Case No: 03/P8/035
Neutral Citation Number: [2003] EWHC 9015 (Costs)
IN THE HIGH COURT OF JUSTICE 
SUPREME COURT COST OFFICE
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 17 October 2003
Before :
MASTER CAMPBELL, COSTS JUDGE
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Between :
 	TREVOR JOHN SLADE
JOHN MICHAEL SLADE	Claimants	
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 	BOYES TURNER SOLICITORS	Defendants	
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The Claimants in Person
Mr Parkinson (instructed by Boyes Turner) for the Defendants
Hearing date : 29 September 2003
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Approved Judgment
Master Campbell
 
1.	The Claimants in this detailed assessment, Messrs Trevor and John Slade ("the Slades") are one time clients of the Defendants, Boyes Turner solicitors. Between May 2000 and February 2002 Boyes Turner acted for the Slades in litigation proceeding in the Chancery Division of the High Court brought against them by Seema and Sona Builders Ltd. By the time that litigation was compromised on 15 February 2002, Boyes Turner had submitted invoices to the Slades for almost £100,000 to include not only their own fees but also disbursements such as counsel and VAT. Three of those invoices were referred to detailed assessment under Section 70 Solicitors Act 1974 pursuant to my order dated 14 February 2003. Those invoices were dated respectively 19 February, 26 February and 20 March 2002. The hearing of the detailed assessment took place on 29 September 2003 when I reserved judgment. 
2.	The Slades have no complaint about the quality of the work undertaken by Boyes Turner. Their grievance is about the level of the bill of 19 February 2002 which charged £11,000 profit costs, £14,942.06 disbursements (including £14,250 for counsel) and £4,526.74 VAT. In the Slades’ view, the amount charged substantially exceeded an earlier estimate given by the solicitors to which, in the opinion of the Slades, Boyes Turner should be held. 
3.	The two other bills were for smaller amounts – the 26 February invoice concerned the costs of a surveyor with only £280 in dispute. The sum in issue in respect of 20 March invoice was even less, only £87 which Mr Parkinson who appeared for the solicitors, conceded during the course of the hearing. 
4.	The material before the court included the solicitor’s files of papers, together with a witness statement made by Mr Trevor Slade on 18 September 2003 and a bundle prepared by Boyes Turner which contained documents material to the dispute. After extensive argument (which was conducted in a sensible and good natured spirit) it became clear to me that three issues required determination: 
i. whether the solicitors should be held to their estimate (as amended) for the costs of the trial; 
ii. whether the hourly expense rate of the partner should be £170 (as the Slades submitted) or £180 (as the solicitors claimed in the breakdown) and the solicitor’s £140 not £150; 
iii. how much the Slades had paid on account. 
5.	It is common ground that up to and including 21 December 2001 Boyes Turner had billed the Slades £60,715.97 including VAT and disbursements (see letter dated 22 January 2002). On 31 January 2002 they received a further bill for £4,707.05 which was followed by the three bills which are the subject of this detailed assessment making a total of £97,960.48. Against this sum, the solicitors concede that by 22 January 2002 they had received £56,288.68, that a further £20,000 was paid in February 2002 and that a further £15,000 stands in court pursuant to my order dated 14 February 2003. Broadly speaking, the Slades paid all the bills sent to them except for the three invoices which are the subject matter of the detailed assessment. However, no agreement has been possible about the cash account. 
THE LAW
6.	The starting point is the Rules relating to the professional conduct of solicitors. Practice Rule 15 (costs information and client care) deals with the information which clients must be given about costs. Paragraph 13.02 of the Solicitors Costs Information and Client Care Code provides as follows: 
"4. Advance costs information – general
The overall costs
(a) The solicitor should give the client the best information possible about the likely overall costs, including the breakdown between fees, VAT and disbursements.
(b) The solicitors should explain clearly to the client the time likely to be spent in dealing with the matter, if time spent is a factor in the calculation of the fees.
(c) Giving "the best information possible" includes: 
(i) agreeing a fixed fee; or
(ii) giving a realistic estimate; or
(iii) giving a forecast within a possible range of costs …
(e) The solicitor should make clear at the outset if an estimate, quotation or other indication of cost is not intended to be fixed.
