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England and Wales High Court (Senior Courts Costs Office) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Senior Courts Costs Office) Decisions >> Burns & Ors v Novartis Grimsby Ltd & Ors [2004] EWHC 9009 (Costs) (16 February 2004)
URL: http://www.bailii.org/ew/cases/EWHC/Costs/2004/9009.html
Cite as: [2004] EWHC 9009 (Costs)
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QUEENS BENCH DIVISION
FROM SHEFFIELD DISTRICT REGISTRY
SUPREME COURT COST OFFICE
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
| PAUL BURNS (EXECUTOR OF THE ESTATE OF LESLIE BURNS DECEASED) |
1st Claimant |
|
| KAREN ADCOCK (COMMON LAW WIDOW AND EXECUTRIX OF THE ESTATE OF LESLIE BURNS DECEASED) |
2nd Claimant |
|
| |
|
|
| - and - |
|
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| NOVARTIS GRIMSBY LIMITED |
1st Defendant |
|
| TIOXIDE GROUP |
2nd Defendant |
____________________
Robert Marven (instructed by Peter Rickson & Partners) for the Defendants
Hearing date : 20 October 2003
____________________
Crown Copyright ©
- Leslie Burns, the deceased, had been employed from about 1958 until 1970, by the predecessors of the First Defendant, first as an apprentice and then as a chemical plant operator. Between about 1970 and 1997 he was employed by the Second Defendant as a plant instructor. During the course of his employment Mr Burns was exposed to asbestos dust and fibre. In 1997 Mr Burns started to experience breathlessness and other symptoms which were diagnosed in July 1998 as malignant mesothelioma. Mr Burns died from this condition on 3 April 2000.
- On 30 March 2001 these proceedings were commenced on behalf of the estate pursuant to the Law Reform (Miscellaneous Provisions) Act 1934 and in respect of the Second Claimant, as the deceased's sole dependent, pursuant to the provisions of the Fatal Accidents Act 1976. Mr Burns had instructed his solicitors to claim damages on his behalf during 1998.
- The First Defendant served its defence on 18 May 2001 denying both liability and causation. The First Defendant also placed reliance upon the decision of Curtis J in Fairchild v Glenhaven Funeral Services Ltd, the decision in which had been given on 1 April 2001.
- The Second Defendant served its defence on 1 May 2001 again denying liability and causation but making no mention of the decision in Fairchild. The Second Defendant's counter schedule was amended in January 2002 to plead the Fairchild defence following the decision of the Court of Appeal on 10 December 2001 in that case.
- No offers were made by the Defendants but when the matter came on for trial before Elias J in June 2002 quantum was agreed between the parties on the first day at £175,000. The trial proceeded on liability and quantum and Elias J gave judgment on 17 June 2002.
- The Judge dealt with the case against the First Defendant very shortly at the beginning of his judgment (transcript page 1H):
- The Judge went on to state that he then had to determine whether the Second Defendant was liable at all, and, if so, the apportionment of liability between the two Defendants.
- At pages 7 and 8 of the judgment the Judge dealt with the evidential problems surrounding the alleged exposure to asbestos dust:
- At page 13 of the judgment, when reviewing the evidence, the Judge expressed the opinion that Mr Gifford, the Second Defendant's safety officer, was "misrecollecting" the standards which were in existence at the relevant time.
- Having found specifically that certain equipment was not lagged with asbestos based material the Judge went on to find (at page 25):
- He then went on to apportion liability as to 7/8 ths against the First Defendant and 1/8 th against the Second Defendant. Costs were awarded to the Claimants against both Defendants jointly and severally.
- Detail assessment proceedings were commenced by serving Notice of Commencement, the bill and requisite documents on the solicitors for the Defendants on 22 November 2002. The bill totals £99,215.52 inclusive of disbursements and VAT. The Defendants, at least in respect of the detailed assessment proceedings, are jointly represented. They served Points of Dispute raising a number of issues on 21 January 2003. Several of those issues have been resolved by agreement, others remain to be decided. The issue presently before the court is that of costs estimates. This is dealt with at paragraphs 6 to 12 of the Defendant's Points of Dispute. Those points include the following:
- The Defendants do not take exception under this head to the costs in Part 1 of the bill (the period up to August 2001). The Points of Dispute continue:
- The Claimants' response to the Points of Dispute is dated 4 March 2003 and adopts the same numbering as the Defendants points:
- In the Access to Justice Final Report 1996 Chapter 7 Lord Woolf dealt with ways in which costs might be controlled. Although the Report contains no specific recommendation in respect of costs estimates and budgeting, under the heading "Estimates of costs and control by the court" Lord Woolf said this:
- Section 6 of the Costs Practice Direction, so far as relevant, states:
- Paragraph 6.2 of the Costs Practice Direction makes it clear that an estimate of costs is an estimate of base costs including disbursements already incurred and to be incurred. "Base costs" means costs other than the amount of any additional liability.
