A costs judge has ordered the detailed assessment of bills worth £4.2m after finding that the estimates provided by City law firm Dechert were at such variance with the reality of what was spent that they had to be examined in detail.
The bills were rendered between one and 12 months before the application, meaning that, under section 70(3) of the Solicitors Act 1974, ‘special circumstances’ had to exist to justify an assessment.
Master Rowley’s decision came in the high-profile dispute between Dechert and its former client Eurasian Natural Resources Corporation (ENRC), which has already been to the Court of Appeal over the assessment being held in private. Despite the order that it should be, the court also allowed publication of a redacted version of this judgment.
Dechert was called in by ENRC to handle an investigation into allegations by a whistleblower. Dechert billed more than £16.3m over two years before the retainer was terminated, according to the earlier proceedings. ENRC accused the firm of serious overcharging – which it denies – and applied for a detailed assessment under section 70(3).
In addition to the bills for £4.2m that will now be assessed, bills worth £5.5m were challenged within the month allowed; however, a further £3.9m was invoiced and paid more than a year before the application and so cannot be assessed. The judgment does not refer to the other £2.7m.
ENRC cited seven factors that justified a detailed assessment, and Master Rowley found that all but one of them amounted to special circumstances.
In particular, he said, “it is clear from the beginning of the retainer through to the end that the estimates [provided by Dechert] were consistently below the costs that were being incurred at the time”.
He described the assumptions made in drawing up the original estimate as “wholly unrealistic” given the work that was required.
Master Rowley said: “The work carried out in this case straddles the period of the review of Lord Justice Jackson. The need to improve the prospective understanding of costs through budgeting was writ large within that report and given prominent publicity.
“In that environment, it is simply not sufficient for a solicitor to provide an early estimate which is then not updated for a considerable period…
“Despite the estimates being updated periodically, they have not come close to mirroring the actuality and they are deficient in themselves.”
Other factors which he found to be a special circumstance were the impossibility of ENRC challenging the bills during the retainer – because it needed to keep Dechert onboard to maintain its relationship with the Serious Fraud Office – Dechert’s unhelpful approach to billing queries, and the firm’s conduct to the costs proceedings, “in that they call for an explanation”.
Master Rowley also found that alleged billing irregularities “would amount to a special circumstance when viewed through the magnifying prism of the size of the bills”, even though on their own those two elements would not be a special circumstance.
However, the fact there was going to be a detailed assessment of a substantial part of the defendant’s charges in any event was not a special circumstance.
In a statement, ENRC said the judgment vindicated its “longstanding and deeply held concerns about the level and nature of Dechert’s charges”.
A Dechert spokesman said: “We look forward now to proceeding with the costs assessment process.”