Getting paid properly – Costs Estimates

Costs Estimates

Why provide an estimate of costs to your client in respect to their legal claim?

It keeps your client informed and therefore there are no surprises, this in turn manages your client’s expectation. This helps to avoid any dispute regarding the level of fees.

However, there is also the techy but important part!

Failure to provide information about costs and funding options for litigation is a breach of the Solicitors Regulation Authority Code of Conduct 2011 (SRA Code 2011),  your obligations are to “clearly explain your fees and if and when they are likely to change”.

Consequently, keep your estimate up to date, monitor the estimate and advise the client if the estimate requires changing – prospective thinking is the key.

The estimate must be clear and concise, must be worded in a way that is appropriate for the client and must be given in writing and regularly updated. The client should be provided with a detailed estimate, not just a ball park figure.

A solicitor is required to undertake a cost benefit analysis. The Code’s requirement in Rule 2.03 (6) is that “a solicitor discusses with their client whether the likely outcome in a matter will justify the expense or risk involved, including, if relevant, the risk of having to bear an opponent’s costs”.

It is essential that the cost-benefit analysis must be kept under review throughout the matter and reviewed with the client at key stages.

What is the impact of not providing an estimate?

Your client may argue that they would have given different instructions/or not proceeded with the matter if they had known: how expensive the claim would be, the length of time it would take, the level of their legal costs that would be recoverable from the other side and also their liability for the other side’s costs.

What if the client asks you to undertake out of scope work?

Explain that the estimate does not cover the additional work and provide a further estimate of the additional work. Advise the client if there is any risk that this work may not be deemed recoverable from the other-side. Failure to do so may result in those additional costs being disallowed.

Is a solicitor bound by their estimate?

Sort of!

If the client requests an assessment of their costs in accordance with the Solicitors Act, the estimate may be used as a “yardstick to measure reasonableness”. Any estimates that have been exceeded because they are simply wrong will be taken into account, together with the circumstances surrounding it, i.e. the reliance the client placed on the estimate and costs reduced accordingly.

Always provide a realistic estimate

Keep your estimate realistic at the outset. Even regular updating might not subsequently save a bad original estimate. The court’s view is that the first estimate is a critical piece of information for a client’s decision whether or not to embark on the action.

The Code’s requirements are for “best” information to be provided about costs. Therefore providing low estimates are unlikely to comply with the SRA Code of Conduct.

IN SUMMARY

Always provide a detailed estimate of costs.

Prepare a realistic estimate of costs.

Monitor the estimate and revisit with client throughout – costs/benefit analysis.

Identify and advise regarding out of scope work.

Sue Fox is a Senior Associate and the Head of Costs Management in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.

 

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Case Management Refresher

Cost estimates are necessary for fast track claims when the fixed costs regime is not applicable and for non-budgeted cases

In accordance with CPR 28 PD6.1 (4), a cost estimate is required to be filed and served at the same time as the pre-trial check list.  It is stated on the pre-trial checklist (N170) that ‘for legal representatives only: a cost estimate to be filed and served at the same time as the pre-trial check list is filed‘.  Therefore, for all fast track claims where there is not a fixed costs regime in place then a costs estimates should be filed. Furthermore, for non-budgeted multitrack claims a costs estimate should be filed.  What is particularly interesting is that this captures those claims that are not automatically included in the costs management regime, e.g. claims over £10m.

Case management conferences and indemnity basis costs

In accordance with CPR 26 PD 6.6, the court can impose a costs sanction where a party has failed to file a directions questionnaire or failed to provide further information which the court has ordered.  The court will usually order a party to pay on the indemnity basis the costs of any other party who has attended the hearing, summarily assess the amount of those costs, and order them to be paid forthwith or within a stated period.

Disposal hearings

In accordance with CPR 26 PD 12.5(2), Section VI of Part 45 (fast track trial costs) will not apply to a case dealt with at a disposal hearing whatever the financial value of the claim. So, the costs of a disposal hearing will be in the discretion of the court.

Any questions? Please contact Sue at sue.fox@clarionsolicitors.com or call  on 0113 336 3389

The Disclosure Pilot Scheme – what roles do costs estimates and precedent H costs budgets have?

Details of the disclosure pilot scheme are now available on the MOJ website, with a large focus of the scheme centring around saving costs – accurate costs estimates are essential (PRACTICE DIRECTION 51U – DISCLOSURE PILOT FOR THE BUSINESS AND PROPERTY COURTS).

In terms of costs, the pilot scheme reveals that costs estimates are now required to support different disclosure proposals; costs estimates of the intended disclosure exercise are required; estimating the costs of disclosure can be deferred until after the precedent H costs budget; costs don’t necessarily follow the event and be prepared for adverse costs orders being made. Be ready to be able to justify any estimates at a hearing and ensure that the estimates are accurate enough to be transferred across to the precedent H costs budget. Please see below some important paragraphs of the pilot scheme that relate to costs and estimates:

Costs don’t necessarily follow the event.

Para 9.9 – In an appropriate case, the court may order that the question of which party bears the costs of disclosure is to be given separate consideration at a later stage rather than the costs being treated automatically as costs in the case;

Para 10.3 – The parties’ obligation to complete, seek to agree and update the Disclosure Review Document is ongoing. If a party fails to co-operate and constructively to engage in this process the other party or parties may apply to the court for an appropriate order at or separately from the case management conference, and the court may make any appropriate order including the dismissal of any application for Extended Disclosure and/or the adjournment of the case management conference with an adverse order for costs.

Costs estimates are required to support different disclosure proposals.

10.6 – Having agreed the List of Issues for Disclosure and exchanged proposals on Model(s) for Extended Disclosure, the parties should prepare and exchange drafts of Section 2 of the Disclosure Review Document (including costs estimates of different proposals, and where possible estimates of likely amount of documents involved) as soon as reasonably practicable and in any event not later than 14 days before the case management conference.

Costs estimates of the intended disclosure exercise are required.

22.1 – The parties are required to provide an estimate of what they consider to be the likely costs of giving the disclosure proposed by them in the Disclosure Review Document, and the likely volume of documents involved, in order that a court may consider whether such proposals on disclosure are reasonable and proportionate (as defined in paragraph 6.4). These estimated costs may be used by the court in the cost budgeting process.

Estimating the costs of disclosure can be deferred until after the precedent H costs budget.

22.2 – In cases where the cost budgeting scheme applies, if it is not practical to complete the disclosure section of Form H in relation to disclosure prior to the court making an order in relation to disclosure at the case management conference, the parties may notify the court that they have agreed to postpone completion of that section of Form H until after the case management conference. If they have agreed to postpone they must complete the disclosure section within such period as is ordered by the court after an order for disclosure has been made at the case management conference. Where possible the court will then consider (and if appropriate, approve) that part of the cost budget without an oral hearing.

If the approach to Extended Disclosure is not fully agreed, the parties should be ready to provide more detailed information at the CMC as to how their global estimates were arrived at and the impact upon them of particular requests for Extended Disclosure.

Any questions? Please contact me at sue.fox@clarionsolicitors.com or call me on 0113 336 3389.