- The Court of Appeal in Griffiths v Solutia UK Ltd [2002] PIQR P176, decided in mid 2001, stated (per Mance LJ):
- The overriding objective, CPR 1.1, requires the court to deal with cases justly, so far as is practicable, by:
- The parties are required to help the court to further the overriding objective (CPR 1.3).
- CPR 44.2 sets out the solicitor's duty to notify the client:
- Paragraph 7.3 of the Costs Practice Direction explains:
- CPR Part 44.14 so far as relevant deals with the court's powers in relation to misconduct:
- Paragraph 18.2 of the Costs Practice Direction states:
- Paragraph 18.3 of the Costs Practice Direction is in terms similar to paragraph 7.3, save that it refers to Rule 44.14(3).
- These provisions, relating to keeping the client notified of what is happening, are reflected in the requirement in Section 6 of the Costs Practice Direction that any costs estimate must be served upon the party represented by the solicitor. The intention underlying these provisions is to be found in the Final Access to Justice Report at paragraphs 27 to 31:
- The existing state of the law was considered by the Court of Appeal in December 2003 in Leigh v Michelin Tyre Plc [2003] EWCA Civ 1766. The parties in the case before me agreed that the matter should be adjourned pending the Court of Appeal decision, and a direction was given that the parties should exchange and file written submissions following the Court of Appeal decision. I will return to the Court of Appeal decision in due course.
- The Defendant's Points of Dispute state:
- Mr Marven argues that, on assessment, the court should have regard to the estimate filed by the Claimants' solicitors in accordance with paragraph 6.6 of the Costs Practice Direction. He points out that the estimate should have been served on the Claimants and relies on Wong v Vizards [1997] Costs LR 2/46. In that case Mr Wong's solicitors provided him with an estimate of costs:
- Toulson J found that:
- Toulson J ordered that the amount allowed in respect of solicitors' profit costs for the relevant period should be limited to the maximum shown in their fee proposal excluding counsel's fees and expert's fees. The Judge explained:
- Mr Marven goes on to argue that had the Claimants' solicitors served the estimate upon the Claimants in accordance with the Practice Direction they would have been bound by the estimate in accordance with the principles laid down in Wong v Vizard and could not have recovered significantly more than the costs in those estimates from their clients. Thus, by operation of the indemnity principle the Defendants should not have to pay more than the clients were in fact liable to pay their solicitors.
- Given that it is accepted that the Claimants were not served with copies of the estimate in breach of the Practice Direction, Mr Marven urged that the court should impose a sanction under CPR 44.14 to ensure that the Claimants' solicitors were not in a better position as a result of their breach of the Practice Direction than they would have been in had they complied with it. In other words their costs recovery should be limited to the extent of their estimate.
- There is a dispute between the parties as to whether or not the estimate includes VAT. Mr Budgen says that it does not, Mr Marven relies on paragraph 6.5 of the Costs Practice Direction and the illustration in Precedent H in the Schedule of Costs Precedents. Precedent H clearly shows the addition of VAT on the solicitors' base fees. Mr Budgen did not use an estimate in the form of Precedent H and I accept his statement that his figures were not intended to, and did not, include VAT.
- The Claimants' response states:
- Dealing with the Claimants' submission that the character of the case altered fundamentally after the estimate was given on 21 May 2001, Mr Marven argued that if this was the case, the solicitors should have informed their clients that the original estimate was inadequate, which was never done, nor was any revised estimate served at the stage of the listing questionnaire/pre trial check list.
