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Keeping your client informed regarding their legal costs (ST v ZY [2022] EWHC B5)

When a costs budget has been prepared, the client should be provided with a copy of the same, and an explanation given regarding why the approved costs differ from the filed costs budget. This should be common practice.

However, to what extent should this, and in the event of any overspend that occurs during the course of the proceedings, be explained to the client.

Senior Costs Judge Gordon-Saker considered this in the case of ST v ZY [2022] EWHC B5 (Costs) (21 February 2022). This claim involved a fatal motorcycle accident where the deceased’s partner (ST) brought proceedings as administratrix of the deceased’s estate, as well as on behalf of herself and her 4 children as dependents. Claims by ST and three of the dependants had been discontinued, with the loss of dependency claim by the Claimant (the only child of the four who was the biological child of the deceased) continued. The case later settled.

In approving the settlement, the Court ordered that the Defendant should pay ST’s costs of the claim “advanced only on behalf of the Claimant as a dependant and as an Administratrix of the Deceased’s Estate”. Costs between the parties were settled. However, an assessment of the Claimant’s solicitor and own client costs was ordered (because she was a protected party).

Consideration was given to (1) whether the retainer (entered into with ST) only covered ST’s personal claim and not those of her dependants, meaning that there would be no enforceable retainer in respect of Claimant’s loss of dependency claim; (2) whether the bill included costs outside the scope of the costs order, namely costs relating in whole or in part to the discontinued claims; and (3) whether any costs that were incurred in excess of the budget should be presumed to have been incurred unreasonably as between solicitor and client (under CPR 46.9(3)). The sums in excess had been conceded in the between the parties costs agreement.

The Court held that (1) the wording in the retainer did cover the claim of each of the dependants. There was therefore an enforceable retainer for the Claimant’s loss of dependency claim; (2) the bill did include costs outside the scope of the costs order, i.e. items which should have been excluded (as related wholly to other claims) or divided (as related partly to other claims). (Please follow this link to read our analysis of specific and non-specific common costs). It was ordered that the bill be redrafted; and (3) the excess costs were unusual in amount and although the client had been advised generally of her liability for a shortfall in costs, she had not been advised that “as a result” (of them being unusual in amount) the costs might not be recovered between the parties.

An analysis of the quantification of the inter-partes costs was undertaken. It was identified that they had failed to advance any argument to support a good reason to depart from the budget in relation to the exceeded phases, with the exception of the witness statement phase.  Consequently, the overspend amounts had been conceded and were  requested from the Claimant’s damages.

It was accepted that ST had been provided with some information regarding costs. She had been initially informed at the outset that there may be a shortfall in costs, but she was advised that this wasn’t anticipated to be significant. She was later informed that the court would set a budget that limited the amount of costs that the parties would have to pay to each other and that she would be advised further if and when that arises. She was further updated regarding the costs position prior to the anticipated settlement, whereby she was advised that there was a likely shortfall in costs that was estimated at £43,500.  The Judge did recognise this and commented that:

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.”

He also commented that:

“ I should add that I think it 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. 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.”

This highlights the importance of monitoring the budget. Focus is often placed on monitoring the budget to identify overspends in order to establish whether the budget should be revised in the event of a significant development. However, managing clients’ expectations in terms of costs is required regardless of whether there is a significant development in the litigation, and for those claims that have been budgeted, monitoring the budget is the recommended way to ensure that this is satisfied.

Whether the claim has been budgeted or not, providing clients with estimates of likely fees, together with a detailed explanation to support the same is of paramount importance. Please follow this link to read our previous blog “Dispute resolution and estimating legal costs. Why is this necessary and important?”

If you require any assistance with your legal costs requirements, please do get in touch with the team on 01733 350 880, or by email mail@aandmbacon.co.uk. For more information please do visit our website aandmbacon.co.uk

 Published 23 February 2022

Author – Sue Fox

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