The High Court has demanded that further cuts be made to costs of over £1.6m claimed by Eversheds, overruling a costs judge.
Mrs Justice Slade said the amount claimed by Eversheds from litigation client Mark Harrison was 4.8 times higher than the firm’s first estimate and about 2.9 times more than a second.
Slade J said that while an estimate was not the same as a quote, Master Rowley had “exceeded the broad measure of his discretion” in considering a reasonable upper limit on profit costs to be twice as high as the second estimate.
“In my judgment the award by Master Rowley of an increase of more than £300,000 in profit costs above those anticipated in the second estimate required explanation and justification.
“Master Rowley erred in principle in relying on the level of the increase in the profit costs of his opponent’s solicitors when nothing was known about the assumptions, advice and information on which it was based.”
Slade J said the master had also erred in the way he calculated the costs of Mr Harrison’s opponent, Lord Laidlaw, which failed to take into account that the first allocation questionnaire figure was net of VAT and the second final figure included VAT.
“The increase was therefore wrongly inflated. Master Rowley based part of his assessment of the figure it was reasonable for the claimant to pay on a mistake.”
The court heard in Harrison v Eversheds  EWHC 2594 (QB) that Mr Harrison was invoiced for just over £1.6m net of VAT for representing him in a property dispute with Lord Laidlaw. The total was made up of over £863,000 in profit costs and over £739,000 in disbursements.
Slade J said the first estimate given by Eversheds in October 2012, including billed profit costs, came to £333,000. By February 2013, an allocation questionnaire provided by Eversheds showed that this figure had increased to £548,000.
In October 2013, Mr Harrison was provided with an estimate showing that profit costs had risen to £692,000 net of VAT. In a Precedent H produced in January 2014, the total for profit costs and disbursements had increased to over £1.6m. The case was settled in March 2014 on a confidential basis.
In a decision in November 2016, Master Rowley ordered that the defendant’s profit costs be limited to £650,000 plus VAT but did not limit disbursements.
Slade J said counsel for Eversheds and Mr Harrison agreed on the legal principles to be applied in the case.
“The overarching question is the sum which it is reasonable for the client to pay. A solicitor is not restricted to an estimate. An estimate of costs is not a quotation.
“A client is not required to establish an estoppel before reliance on an estimate is to be taken into account in assessing costs. In determining what is reasonable for the client to pay the costs judge is to have regard to the estimate. An estimate of costs is not a quotation.”
A quotation was an offer which is accepted, the judge emphasised. “An estimate is what it says. It gives an idea, which from a professional firm can be taken as reasonably and carefully made taking into account all relevant considerations, of what the future costs of work on a case is likely to be.
“A solicitor cannot be held to be restricted to recovering the exact sum set out in an estimate. However, a client is entitled to place some reliance on the estimate. The nature, degree and reasonableness of that reliance will no doubt be one factor in the view taken on an assessment under section 70 of the Solicitors Act 1974 of how much more than the estimate it is reasonable for the client to pay.”
Slade J said of the final total of over £739,000 for disbursements, counsel’s fees amounted to £476,500, experts to £167,600, and accountants to £65,000.
She said that Master Rowley erred in “relying upon the fact that the claimant did not include counsel’s fees in the CFA as a reason for not making an overarching reduction in counsel’s fees” and the fact these fees were outside the CFA “did not absolve the master from considering whether it was reasonable” for Mr Harrison to pay £476,000.
Slade J concluded that Mr Harrison’s first ground of appeal, that Master Rowley “erred in taking the second estimate as the starting point for what costs could be recovered” should be dismissed.
However, she upheld the second ground, that the Master erred in holding that (subject to the impact of the CFA) it was reasonable for the defendant to recover profit costs which were up to double the amount stated in the second estimate.
Slade J upheld the third ground, that Master Rowley should have limited the recovery of disbursements, in respect of counsel’s fees only. Detailed assessment of the defendant’s profit costs and counsel’s fees was remitted to Master Rowley for determination.