- The Claimants' listing questionnaire is dated 26 November 2001 (pages 67 to 70 trial bundle). This questionnaire is on Form N170 published in April 1999. There is no provision for a pre trial estimate anywhere on it. The First Defendant completed its listing questionnaire dated 6 December 2001 on the same version of Form N170. The Second Defendants' listing questionnaire (pages 75 to 78 trial bundle) dated 5 December 2001, is on a later version of N170 published in June 1999. The third paragraph of this form reads:
- There is no other reference to costs estimates on the form. It appears that none of the parties produced revised estimates at the listing questionnaire stage.
- The Form N170 currently in use was published in December 2002. That form states:
- At Section F of the Form there are tick boxes as follows:
- It appears that legal representatives routinely ignore the requirement to attach an estimate of costs to the pre-trial questionnaire. Indeed in certain cases the Master or District Judge directs that listing questionnaires be dispensed with.
- In the light of all the above Mr Marven argued that there was nothing in the shape of the case or the shape of the law to warrant the alteration of the estimate of future costs.
- Mr Marven pointed out that the Claimants' experts remained the same after their allocation questionnaire had been served and the factual witnesses also remained the same. He suggested that the particular claim was unremarkable for a mesothelioma case. There were only two employers involved. An allegation against a third employer was never pursued and was never a material factor. He suggested that the Claimants had overstated the legal difficulties at the allocation questionnaire stage and pointed to paragraph 3 of the Claimants' skeleton argument dated 28 May 2002:
- In seeking to explain why their estimate of future costs was wrong the Claimants' solicitors argue that the case had fundamentally changed. The decision of Curtis J in the Fairchild case was negative as far the Claimants were concerned but their counsel, Philip Matthews, was positive about the future prospects. Mr Budgen remained positive as to the outcome and thought that the matter would resolve. In the summer of 2001 the First Defendants indicated that they intended to make an offer (which was never done) but when the Court of Appeal handed down its judgment in Fairchild, on 10 November 2001, this, said Mr Budgen, changed things. He pointed out that the listing questionnaire was completed in November 2001 before the Court of Appeal decision radically altered things.
- Pausing there, the fact that Mr Budgen was hopeful that the claim might be resolved by agreement should not, in my view, alter the estimated figure for future costs since this figure is intended to indicate the likely costs if the case went to trial. A case resolved by early settlement ought to result in a figure for costs less than the estimate.
- Mr Budgen stated that, at the beginning of November 2001, the Second Defendant indicated that it would not be pursuing a Fairchild defence, but once the Court of Appeal had issued its decision they amended their pleadings in order to do so. He pointed out that the Second Defendants were not ready to serve their liability evidence until December 2001; that the Fairchild decision of the Court of Appeal caused uncertainty; and that the Claimants had to be fully prepared for every eventuality. They had to obtain further medical evidence and advice from leading counsel who had appeared in the case of Matthews v Fox, in which the court had come to a different conclusion than that in Fairchild. The Claimants also sought, unsuccessfully, to find further witnesses. He pointed out that the Defendants had tried on two occasions to have the trial adjourned. The last application being only days before the commencement of the trial.
- The House of Lords gave its decision in Fairchild in May 2002, the decision was given orally and then in writing some time later. This decision swung things back in favour of the Claimants and led to a flurry of work (see for example items 102 to 107 of the Claimants' bill of costs).
- The Defendants produced medical evidence late in the day, in April 2002. One report by Dr Stanton being served only 48 hours before trial. There was also late disclosure, two lever arch files of documents being produced at trial.
- Mr Budgen pointed out that the Defendants' own costs estimates were also wrong. The First Defendant suggesting costs would be £5,000 to the conclusion of the case and the Second Defendants £10,000. He suggested that, the Defendants not having served estimates at the listing questionnaire stage, it was not open to them to raise the point against the Claimants. I do not accept that submission.
- Whilst Mr Budgen accepts that the indemnity principle bites if there is an agreement as to costs between the solicitors and the clients, he points out that there is no complaint by the clients in respect of their charges. Given that the clients do not appear to have been kept informed of the estimates, it is perhaps not surprising that there had been no complaint.
- Finally, Mr Budgen pointed out that even if he had complied with the Practice Direction and delivered a further estimate at the listing questionnaire stage, that estimate would have been an under estimate because of matters which occurred subsequently. He suggested that the Defendants' liability evidence was served after the listing questionnaire and that the bulk of his firm's activity was after this.
- I accept that there may be an argument for saying that any extra work caused by the House of Lords decision and applications made by the Defendants thereafter should be recoverable over and above the figure which had been estimated.
