Gordon-Saker’s surprise that firm failed to spell out budget overspend to client

The Senior Costs Judge (SCJ) has expressed his surprise that a law firm – in this case Irwin Mitchell (IM) – would exceed budgeted costs without properly consulting their client.

Andrew Gordon-Saker was clear that telling a client that some costs might not be recovered from the other side was “not sufficient”; IM seemed “happy simply to ignore the budget” instead.

The claim in ST v ZY [2022] EWHC B6 (Costs) was brought on behalf of C, a seven-year-old whose father was killed in a road traffic accident in 2015. The defendant was convicted of causing death by careless driving.

C’s mother, ST, instructed IM in relation to her claims and those of her four children, of whom C was the youngest and the only child of the deceased. ST and the deceased were not married but had lived together.

A separate claim was issued by other solicitors on behalf of the deceased’s former wife and her children. The claims were consolidated, with ST as the first claimant and the former wife as the second.

In November 2019, the dependency claims of ST and of her older three children were discontinued. The claim of the estate and C’s loss of dependency claim settled in April 2020, along with the claims of the former wife and her children. All of the sums payable to ST were apportioned to C’s loss of dependency claim.

In approving the settlement, HH Judge Coe QC, sitting as a High Court judge, ordered the defendant to pay ST’s costs of the claim “advanced only on behalf of [C] as a dependant and as an administratrix of the deceased’s estate” and directed that the costs payable by ST to her solicitors “shall be assessed pursuant to CPR 46.4 and shall take place following the conclusion of the assessment or agreement of the defendant’s liability for ST’s legal costs”.

IM has sought costs of nearly £190,000 on behalf of ST and the parties agreed that the defendant would pay £132,000. IM asked the court to approve the agreement and to assess the costs payable by C to it – IM sought the £54,000 shortfall, a success fee of 12.5% and £1,100 in respect of the after-the-event insurance premium.

Judge Gordon-Saker found there was an enforceable retainer between IM and ST on behalf of C, and that the bill contained costs which did not fall within the scope of the retainer.

There were “obvious examples” of work that did not relate to C’s claim. “For example. in taking instructions from ST, time was spent in investigating her claims for loss of dependency and bereavement and the loss of dependency of her other children.”

It was not in issue that the costs claimed exceeded the amounts approved by the court in three phases of the budget by more than £31,000. IM advanced no argument that there was a good reason to depart from the budget in relation to £25,000 of this and the judge found no good reason to depart in relation to the rest.

Pursuant to rule 46.4, the SCJ held that the costs were unusual in amount: “In approving the budget at £53,401.72, rather than at £147,981.50, the court arrived at the figures which it considered would be reasonable and proportionate to take the case to trial.

“In respect of issue/statement of case, that reasonable and proportionate figure was exceeded by over 100%. In respect of witness statements, the reasonable and proportionate figure was exceeded by over 400%. In respect of ADR/settlement, the reasonable and proportionate figure was exceeded by over 150%. These figures are so far over what they should be, and what the court has already decided that they should be, that they must be unusual in amount.”

He accepted that IM told ST throughout that there would be costs which would not be recovered and instead deducted from the damages, and was given specific estimates of what the shortfall would be during the case. The last one proved to be very close to the final figure.

He continued: “I have found nothing to suggest that ST was told about the budget or about the effect of the budget.

“To avoid the presumption applied by CPR 46.9(3)(c), the solicitor must tell the client that as a result the costs might not be recovered from the other party. That must mean as a result of their unusual nature or amount.

“Telling the client that some costs might not be recovered from the other side is not sufficient. ST should have been told that the budget was being exceeded by a wide margin and that, as a result, those costs might not (and, indeed, almost certainly would not) be recovered from the other side.

“Accordingly, in my judgment, the costs in excess of the budget and in excess of the caps imposed by CPR 3.15(5) are to be presumed to have been unreasonably incurred.”

Judge Gordon-Saker added that it was “very surprising that a solicitor would not tell their client that the budget had been exceeded and that the costs in excess of the budget would not be recoverable”.

He explained: “At that point the client is moving from pursuing a claim in which reasonable and proportionate costs will be recoverable to a claim where no further costs will be recoverable in respect of some or all of the phases.

“Instead IM appear to have been happy simply to ignore the budget and incur costs which they would or should have known would not be recovered from the defendant.

He approved the settlement between the parties, adding: “The bill still needs to be the subject of a detailed assessment between IM and C, at which, inter alia, I will need to make a decision as to which costs should be disallowed because they do not fall within the scope of the retainer. IM may consider it helpful to redraft the bill to exclude those costs.”

Matthew Waszak (instructed by Irwin Mitchell) for the claimant’s solicitors.

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Costs News
Published date
24 Mar 2022

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