Mastercigars Direct Ltd v Withers LLP – estimates given to clients are not binding  EWHC 2733 (Ch)
While estimates will be taken into account on assessing costs, it does not automatically follow that solicitors will be bound by the amount of an estimate as against their client nor is there any rule that entitles a solicitor to recover a margin over the estimate. The reasonableness of the costs claimed by a solicitor from his client is a matter for the court’s discretion. Morgan J reversed the decision below, holding that Withers were not bound by their inaccurate costs estimate, which was merely a factor to be taken into consideration when assessing the reasonableness of the costs claimed.
Uncertainty as to the status of estimates provided to the client, as opposed to those provided to the other side, was created by the following paragraph at page 15 of Cook on Costs 2007 which had been relied upon by the costs judge. It does not summarise the law correctly.
"Unless at the time - or preferably before - the costs have reached the estimated figure, the client is notified of this and a new basis for charging is agreed , the solicitor will be unable to recover costs in excess of the estimated amount."
The appropriate question is "what in all the circumstances is it reasonable for the client to be expected to pay?" It was clear from Withers’ standard terms of business that the estimate was not intended to put an upper limit on the costs nor did it define the work to be done. Withers was entitled to charge a reasonable fee for its work within the retainer and the estimate did not define the work for which a charge could be made.
Comment: Withers must be greatly relieved that it now has a chance of recovering some of the costs it incurred in excess of its £365,000 estimate – their bill exceeded £1 million. For details of the decision below and the position more generally concerning estimates, see the May 2007 Litigation Update.