing the Claimant's attention to those changes.
- There is clearly a disagreement as to whether the CCL was representative of what Mr Wooldridge and Mr Kelly had agreed. This makes it all the more important that the Defendant should have awaited the signed CCL. They cannot even demonstrate a phone call in which an altered estimate (altered parameters / scope) was discussed.
- Thus, a major hurdle the Defendant has failed to overcome is that whilst it may be inferred that (internally) it dawned on the Defendant that either Mr Kelly's estimate was inadequate, or that clarification was required in the form of a formal client care letter, that clarification was never effectively communicated to the Claimant before further costs were incurred.
- I say clarification, but being frank, what the CCL amounted to was the provision of an estimate based on different criteria to that which the original estimate was based on. In those circumstances, I consider there was a burden on the Defendant to be explicit and unambiguous as to what had changed.
- Turning to the wording of the CCL dated 3 January 2024, there is in fact no distinct "steps" section explicitly set out. Given what is now said, and the apparent confusion as to what steps were included or excluded from the estimate of costs, one would have thought the Defendant would be alive to the importance of setting out the steps clearly.
- Instead, those steps are to be inferred from the opening two sections of the CCL, titled "Capital Reduction Demerger" and "Scope of Work":
"Capital Reduction Demerger
Thank you for instructing us to act for Gallantgreen Limited (the Company) in relation to the various steps required to affect the proposed demerger detailed in the clearance application (Clearance) prepared by Trident Tax (Demerger).
Scope of work
I am writing now to confirm we will prepare the legal documentation for the Demerger referred to directly in the Clearance."
- In this regard, it is difficult to criticise the Claimant for not assuming that the intention of the CCL was to mirror the steps in the Trident Tax letter. To put it another way, even had the Claimant seen the CCL on 3 January 2024, the 'Capital Reduction Demerger' and 'Scope of work' sections do not obviously or unambiguously exclude work relating to the transfer of assets (including land).
- I observe that the purpose of the CCL was simply to put into writing what had already been discussed between Mr Kelly and Mr Wooldridge. The CCL scope section talks of work 'to be' done, and a timescale of one month which "..assumes we are provided all requisite information promptly". In my view, that is consistent with the Claimant's understanding that the estimate was based on what the Defendant had already seen, and that further information would likely be required but not on terms that would impact or require upward revisions to the estimate.
- To put it another way, even if the Claimant had seen the CCL on 3 January 2024, there is nothing to suggest that there would be constant upward revisions to the estimate based on every time further information was provided. For example, when a solicitor enters into a retainer to represent a personal injury client, the estimate will include a reasonable amount of time to attend the client and take a witness statement. A client relies on the skill and experience of a solicitor to anticipate what will be necessary and provide an estimate, not to keep changing the parameters (whether that be in terms of scope or amount).
- In a similar fashion, Mr Kelly had confirmed he had received "sufficient" information to provide an estimate, and the Claimant was given no indication that the mere provision of further information (in the normal course of giving instructions and receiving advice) would lead to alterations to the estimate or scope of work.
- In terms of any reference to estimates in the CCL, it outlines figures of £7,000-£10,000 (excluding VAT and disbursements) to "cover the steps you have instructed us to take as outlined above".
- Again, the Defendant's failure to explicitly state those steps counts against them. Instead, the CCL defaults to either what the Claimant's understanding of the steps were, or at the very least "the various steps required to affect the proposed demerger detailed in the clearance application (Clearance) prepared by Trident Tax (Demerger)."
- The CCL then lists 7 assumptions, and I have already commented on the fact that where there was a change in assumptions the burden rested on the Defendant to a) make sure they were explicit about any changes, and b) ensure the Claimant had at least seen the CCL before undertaking any further work pursuant to the same.
- Assumption 3 refers to "matters pertaining to property or land" and include "the preparation of simple transfer documents (whether by distribution or by other means)". There are no form of words which limit the work to a single piece of property or land, and I certainly don't see how the Claimant could have viewed this section as excluding the transfer of any property or land from the estimate provided.
- Assumption 5 appears to be a clearer variation to the original assumptions. However, I do not consider the Claimant can make out an argument that fees relating to SDLT, being a tax matter, was intended to form part of the original instructions anyway.
