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Solicitor-client dispute: Firm’s failure to update cost estimate

In a trial of a preliminary issue, Senior Courts Costs Office Costs Judge, Master Leonard, held that a law firm breached its professional and contractual duties by failing to adequately advise a client on mounting costs and failing to update an initial costs estimate for work on a matter after the estimate was exceeded.

In a trial of a preliminary issue, Senior Courts Costs Office Costs Judge, Master Leonard, held that a law firm breached its professional and contractual duties by failing to adequately advise a client on mounting costs and failing to update an initial costs estimate for work on a matter after the estimate was exceeded.

Background to detailed assessment proceedings

The Defendant firm, Gordon Dadds LLP was retained by Adam Newman (the Claimant) in August 2017 in a family company dispute concerning Jabac Finances Limited (JF Ltd). The ultimate aim of the Claimant was settlement of the dispute without litigation, potentially by way of a mediation. A mediation between the directors of JF Limited did take place in March 2018 but a resolution was not reached.

The Claimant received an initial estimate from the solicitors in August 2017 for £10,000 which was set out in the retainer. He subsequently paid almost £76,000 across a series if bills rendered until the end of 2017. The Firm rendered further invoices for the total sum of £61,025 from January 2018 to May 2018, which were unpaid and remained outstanding at the time of the detailed assessment proceedings.

The Claimant made an application for detailed assessment to obtain a reduction on the solicitors’ bills. On 16 November 2018, the SCCO granted an order for detailed assessment of six bills rendered to the Claimant between January 2018 and May 2018 under section 70 of the Solicitors Act 1974.

In his Points of Dispute (challenge to the solicitors’ bill), the Claimant sought to restrict the costs and recoverable fees to the initial estimate of £10,000 provided by the Firm in alleging that there was ‘hardly any discussion’ from the Firm about the expected costs of the litigation.

The Court ordered a hearing of the preliminary issue concerning the issue of estimates and their effect upon the Claimant’s bills.

Claimant’s complaints about solicitors firm and potential negligence

The Claimant made a number of complaints about the Firm and the work carried out for him, many of which may be considered to have amounted to professional negligence.

The Claimant stated that the solicitor had failed to set out his position in writing priori to a meeting of the directors of JF Ltd which prejudiced his position as the solicitor failed to present his case. The Claimant had been suspended as a director of the family company JF Ltd and he alleged that his solicitor failed to adequately advise on any challenge to the suspension. The Claimant further alleged that the solicitors had failed to adequately prepare for his case at the Employment Tribunal.

He claimed that the solicitor also failed to advise him of the need to contact the FCA to inform them of his suspension. This led the Claimant to seek alternative advice from another law firm, Shakespeare Martineau to maintain his FCA authorisation which resulted in further costs.

The Master acknowledged the Claimant’s complaints and has referred to them in his judgment, however he stated that they were not matters raised for the purposes of the detailed assessment and made no finding of them.

Solicitors fail to provide adequate estimate or costs advice

It was held in this case that the solicitors had failed to provide the Claimant with any estimates of potential future costs, save for a very limited estimate in August 2017 of £10,000 plus VAT for initial work. The Firm in this case failed to produce evidence to satisfy the Court otherwise.

Master Leonard held the firm’s failure to advise adequately on estimates was in breach of its contractual and professional obligations and prevented the Claimant from seeking alternative representation.

The Defendant’s failure to provide any further estimates of potential future costs after August 2017 deprived the Claimant to make an informed choice as to whether to seek out less expensive representation for the litigation that followed

Solicitors’ costs not limited to initial estimate

Despite agreeing with the Claimant that the Firm had failed to provide an updated estimate beyond the estimate of £10,000 in August 2017, Master Leonard did not agree that the costs the Firm should be able to recover should be limited to £10,000.

It was accepted that the Firm had delivered regular bills to the Claimant and therefore the Claimant had been aware of the fees being charged every month. The Master further held that the strategy to achieve settlement which carried the cost estimate of £10,000 would have changed at the failed mediation in the early stages of the matter. The Master concluded that the costs that the Defendant can reasonably recover from the Claimant should not be limited to any specific figure. The case will now proceed to detailed assessment.

Read the full judgment for Newman v Gordon Dadds LLP [2020] EWHC B23 here.

Solicitor client disputes

The judgment highlights the importance of seeking legal advice on any challenge to solicitors’ bills from the outset, to be able to narrow down issues in dispute and strengthen a case for detailed assessment. It is also advisable to seek advice on any complaints against solicitors in the event you have a potential claim for professional negligence and you should avoid becoming time barred. Our costs team and professional negligence can assist you in such matters.

If you have received a bill or bills from your solicitors and you think that the fees are higher than they should have been then a specialist court exists to deal with such disputes with its own rules and guidance. Many law firms simply do not understand what is a niche area of legal practice. Unlike most law firms, we understand solicitor/client costs disputes.

City of London Specialist Legal Costs Lawyers

Our SCCO Legal Costs Dispute Lawyers are experienced in checking and disputing legal fees. We are experts in assessing whether the time claimed for is reasonable and whether your solicitor may have overcharged. We are well versed in both negotiating a reduction with your solicitor and attending detailed assessment proceedings at court if necessary. Our team have an in-depth knowledge of litigation against the client or solicitor under the Solicitors Act 1974.