Basis of firm’s charges
(f) The solicitor should also explain to the client how the firm’s fees are calculated except where the overall costs are fixed or clear. If the basis of charging is an hourly rate, that must be made clear.
(g) The client should be told if charging rates may be increased …
6. Updating costs information
The solicitor should keep the client properly informed about costs as the matter progresses. In particular, the solicitor should:
…
(b) Explain to the client (and confirm in writing) any changed circumstances which will, or which are likely to, effect the amount of costs, the degree of risk involved, or the cost benefit to the client of continuing with the matter.
(c) Inform the client in writing as soon as it appears that a costs estimate or agreed upper limit may or will be exceeded."
7.	Additional guidance can be found in paragraph 13.03. This provides at paragraph 2: 
"Wherever possible, a solicitor should give an estimate of the likely cost of acting in a particular matter …
3. Oral estimates should be confirmed in writing and clients should be informed immediately it appears that the estimate will or is likely to be exceeded. In most cases this should happen before undertaking work that exceeds the estimate. The solicitors should not wait until submitting a bill of costs. The Office for the Supervision of Solicitors deals with many complaints that have arisen simply because the solicitor does not have a system for tracking costs, and estimates are exceeded without the client’s authority …"
8.	Judicial guidance has been given concerning the implementation of this Code. In Wong v Vizards (A Firm) [1997] 2 Costs LR 46, Toulson said this: 
"An attendance note of Vizards dated 7 June 1991 recorded that Mr Wong had been told that he would be charged hourly rates of £110 per hour for Mr Ryan and £125 for partners time, both rates to be subject to review. The Deputy Master said that he did not find it surprising or unreasonable that the rate should have gone up by November 1993. However on 26 November 1993 Mr Ryan wrote to Mr Wong on the subject of costs. The trial had been fixed for July 1994 and Mr Wong not unreasonably wanted to know how much it would cost him to go to trial in order to decide whether to take the risk of doing so. In his letter Mr Ryan wrote:
"I attach to this letter my fee proposal for your consideration. I have drafted the proposal on the worst case basis. With regard to counsel’s fees, his clerk has given me a rough idea how fees would be assessed and from that I have assessed what his clerk would charge. Please note that I have not included an estimate for enforcing judgment or dealing with costs and taxation."
The attached fee proposal showed his time charged at £100 per hour. At no time was Mr Wong subsequently informed of an intention to charge him at a higher rate. In those circumstances I consider it unreasonable that he should now be charged a higher hourly rate than he was led to believe that he would be charged … Mr Wong submits that it is unreasonable that he should be charged more than the amount proposed on a worst case basis. The Deputy Master rejected Mr Wong’s argument that the correspondence contained a binding agreement and dismissed his objection. I agree that there was not a binding agreement that in no circumstances would Vizards fees exceed their fee proposal, but I do not think that this concludes the objection. The correspondence amounted to a clear and considered indication on Mr Wong’s maximum liability to Vizards upon which Mr Wong was likely to and did rely … In relation to the remainder of the costs of trial no indication was given to Mr Wong that they were outrunning the fee proposal made to him … The question is whether it is reasonable that Mr Wong should have to pay more than twice what he had been led to expect on a worst case basis, without any explanation why there should have been such a disparity. I do not think that it is. The amount at stake in the action against Mr Fung and Mr Chiew was not a huge amount and Mr Wong has just cause for complaint if, after seeking a reliable estimate from his solicitors as to his potential costs exposure before deciding to take the matter to trial, he should then be required to pay a far greater amount without further warning or a proper explanation for the difference."
9.	In Anthony v Ellis & Fairbairn (A Firm) [2002] 2 Costs LR 277, Sir Oliver Popplewell considered Wong and then said this: 
"Toulson J (as he then was) took the view that a margin of approximately 15% over the worst case estimate was a proper figure. In our judgment that is a figure that we are perfect prepared to adopt in the instant case and for the reasons given we take the view that the estimate was the figure concerned and to that can properly be added a sum of 15%."
THE EVIDENCE BFORE ME
10.	In the evidence before me the first material letter is dated 21 December 2001 and was written by Mr Daniel Stephens (Mr Parkinson’s assistant) to the Slades. The letter said this ("the December estimate"): 
"I have spoken to John Clargo’s clerk and ascertain his fee for dealing with the five day hearing and preparing will be £10,000 to £12,000 plus VAT.