- Mr Marven's case was that if the court decides to depart from the estimate it should only allow new or additional work which could not have been included in the original estimate. Since the claim for costs is twice the estimated costs it is clearly disproportionate and must be considered applying a test of necessity as well as reasonableness (see Lownds v Home Office [2002] EWCA Civ 365).
- The court, having set out the law and the facts, dealt with the rationale for costs estimates:
- Later in the judgment the court turned its attention to the way in which costs estimates should be taken into account on an assessment of costs:
- The court went on to express the view that the whole question of costs budgets should be re-examined by the Civil Procedure Rule Committee.
- The Claimants filed written submissions in accordance with the direction which had been given. In short, their submission was that the present case could be distinguished from the case of Leigh on the grounds that the matter proceeded to a contested trial, it involved complicated issued of causation and was the first case to proceed to a trial following the House of Lords decision in Fairchild. The Claimants submit that it was a test case of the principles applied in Fairchild and that significant work had to be undertaken for the trial.
- Of the three instances in which the Court of Appeal felt that it might be proper to take a costs estimate into account, only the first a substantial difference between the estimated costs and the costs claimed calls for an explanation. In that respect the Claimants rely on the submissions which they had already made at the earlier hearing before me. In summary the Claimants' submission is that the case changed dramatically from what was known at the time of the allocation questionnaire. The matter turned into a very difficult and complex issue with novel law surrounding the Fairchild matter, and became a case which was fought to a fully contested trial. Much more work was necessary than had been anticipated at the time the estimate was filed. In the light of that the Claimants submit that they should not be held to the costs estimate and that the court should proceed to assess the reasonable and proportionate recoverable costs.
- The Defendants for their part, having originally indicated that written submissions would be made, indicated to the court, on 26 January, that they no longer intended to pursue the preliminary issue as to costs estimates and would not be filing written submissions.
- In the light of the above, and following the decision in Leigh v Michelin, the Defendants' argument that the costs of the Claimants should be limited to the amount of the costs estimate fails. Nor is it appropriate to take the costs estimate into account in assessing the costs on the standard basis in accordance with the original judgment.
- In accordance with the order of 20 October 2003 any issue relating to success fees may be pursued in front of me if the parties have been unable to agree the issue.
- The remainder of the detailed assessment is adjourned to be dealt with by Deputy Master James on a date to be appointed.
Senior Costs Judge Hurst
BACKGROUND
"In fact, however, although the First Defendant has not formally conceded liability, there is extensive evidence to show that the deceased almost certainly was exposed to prolonged asbestos dust when working for the First Defendant and no evidence was called by the First Defendant to rebut this evidence. Accordingly, I find that the First Defendant plainly is liable to the Claimant in this case."
"Firstly the evidence comes almost exclusively from the Claimant himself, and, of course, he was not cross examined upon it. There are three points in particular to which I think it is relevant to draw attention.First, although the deceased says, that the conditions with the Second Defendant were "generally similar" to those of the First Defendant, it is right to say that he does not provide anything like the same degree of specificity in relation to his complaints about the working conditions of the Second Defendant.
Secondly, as I have indicated, there was no supporting evidence from colleagues in relation to the conditions of the Second Defendant.
Thirdly, by contrast to the First Defendant, the Second Defendant has provided three witnesses who deal with certain matters raised by the Claimant "
"That there was a realistic risk that the mesothelioma contracted by the deceased could have arisen as a result of his employment by the Second Defendant."
THE DETAILED ASSESSMENT PROCEEDINGS
"7. The Claimants' allocation questionnaire is dated 21 May 2001. The costs to that date are estimated at £17,500, and the overall case life costs were estimated at £35,000."
"9. However, the total bill less the success fee and premium equivalent is £71,082.20 which makes it more than double the overall case life estimate of £35,000.10. CPD 6.4(2) requires the Claimants' solicitors similarly to file at court, serve on the Defendants and serve on the Claimants themselves with the listing questionnaire an estimate of base costs. The Defendants were not served with such an estimate and there is no indication that one was prepared for filing and service.