- In any event, there is something of a saving provision in Assumption 6, in that it states "that we are not for any reason required to do any work outside the scope of our engagement described above or undertake any actions or steps not set out in the Clearance". This would mean that the Defendant either didn't do work they were not instructed to, or would be expected to seek clear and explicit approval to do 'out of scope' work.
- The attached 'Terms of Business' are generic and have not been tailored in a way that assists with the dispute before this court.
- Thus, even if the Claimant had seen the CCL on 3 January 2024, I do not consider the same unambiguously excludes the transfer of land or property, and given this was such an important element of the work the Defendant was instructed to do I would have expected exclusion to be explicit, if that was the intention.
- The issue which arises for the Defendant is the decision to not adequately communicate to the Claimant why an alteration to the estimate was necessary, and importantly to ensure that was communicated before any additional work was done.
- In effect, the Defendant assumed the Claimant had seen the CCL and despite not having received a copy of the CCL countersigned by the Claimant, or otherwise chasing up the Claimant, the Defendant simply went ahead and conducted further work.
- The argument for the Defendant is of course that by corresponding with the Claimant throughout January 2024, the Claimant appeared to have given their inferred approval for the work to be done. However, that was only in the context of the estimate provided by Mr Kelly in December 2023, and in circumstances where Mr Wooldridge had been at pains to ensure Mr Kelly had all he needed to provide an accurate estimate in the first place.
- I acknowledge that the giving of instructions and acceptance of advice up to 30 January 2024 has all the characteristics of giving inferred approval of the work done. However, that was on the presumption all matters being discussed were within the scope and fees estimate which had been established by 21 December 2023.
- I find that I am unable to infer approval through conduct because the Claimant hadn't seen the CCL before 31 January 2024, and I therefore conclude that I must view the parties' interactions during the course of January 2024 through the prism of the '21 December 2023 agreement'.
- As to the 21 December 2023 agreement, I observe that Mr Wooldridge is a sensible person, and he did not invite this court to treat Mr Kelly's estimate as a fixed fee agreement, cap or otherwise. Mr Wooldridge understands what an estimate is. He understands it may be subject to change. He has in fact since sought estimates from others and, implicitly at least, accepts that Mr Kelly's estimate may well have been inadequate.
- The Claimant's issue is that, furnished with a better estimate, they could have taken an informed choice as to the engagement of the Defendant. Further, the Claimant also submits that had they been informed of the need to revise the estimate before further costs were incurred, they would have at least had an opportunity to agree to that work or otherwise elect to transfer instructions elsewhere.
- Next, I address the Defendant's interpretation of Mr Langley's e-mail of 24 March 2024. I accept there is some force in Ms Kostova's argument that Mr Langley was likely not openly criticising Mr Kelly in an e-mail to a client in which Mr Kelly was cc'd. However, if he wasn't, then the alternative interpretation is that Mr Langley is criticising Mr Wooldridge (i.e. his lay client) for taking Mr Kelly's arguably unambiguous response of "This is sufficient" at face value.
- If Mr Langley's "lack of understanding" comment was aimed at either Mr Wooldridge or the otherwise hypothetical lay-client, it seems that would be an invitation to conclude Mr Wooldridge should not have accepted Mr Kelly's original estimate at face value. I am not persuaded to draw such a conclusion.
- Mr Wooldridge is the de facto lay client. Mr Kelly is a partner with some 15 years PQE at the time of initial engagement. What possible reason did Mr Wooldridge have to query the estimate he had been provided, and especially after he has demonstrated that he raised queries at the time about whether Mr Kelly needed any more information or to see any more documents, specifically to ensure the estimate would not be altered.
- Had Mr Kelly used words to the effect that "this is an initial estimate, which is subject to..", or "this is an estimate for the initial steps and a further estimate will be provided when
", then an updated estimate would not have come as a surprise, or the Claimant could have enquired as to what else was excluded from the estimate before deciding which firm to instruct. The fact is that no such language was used.