It will be necessary for myself to be at trial and that is an additional £5,000 plus VAT for those five days. 
There will no doubt be a lot of preparation work and the need for at least one or more conferences with John Clargo. I would estimate that your costs from herein will be between £20,000 and £25,000 excluding VAT which will have to be added … To continue [acting for you] Boyes Turner is going to require £20,000 on account within the first two weeks of January. It is also going to require the outstanding bills of almost £9,000 to be paid off in full as well as by at least the same deadline if not sooner. You are therefore being asked to find another £30,000 …"
11.	Mr Stephens wrote again to the Slades on 10 January 2002: 
"6. Boyes Turner’s legal fees
At the time of dictation I am preparing a schedule of the bills rendered as against the sums you have paid.
I can assure you as I did at my meeting with John and Trevor on Tuesday that my calculations of what is outstanding are correct. I acknowledge the two cheques from John and Trevor settling my December invoice but the invoice from November remains outstanding. We need that paying off and £20,000 on account by Monday 14 January as I have indicated to you before."
12.	Mr Stephens wrote again on 22 January 2002. His letter set out the bills that had been issued to the Slades and the payments they had made. It also acknowledged receipt of £10,000 each from John and Trevor Slade being the "£20,000 requested." 
13.	On 12 February 2002, shortly before the trial which was listed to start on 14 February, Mr Stephens wrote to the Slades in these terms ("the February estimate"): 
"Maintaining the theme of legal fees, I explained to Trevor and John that in my latest costs estimate I said we would require all our invoices paid plus £20,000 on account. I think I gave this at the beginning of the year or just before last Christmas. It has sadly proven inadequate. As I explained to John and Trevor, Mr Clargo’s clerk has sought to increase his initial fee estimate of £12,000 to £14,000 plus VAT to a brief fee of £15,000 (to include site visit, opinion of 19 January and conference of 17 January) plus a refresher of £1,000 per day of trial plus VAT. This in itself suggests barristers fees alone in excess of £20,000 if the matter goes five days. I have managed to ever so slightly renegotiate this down to £13,000 plus a refresher of £1,250 per day (all figures exclusive of VAT) which is some saving particularly if the trial does not last a full five days. I myself have incurred a great deal more costs than I anticipated since the beginning of the year because of the enormous amount of work John and Trevor are asking me to do and the enormous amount of evidence involved in this case. I am in effect working on this full time.
To this end I advised John and Trevor that our costs estimate for mine and John Clargo’s fees has been increased by another £19,000 assuming this matter goes to trial for five days. This could be more if the matter goes longer than five days but less if it does not … Please let me have £19,000 by return …"
THE SLADES’ SUBMISSIONS
14.	The Slades accepted that there was an agreed rate of charge of £170 for partners, £140 for assistant solicitors and £80 for trainees, but they submitted that they had not received in writing any indication that the rates were to be increased. 
15.	So far as the estimates were concerned, the Slades contended that as the trial had settled on the second day, the solicitors should be held to the best case scenario of £12,000 being the estimate given in December (£10,000 plus two days in court at £1,000 per day). They further submitted that the barrister’s fee should be capped at £10,000 given that the case went short. The Slades also told me that they had no recollection about a discussion concerning fees at their meeting with Mr Stephens on 11 February 2002. Owing to local postal delays, the Slades had not received Mr Stephens letter of 12 February 2002 advising them about the revised costs estimate until after the trial. Their discontent had been raised promptly after the final invoices were submitted – I was referred to their letter of 23 February 2002 which requested an itemised bill and further letters dated 8 and 28 April, 1 June, 10 August and 21 September. In these circumstances the solicitors should not be entitled to charge over and above the original estimate. 
THE DEFENDANT’S SUBMISSIONS
16.	Mr Parkinson on behalf of his firm drew my attention to Boyes Turner’s terms of business which were recorded by letter on their correspondence files. This was dated 22 May 2000 and set out the hourly rates including £170 for partners, £140 for assistant and £85 for trainees. He conceded very frankly that a letter should have gone out in April 2001 informing the Slades that the rates had gone up respectively to £180 for partners and £150 for assistants. Having said that, each bill submitted by Mr Stephens had attached to it the firm’s time charge printout which made clear that the costs claimed had been calculated in accordance with the higher rates. What is more, a letter was sent to the Slades on 28 September 2001 which wrote off £185 of Mr Stephen’s time "which is the equivalent of you receiving over an hour’s worth of my time without charge". In Mr Parkinson’s submission, the Slades new perfectly well that the rates had been increased. 
