The recent case of ST v ZY [2022] EWHC B6 (Costs) has highlighted the importance of keeping clients fully informed in relation to costs being incurred in pursuing a claim on their behalf, and of the implications of any costs decisions, including budgeting.
It is not sufficient to advise a client that some of the costs of pursuing their claim would be recovered from the other side; the client must be clearly informed.
Background of the case
By way of background, the case of ST v ZY [2022] stems from a fatal road traffic accident. A claim was issued on behalf of the deceased’s partner (ST) and her four children, the youngest of whom was the deceased’s child. The claim of the mother and her 3 elder children was subsequently discontinued, and the claim continued on behalf of the estate and the child’s dependency claim. Settlement was approved with an order that the Defendant 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”.
A Bill of Costs was submitted to the Defendant. Settlement of the inter partes costs was achieved but as a result there was a substantial shortfall of over £50,000, in addition to which a 12.5% success fee and ATE premium were also sought. The Claimant’s solicitor asked the court to assess the solicitor and own client costs, also to approve the inter partes settlement (which the court did).
The total sum sought by the solicitor from the Claimant would form a significant part of the damages.
The issues raised by this case
This case raised a number of issues in relation to the costs claimed. Of prominence, and that being addressed in this article, was the fact that the client had not been told about the Costs Budget or the effect of the Budget, i.e. that once Budget Phases were exceeded those costs might not be recovered from the other party.
The claim had been subject to Costs Budgeting, however in continuing to pursue the case the solicitor had significantly overspent on a number of the Budget Phases, with the costs management caps also exceeded.
When seeking recovery of costs on an inter partes basis the solicitor advanced no argument that there was good reason to depart from the Budget in relation to Issue/Statement of Case and ADR/Settlement phases and offered to accept the approved figures, thereby conceding a significant sum. The solicitor then sought to recover the conceded sum on a solicitor and own client basis, to be taken from the Claimant’s damages.
The provisions of CPR 46.9(3), as relating to a solicitor own client assessment, provide that:
“Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed –
(a) to have been reasonably incurred if they were incurred with the express or implied approval of the client;
(b) to be reasonable in amount if their amount was expressly or impliedly approved by the client;
(c) to have been unreasonably incurred if –
(i) they are of an unusual nature or amount; and
(ii) the solicitor did not tell the client that as a result the costs might not be recovered from the other party.”
The ruling of the Costs Judge in this case
In undertaking the solicitor and own client assessment Judge Gordon-Saker accepted that the Claimant had been told that there were costs which would not be recovered from the Defendant, so would be deducted from damages, however he importantly also stated that “I have found nothing to suggest that ST was told about the Budget or about the effect of the Budget.”
He went on to say:
“ 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.”
Conclusions
It is very clear from this case that it is not just sufficient to monitor Costs Budgets with a view to readdressing the budget in the event of a significant development, but it also important to do so with a view to ensuring that the client is fully appraised at all times and of the implications.
It is not just Costs Budgeting which this decision has any bearing on. Any decisions made during the course of the matter which impact the costs of conducting a claim should be relayed to the client, with clear information given as to the implications.
There has been a rise over the last few years in the number of clients seeking assessments of their solicitor’s invoice. It is therefore more important than ever to make sure that clients are informed of any decisions in proceedings which may impact recoverability of costs, inter partes or otherwise.
If you have any queries in relation to this article or require advice or assistance on any aspect of legal costs, please contact our Senior Partner, John Mistri, by calling 0800 086 2929 or by emailing jmistri@elitelawsolicitors.co.uk
