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Garbutt v Edwards, Court of Appeal, 27 October 2005

8 November 2005
The issues

Costs – Costs Estimate – Whether Failure To Provide Costs Estimate To Client Rendered Retainer Unlawful Or Unenforceable – Indemnity Principle

The facts

The Defendant appealed from the Order of the Judge in the Cambridge County Court when the Judge dismissed the Defendant’s appeal from a summary assessment of costs made by the District Judge in May 2004. The District Judge had rejected the Defendant’s argument that there was no costs liability on the Claimant (who had succeeded in the claim) where the Defendant’s solicitors had not provided the client with a costs estimate as was required by the solicitors costs information and client care code 1999.

The decision

1. If the effect of the receiving parties’ failure to give an estimate was to make the receiving parties promise to pay his solicitors fees unenforceable then no fees would be recoverable from the paying party.
2. The Solicitor’s Code requires estimates only. The purpose of the code is to protect the legitimate interests of the client, and the administration of justice.
3. The rules are silent on the effect of a breach of a Code on an assessment of costs as between the parties to litigation.
4. There is benefit to the client in receiving an estimate. The discipline of producing estimates is one of the strategies that has been adopted to contain legal costs and there was no doubt as to the public interest in avoiding unnecessary legal costs.
5. The sanction for non compliance was disciplinary. The Law Society could determine what the fees payable by the client should be and had power to award compensation up to £5,000.00. As a matter of interpretation the effect of a breach was not to render the contract of retainer unlawful or unenforceable.

It was however a question of the discretion of the Judge assessing costs whether to take into account any failure by the receiving party to provide an estimate in the circumstances and of the kind required by the code. It would be wrong in principle for the Court to establish a tariff of deductions in these circumstances. The paying party could however if it had grounds to do so, argue that if the receiving parties work had been estimated in accordance with the requirements of the code, that a lower amount of costs would have been incurred. The Costs Judge however must be satisfied that there is some real basis for the paying parties contention that the receiving party should be required to prove that there was an estimate and should be satisfied that the dispute was not a sham or a fanciful dispute. He may also be satisfied that the absence of a proper estimate or of an estimate at all could have had a calculable effect and not an immaterial effect on the costs claimed.

Costs estimates provided to the Court and to the other side and to that extent which were therefore capable of reliance upon by the opponents to the litigation. This was not the case here. Much of the guidance in the lead case therefore could not be applied. Where the estimate was given but not updated the first part of the guidance in the lead case could be applied namely that the estimates made could provide a useful yardstick by which the reasonableness of the costs finally claimed could be measured and that if there was a substantial difference between the estimated costs and the costs claimed that difference calls for an explanation and that in the absence of a satisfactory explanation the Court might conclude that the difference itself was evidence from which it could conclude that the costs claimed were unreasonable.

In this case no reasons were advanced to the Judge as to why the presence of an estimate of costs would have made any difference to the amount of costs that the paying should be required to pay. The Judge’s order was therefore correct and the appeal would be dismissed.

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