17.	So far as the estimate was concerned, Mr Parkinson submitted that the complexity of the case during the run up to trial had meant that far more work than anticipated had been undertaken. The Slades were aware that counsel had provided an advice and made a site visit. It could not be argued that the December estimate could have included such work over and above the brief fee. What had happened was that counsel’s clerk, on seeing the extent of the papers, had revised his initial estimate upwards. This revision had been notified to the Slades during the meeting on 11 February and confirmed in writing in Mr Stephen’s letter dated 12 February 2002. Mr Parkinson also pointed out to me that, in the event, the negotiations on the second day of trial had lasted 11 hours which could not reasonably have been foreseen when the estimate was given and in these circumstances it was only just for this to be exceeded. 
MY DECISION
Hourly Expense Rates
18.	It is plain from Wong that the client must be told if hourly rates are to increase. In my judgment it is insufficient for notification to be by inference, which happened in the present case. Whilst in theory with some detective work, the Slades could have worked out from the print outs attached to the bills that Mr Parkinson’s rate had gone up from £170 to £180 per hour, in my opinion they were entitled to be told in terms about the increase. It would have been a simple matter for Boyes Turner to have written a short letter stating, for example, that from 1 January 2002, expense rates were to rise by £10 per hour. Certainly, the letter of 28 September 2002 did not do that. Having failed to do so, in my judgment the solicitors cannot rely on inference to satisfy the requirements laid down in Wong and in the professional practice rules. It follows that the rates to be applied are those set out in the letter of engagement, namely £170 for partners, £140 for solicitors and £75 for trainees (this was the rate which was charged in the breakdowns of the bills). 

The Estimates
19.	To reach my decision about whether the solicitors should be held to their original estimate it has been necessary to examine each estimate closely. 
(a) The December estimate
20.	Disregarding VAT, Mr Stephens estimated that "from here on in [to trial] it will be £20,000 to £25,000". Of that sum counsel’s fees were to be £10,000 to £12,000 depending upon whether the trial lasted the full five days. Within the budgeted figure, Mr Stevens’ own charges would be £1,000 for each day of the trial to a maximum of £5,000. 
21.	It follows that the "worst case" scenario was this – counsel would charge £12,000 if the case went the distance and Boyes Turner £13,000; total £25,000. On the other hand, if the trial went short on the best case scenario, the Slades would pay £10,000 for counsel and £10,000 to the solicitors; total £20,000 plus VAT. 
22.	In the event, I suspect that Mr Stephens’ figures for counsel were erroneous, in that no mention was made about refreshers. It is more likely than not that the £10,000 to £12,000 was the brief fee, to which Mr Stephens should have added refreshers for the second and each subsequent day of the trial (later claimed at £1,250 each). That said, in my judgment Boyes Turner are bound by their error and the Slades could reasonably have budgeted on the basis that counsel’s fees would not exceed £12,000 plus VAT. 
(b) The February estimate
23.	There is a conflict of evidence on this point. Boyes Turner’s case is that Mr Stephens discussed and agreed the revised estimate with the Slades at a meeting on 11 February and sent written confirmation on 12 February 2002. The Slades have no recollection of fees being discussed at the meeting and contend that they only received letter after the trial. 
24.	The revised estimate for another £19,000, it will be recalled, fixed a new figure for counsel’s fees of £13,000 on the brief (to include a conference and site visit) and refreshers of £1,250 per day making a total of £18,000 if the trial went the full distance, that is £6,000 above the December estimate’s "worst case scenario" for Mr Clargo’s fees. It follows that as the extra for counsel’s fees out of the £19,000 was £6,000, that would leave a further £13,000 for Boyes Turner’s costs. Their total fees from December on a worst case scenario would now be £26,000, or double their original estimate (see paragraph 21). 