- I take into account that this is not a case of a Claimant who was uninterested or disengaged with solicitor costs. Indeed, via Mr Wooldridge, the Claimant has been able to demonstrate quite the opposite. Mr Wooldridge was keen to ensure that Mr Kelly's estimate was realistic and placed his faith in Mr Kelly's responses. Mr Kelly is a partner in the Defendant's firm and his words carry an according level of gravitas in that regard.
- The conclusions I have drawn do not lead to the Defendant's costs being automatically capped. Mr Wooldridge is a sensible person, and he did not invite this court to treat Mr Kelly's estimate as a fixed fee agreement, cap or otherwise. Mr Wooldridge understands what an estimate is. He understands it may be subject to change. He has in fact since sought estimates from other firms and, implicitly at least, accepts that Mr Kelly's estimate may well have been inadequate.
- The Claimant's issue is that, furnished with a better estimate, they could have taken an informed choice as to the engagement of the Defendant. Further, the Claimant also submits that had they been informed of the need to revise the estimate before further costs were incurred, they would have at least had an opportunity to agree to that work or otherwise elect to transfer instructions elsewhere.
- Authoritative guidance with respect to estimates is found in the decision of Mastercigars Direct Ltd v Withers LLP [2009] EWHC 1296 (Ch) where Morgan J found:
"92. In a case where a solicitor does give his client an estimate but the costs subsequently claimed exceed the estimate, it will not follow in every case that the solicitor will be restricted to recovering the sum in the estimate."; and
"99. The estimate is a useful yardstick by which the reasonableness of the costs may be measured. If there is a modest difference between the estimate and the final bill, because an estimate is not a fixed price for the work, one may be very little surprised by the modest difference. The greater the difference, the more it calls for an explanation. If there is a satisfactory explanation for the difference then the estimate may cease to be useful as a yardstick with which to measure reasonableness. Conversely, if there is no satisfactory explanation the estimate may remain a very useful yardstick with which to measure reasonableness."
- The ultimate question is what in all the circumstances is it reasonable for the client to pay. As per paragraph 103 of Mastercigars Direct Ltd, ".. in some cases, the solicitors' estimate will be a useful yardstick with which to measure the reasonableness of the final bill and in other cases the amount of the estimate will be a factor in considering what some it is reasonable to expect the client to pay."
- A key factor in the index matter is the Claimant's demonstration of reliance. In the second Mastercigars Direct Ltd judgment, Morgan J set out the steps the court should take, albeit expressed to be "practical guidance rather than as a legal imperative". See paragraph 54 of the judgement:
"In my judgement, the legal process involved in a case where a client contends that its reliance on an estimate should be taken into account in determining the figure which it is reasonable for the client to pay is as follows. The court should determine whether the client did rely on the estimate. The court should determine how the clients relied on the estimate ..without conducting an elaborate and detailed investigation. The court should decide whether the costs claimed should be reduced by reason of its findings as to reliance and, if so, in what way and by how much. Whether there should be a reduction, and if so to what extent, is a matter of judgement. Specific deductions can be made from the costs otherwise recoverable to reflect the impact which an erroneous and uncorrected estimate had on the conduct of the client. Such an approach requires the court to form an assessment of the impact of the estimate on the conduct of the client. The court should consider the deductions which are needed in order to do justice between the parties. It is not the proper function of the court to punish the solicitor for providing a wrong estimate or for failing to keep it up to date as events unfolded."
- In terms of the burden on the client, there is no requirement, even on the balance of probabilities, to prove they would have acted differently. They only need show it is possible they may have approached the litigation differently had an accurate estimate been provided.
- I consider Mr Wooldridge, on behalf of the Claimant, has demonstrated that the Claimant may have approached the litigation differently had an accurate estimate been provided. As such, I do consider I may take the initial estimate of Mr Kelly into account when assessing the costs.
- I also conclude that the Claimant relied on Mr Kelly's estimate because of the obvious interest Mr Wooldridge showed in costs and efforts made to establish that Mr Kelly had sufficient information to provide a reliable estimate. I remind myself this was not a contentious instruction. There were no surprises or changes emanating from unexpected disclosure from an opponent. The Claimant, and their accountant, was at all times ready, willing and able to provide the Defendant with whatever information and documents they needed to see.