12. Further, the Claimants' solicitors were obliged to serve a copy of the allocation questionnaire estimate on the Claimants themselves. Unless it can now be demonstrated that the Claimants (or the union) were warned that they would be personally liable for an increase in costs from £35,000 to more than £70,000 in accordance with the Claimants' solicitors obligations under the Solicitors Practice Rule 15 and the [Solicitors Costs Information and Client Care Code] then Irwin Mitchell will not be able to recover more than £35,000 from the Claimants and the Claimants' ability to recover costs from the Defendants will accordingly be limited to £35,000 because of the operation of the indemnity principle."
"6 12 The Claimants submit that the costs estimate is simply that, an estimate. The figures quoted by the Defendant were provided at the allocation stage in this case. These figures do not include VAT (see CPR Part 43).The Claimant solicitors are not aware that the Rules state that sanctions should be invoked for failure to provide their client with a copy of the allocation questionnaire or the listing questionnaire. The Claimants are unable to see how this could lead to a breach of the indemnity principle."
THE APPLICABLE LAW
"32. It is important that the court is aware of the parties' estimate of the expenditure which has been or will be incurred when considering the future conduct of a case. The parties' estimates will be dependent on how they are proposing that the case should be conducted. If one method of dealing with the case would be beyond the resources of one of the parties, then dealing with the case justly may involve not adopting that procedure. This could be particularly important where, for example, one party wishes a case to remain on the fast track but the other is arguing for the case to be transferred to the multi track.33. Estimates need not go into detail and would therefore not disclose confidential information which might be of tactical value to an opponent. ... The estimates would be indications to help the procedural Judge decide the best course of action rather than budgets which limited what parties could recover. ..."
"6.1 This section sets out certain steps which parties and their legal representatives must take in order to keep the parties informed about their potential liability in respect of costs and in order to assist the court to decide what, if any, order to make about costs and about case management.
6.3 The court may at any stage in a case order any party to file an estimate of base costs and to serve copies of the estimate on all other parties. The court may direct that the estimate be prepared in such a way as to demonstrate the likely effects of giving or not giving a particular case management direction which the court is considering, for example a direction for a split trial or for the trial of a preliminary issue. The court may specify a time limit for filing and serving the estimate. However if no time limit is specified the estimate should be filed and served within 28 days of the date of the order.
6.4 (1) When a party to a claim, which is outside the financial scope of the small claims track, files an allocation questionnaire he must also file an estimate of base costs and serve a copy of it on any other party, unless the court otherwise directs. The legal representative must, in addition, serve an estimate upon the party he represents.
(2) Where a party to a claim files a pre- trial check list (listing questionnaire), he must also file an estimate of base costs and serve a copy of it on every other party, unless the court otherwise directs. Where a party is represented the legal representative must in addition serve an estimate on the party he represents.(3) This paragraph does not apply to litigants in person.
6.5 An estimate of base costs should be substantially in the form illustrated in Precedent H in the Schedule of Costs Precedents annexed to the Practice Direction.
6.6 On an assessment of the costs of a party the court may have regard to any estimate previously filed by that party, or by any other party in the same proceedings. Such an estimate may be taken into account as a factor among others when assessing the reasonableness of any costs claimed."
"It is to be hoped that subsequent to the Woolf Reforms Judges conducting cases will make full use of their powers under the Practice Direction about Costs, Section 6 to obtain estimates of costs and to exercise their powers in respect of costs to keep costs within the bounds of the proportionate in accordance with the overriding objective."
"(a) ensuring that the parties are on an equal footing;(b) saving expense;
(c) dealing with cases in ways which are proportionate ..."
"44.2(1) Where (a) the court makes a costs order against a legally represented party; and(b) the party is not present when the order is made
the party's solicitor must notify his client in writing of the costs order no later than seven days after the solicitor receives notice of the order."
"Although Rule 44.2 does not specify the sanction for breach of the rule the court may, either in the order for costs itself or in a subsequent order, require the solicitor to produce to the court evidence showing that he took reasonable steps to comply with the rule."
"44.14 (1) The court may make an order this Rule where:(a) a party or his legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or
(b) it appears to the court that the conduct of a party or his legal representative before or during the proceedings which gave rise to the assessment proceedings was unreasonable or improper.
(2) Where paragraph (1) applies the court may:
(a) disallow all or part of the costs which are being assessed; or(b)
(3) Where
(a) the court makes an order under paragraph (2) against a legally represented party; and(b) the party is not present when the order is made
The party's solicitor must notify his client in writing of the order no later than seven days after the solicitor receives notice of the order."