25.	In fact, and contrary to what the Slades perhaps believed the position to be, for the period from 21 December 2001 to 19 February 2002, Boyes Turner billed £15,000 not £26,000 for their costs (£4,000 on 31 January 2002 and £11,000 on 19 February 2002) and £14,250 (not £18,000) for counsel. The issue I have to decide is whether they should now be held to the December estimate, as the Slades contend, or be permitted to rely on the February estimate as the solicitors contend. 
26.	To determine this point, it is not necessary for me to resolve the dispute on the evidence because I can reach my decision without having to decide who was mistaken in their recollection about the February meeting. In my judgment, it was or ought to have been clear to Mr Stephens by the end of January at the latest, that the December estimate would over-shoot. Yet the problem was not raised with the Slades, even on the solicitor’s case, until three days before the trial. What is more, it is clear from the solicitor’s file notes that the problem about counsel’s fees was discussed with counsel’s clerk on 8 February, but the Slades were not alerted about this until 11 February (on Boyes Turner’s case) and until after the trial (on the Slades’ case). Both Wong and the practice rules make it abundantly clear that clients must be told as soon as possible when it becomes clear an estimate is likely to be exceeded. It is incorrect for the notification to be given after the work is done, or the bulk of the fees are incurred, as happened here. It follows that in my judgment, the February estimate came too late and the Slades were effectively presented with a fait accompli. 
27.	To what extent then must the solicitors be held to the December estimate? In Wong and Ellis v Fairbairn the court permitted a 15% margin above the estimate. The calculation is not quite as simple in the present case because the estimate was given on a "best case/worst case" basis dependent upon the length of the trial. Doing the best I can on the material before me, I would allow something in between. For counsel, I consider a composite fee of £13,000 would be fair to reflect the fact that counsel attended a site visit and spent two days in court. 
28.	For the solicitors, the position is more complicated. I have recalculated the invoice of 19 February 2002 at the correct rates and this produces a figure of £10,150. Bearing in mind that between the December estimate, Boyes Turner billed (and were paid) £4,000 plus VAT for their work to 29 January 2002, I would allow a further £7,500 for their profit costs making a total charge from 21 December to 19 February 2002 of £11,500. I reach this figure having used as my starting point the "best case" scenario and then added an additional amount to cover the second day in court and the margin for error applied in Wong, all at the rates set out in the engagement letter. 
29.	As I have said, the other bills were effectively agreed in the hearing. The 26 February bill will be reduced by £280 to reflect the work done by the surveyor to put right his mistake, and the March bill by £87 which was conceded. 

30.	In the result, I allow the following: 
Bill 19 February 2002	Profit costs	£7,500.00	
 	Counsel’s fees	£13,000.00	
 	Other disbursements	£692.06	
 	VAT	£3,695.48	
 	 	£24,887.54	
Bill 26 February 2002	Disbursements	£1,012.50	
 	VAT	£177.18	
 	 	£1,189.68	
Bill 20 March 2002	Profit costs	£201.00	
 	Disbursements	£40.25	
 	VAT	£42.21	
 	 	£283.46	
 
COSTS
31.	As this is an assessment under the Solicitors Act s70(9) applies. The Slades have reduced the bills by less than one fifth so the costs must follow the event. They must bear the costs of the detailed assessment unless special circumstances apply. 
32.	Subject to any arguments which the parties may wish to raise, in my judgment special circumstances apply in this case and the just order would be for each side to bear their own costs. This was not an assessment in which the former clients took issue with numerous quantum items in the bills. On the contrary, there was no complaint whatsoever about the quality of the work and the only issues in dispute related to hourly expense rates and the estimates. On both those issues I found for the Slades, and in my judgment it would be unjust for them now to be obliged to bear the costs of these proceedings solely on account of s70(9). 
33.	In my view there should be no order as to costs, but the parties may apply to me for a different order when this judgment is handed down, and for permission to appeal. If, hopefully, both sides agree terms, there will be no need for anyone to attend. This presupposes that the cash account can also be agreed. There is an issue between the parties about what was billed and what was paid. If agreement cannot be reached, the parties can apply to me by letter for directions. A formal order will also be required enabling the money standing in court to be paid out in the correct proportions. 
POSTSCRIPT When this judgment was formally delivered neither party sought a different order for costs and neither party sought permission to appeal.