- I am assisted by the case of Reynolds v Stone Rowe Brewer [2008] EWHC 497 (QB) with respect to inadequate estimates, and the role of later estimates. In that case, an initial estimate had been altered up and up, but the court on assessment was entitled to take the initial estimate into account. At paragraphs 70 and 71 the court found:
"70. In my judgement the Costs Judge was fully entitled to come to the view that, if the estimates given at the start of the case had been such as are required by the applicable rules, then the claimant would not have acted as she did. She would clearly not have been able to afford to do so, and I think it unlikely she would have embarked on the course she did embark on."; and
"71. I assume that the solicitors have spent a reasonable time on reasonable items of work, and that the charging rate is reasonable. But I find that the resulting figure exceeds what it is reasonable in all the circumstances to expect the client to pay. The figure that the cost judge certified is a figure that is reasonable to expect the claimant to pay in this case."
- In that case, the original estimate was £10,000 to £18,000 plus VAT to trial, caveated with "..this is only of course an estimate which could be increased depending on how strenuously the matter is defended." The solicitors' final revised estimate exceeded £59,000 plus a further £55,000 plus VAT to go to trial.
- The costs judge was not satisfied with the solicitors' explanation as to the differences between the initial and revised estimate, and allowed the solicitor £18,000 plus VAT (representing the upper end of the initial estimate), plus a broadbrush 15% margin in addition. The High Court chose not to interfere with that decision.
- The approach of taking the upper end of an initial estimate and applying a broad margin of 15-20% has in many case been adopted. However, that is a matter of practice rather than procedure, and certainly not imposed on my decision in this assessment.
- I do acknowledge that, as the breakdown demonstrates, the Defendant has repeatedly invoiced for less than the time actually incurred (albeit that the effect of that will be diminished as a consequence of my rates decision below).
- However, having concluded that the Claimant relied on the initial estimate, and accepting the possibility the Claimant might have acted differently had they been provided either with an accurate estimate or an estimate that made it clear which steps were excluded / out of scope, I wish to place the Defendant on notice that I am unlikely to be persuaded to allow more than a margin of 20% on the upper level of Mr Kelly's original estimate (which would equate to £12,000 plus VAT). The Claimant should observe I am equally unlikely to be persuaded to allow less than that amount.
- At this stage, that is not my final assessment. However, see the 'next steps' section of my judgment, below.
Rates
- In so far that any of the time claimed post 30 January 2024 is recoverable (subject to assessment), I am satisfied that by then the Claimant had seen the CCL and was aware of the rates contained in the same.
- Accordingly, my conclusion is that the Claimant agreed to those rates, implicitly if not explicitly, but in any event under the continuing presumption that the work would be completed within the parameters of the estimate originally agreed upon.
- As for work up to 30 January 2024, the Claimant argues for National 1 guideline rates for 2024. In circumstances where I have concluded the hourly rates were not effectively communicated or agreed with the Claimant prior to 31 January 2024, I consider it falls to me to assess the rates for that period.
- I do not accept that the guideline rates should apply. This was not a simple or straightforward instruction. It required the use of a specialist firm with specialist solicitors involved.
- The guideline rates represent a useful starting point, and are often applied where a court is assessing the costs of routine matters. However, one must be mindful of what other firms charge for this category of work.
- The rates I allow for work up to and including 30 January 2024 are £325/hr (Kelly & Barnett), £225 (Houghton), £260 (Todd), £175 (L'Esperance & Champion) and £145 for all other fee earners (save for where less has been charged).
Next steps
- The contents of paragraph 198 above are intended to give guidance only, and designed to assist the parties in deciding whether to compromise or return before me to persuade me to depart upwards or downwards from the indicative figure given at paragraph 198.
- If the parties do not compromise the fees dispute following this judgment, they may either return before me for a further hearing (which will be conducted via Microsoft Teams) or seek that I complete the assessment 'on the papers', i.e. that I assess the breakdown of costs whilst sitting in private and send the parties details of my decision.
- I will only complete the assessment 'on the papers' if both parties agree to such an approach. In the event a further hearing is required, it will be listed for no longer than 1 day and the parties should provide my clerk with any dates to avoid.
- The parties may also request a short remote hearing if the only remaining issue concerns the costs of assessment.