"Conduct before or during the proceedings which gave rise to the assessment which is unreasonable or improper includes steps which are calculated to prevent or inhibit the court from furthering the overriding objective."
"27. The Chief Taxing Master has suggested to me:"That the most effective and simple method of keeping costs under control is to keep the client informed at all times as to what is proposed in his name."
28. I agree that this is extremely important. I have recommended in the Interim Report that it should be a mandatory requirement for a solicitor to tell prospective clients how fees are to be calculated and what the overall costs might be; and to give reasonable notice of when that estimate is likely to be exceeded and the reasons. If, in the past, the uncertainty of what might occur in proceedings provided justification for not making this a mandatory requirement, that justification would no longer exist under the more predictable system which I am proposing."
SUBMISSIONS
"7. Between [the allocation questionnaire] and the eventual trial there was no significant change in the amount of factual or expert witness evidence or in the length of trial anticipated by the Claimant solicitors, or in any of the allegations set out in [the] defence. The only slight difference was that in the allocation questionnaire the Claimants anticipated calling factual witness from former work colleagues of the late Mr Leslie Burns to prove exposure to asbestos dust. In fact, the Claimants did serve witness statements from three such witnesses but the amount of time spent with those witnesses and on the preparation of their statements was relatively modest The allocation questionnaire anticipated the hearing of 2½ days, and this was precisely how much time the trial did occupy."
"which sets out the fullest extent of your liability to this firm for costs likely to be incurred in the future."
"The correspondence amounted to a clear and considered indication of Mr Wong's maximum likely liability to Vizards upon which Mr Wong was likely to rely and did rely."
" I am also mindful that while the sum claimed by the solicitor ought not to vary "substantially" (as the Law Society's Guide says) from that previously estimated without prior warning to the client, more especially if that estimate was expressed to be on a worst case basis. Mr Ryan's fee proposal was a projectional estimate rather than a warranty I have effectively allowed to the solicitor a margin of approximately 15% over the worst case estimate given. I consider that a greater divergence would be substantial and unreasonable."
"6-12 The Claimant submits that the case was materially altered by events occurring after [the date of the allocation questionnaire]. This was a very complex case which involved two defendants both of whom denied liability. The Claimants submit that the case was substantially altered by the uncertainty created in this area of law by the decision (and subsequent appeals) in the case of Fairchild v Glenhaven Funeral Services Ltd, a defence which was relied upon by both Defendants. The Claimants submit that this and the various applications by the Defendants resulted in substantial additional work being incurred over and above that anticipated in the costs estimate for the lifetime of the case. The action was strongly contested by the Defendants. The Second Defendant refused to make an offer of settlement and repeatedly asked the Claimants to discontinue. The consequence of this stance was that the Claimants were forced to proceed to trial. The Defendants continued to frustrate the progress of the action even after the oral decision of the House of Lords in the Fairchild case and insisted on waiting for the written judgment. Further clarification of this decision was given by the Law Lords prior to the written judgment and this was questioned by the Defendants."
"Separate estimates of costs incurred to date and those which will be incurred if the case proceeds to trial should be given using Form 1 in the Schedule of Costs Forms set out in the Civil Procedure Rules [similar in form to the Statement of Costs used in summary assessment]. This form should be attached to and returned with your completed questionnaire. (This relates only to costs incurred by legal representatives)."
"Legal representatives only: you must attach estimates of costs incurred to date and of your likely overall costs. In substantial cases, these should be provided in compliance with CPR Part 43."
"I attach to this questionnaire ? an application and fee for additional directions; ? a proposed timetable for trial; ? a draft order; ? a listing fee; ? an estimate of costs."
"In this case all the deceased's employers who exposed him to asbestos are named as Defendants, albeit that exposure whilst with the First Defendant was significantly greater than that with the Second Defendant."
THE DECISION IN LEIGH v MICHELIN
"15. The provisions relating to the giving of estimates of costs at significant stages of litigation are important in assisting the court to achieve the overriding objective stated in CPR r. 1.1 and to control the costs of litigation. The purpose of requiring costs estimates is, as is made clear by CPR 43 PD para 6.1, to keep the parties informed about their potential liability in respect of costs, and to assist the court to decide what, if any, order to make about costs and case management. Realistic costs estimates will also enable the parties to settle costs issues: they should therefore reduce the need for assessments of costs16. Costs estimates are an important part of the machinery of case management. At the first case management conference, the court will have the parties' statements of case, and will therefore be aware of the issues in the case. The allocation questionnaires will inform the court how many witnesses, and in particular how many expert witnesses, each party wishes to call at the hearing. The parties' costs estimates are part of the material that is placed before the court at this early stage of the litigation to enable it to form a view as to what measures it should take in order to manage and control the case in the interests of what is reasonable and proportionate
17. We accept, of course, that it will not always be possible at the allocation questionnaire stage to provide a reasonably accurate estimate of the likely overall costs. But it should usually be possible to do so even at that stage, especially in run of the mill cases. Where it becomes clear during the course of the litigation that the estimate was inaccurate, it is all the more important to comply with the obligation in CPR 43 PD para 6.4(2) to file an updated estimate at the listing questionnaire stage."
"26. What follows is not intended to provide an exhaustive guide as to the circumstances in which a costs estimate may be taken into account in determining the reasonableness of the costs claimed, but it should assist judges in the application of para 6.6 of the practice direction. First, the estimates made by solicitors of the overall likely costs of the litigation should usually provide a useful yardstick by which the reasonableness of the costs finally claimed may be measured. If there is a substantial difference between the estimated costs and the costs claimed, that difference calls for an explanation. In the absence of a satisfactory explanation, the court may conclude that the difference itself is evidence from which it can conclude that the costs claimed are unreasonable.27. Secondly, the court may take the estimated costs into account if the other party shows that it relied on the estimate in a certain way. An obvious example would be where A shows that he relied on the relatively low estimate given by B not to make an offer of settlement, but carried on with the litigation on the basis that his potential liability for costs was likely to be of the order indicated in B's estimate. In our judgment, it would be a proper use of para 6.6 of the practice direction to take such a factor into account in deciding what costs it was reasonable to require A to pay B on an assessment.
28. Thirdly, the court may take the estimate into account in cases where it decides that it would probably have given different case management directions if a realistic estimate had been given. To take a rather crude example: suppose that at the allocation questionnaire stage the claimant provides an estimate of overall costs in the sum of £20,000, and claims £50,000 at the assessment. The court might conclude that, if it had known that the claimant's costs were likely to be of the order of £50,000, rather than £20,000, it would probably have given different directions from the ones it gave, and that these would have had the effect of reducing the claimant's costs. It might, for example, have trimmed the number of experts who could be called, and taken other steps to slim down the complexity of the litigation in the interests of controlling costs in a reasonable and proportionate manner.
29. In our view, para 6.6 of the practice direction gives the court the power to take matters such as these into account in deciding whether, and if so how far, to reflect them in determining what costs it is reasonable to order the paying party to pay on an assessment. We do not, however, consider that it would be a correct use of the power conferred by para 6.6 to hold a party to his estimate simply in order to penalise him for providing an inadequate estimate. Thus, if (a) the paying party did not rely on the estimate in any way, (b) the court concludes that, even if the estimate had been close to the figure ultimately claimed, its case management directions would not have been affected, and (c) the costs claimed are otherwise reasonable and proportionate, then in our view it would be wrong to reduce the costs claimed simply because they exceed the amount of the estimate. That would be tantamount to treating a costs estimate as a costs cap, in circumstances where the estimate does not purport to be a cap.
32. If, applying the guidance given in this judgment, the court is satisfied that the costs claimed should be reduced having regard to the costs estimate, the question remains: by how much should the costs be reduced? This will always depend on the circumstances of the individual case. It is a matter for the judgment of the court to decide what reduction to make. Regard should be had to the costs estimate when considering whether the costs claimed were reasonably incurred and reasonable in amount. Moreover, where justice so requires, specific deductions can be made from the costs recoverable to reflect the impact that erroneous and uncorrected estimates have had on case management or on the conduct of the other party.
33. We consider that the costs judge should determine how, if at all, to reflect the costs estimate in the assessment before going on to decide whether, for reasons unrelated to the estimate, there are elements of the costs claimed which were unreasonably incurred or unreasonable in amount. This will avoid the danger of "double jeopardy" referred to in the context of a discussion about proportionality by Lord Woolf CJ in Lownds v Home Office [2002] 1 WLR 2450, [2002] EWCA Civ 365 at para 30."
THE SUBSEQUENT SUBMISSIONS
CONCLUSION