It does not need to cost the earth

The Court OF APPEAL was asked to consider whether a firm of solicitors David Truex, solicitor (a firm) v Simone Kitchin [2007] EWCA Civ 618 who were not in possession of a franchise for public funding should have advised a client that she might be eligible for legal aid earlier than they did. In reaching its conclusion the court considered the guide to professional conduct which was then in force, namely paragraph 5.01 of the Guide to Professional Conduct of Solicitors 8th Edition.

Advise if entitled to legal aid

Paragraph 5.01 provided that a solicitor was under a duty to consider and advise the client on the availability of legal aid where the client might be entitled to such funding. The new Code of Conduct which came into force on 1 July 2007 has a similar provision in Rule 2.03 (1)(d)(i) which requires a solicitor to discuss with the client how the client will pay and whether the client may be eligible for and should apply for public funding.

The appellant solicitors had claimed against their client, the respondent, a sum of some £21,000 for work allegedly carried out on the instructions of the respondent, who had paid £9,000 on account of costs. At first instance, the court found that the solicitors had failed to advise their client that she might be eligible for public funding.

The claim was dismissed and the counterclaim for repayment of monies paid on account was upheld save for a small amount in respect of a conference on 19 February 2003, the day after the solicitors were first approached to advise her on matrimonial matters.

Advice was subsequently given relating to divorce proceedings and to financial aspects and custody. Counsel was instructed to advise resulting in instructions to take proceedings to freeze her husband's assets. It was not until 3 March 2003 that the solicitors informed the client that they did not undertake legal aid work and the client subsequently changed to another firm who were able to undertake legal aid work. By then, considerable costs had been incurred. Although there was some indication that the solicitors had reason to think that the client would not be eligible for legal aid funding, no in-depth investigations were made.

The court held that a solicitor was not entitled to a period of time during which they gathered information and ran up costs while gathering information in order to commence proceedings and after that gathering exercise be prompted into considering whether or not the client was eligible for legal aid. In dismissing the appeal, the court said that a solicitor must be bound at the outset to consider the funding position of the client.

Estimates for costs

The new Code of Conduct referred to above also signifies a slight change in the attitude of the Solicitors' Regulation Authority from that of its Law Society predecessors with regard to the provision of estimates to a client.

Prior to 1 July 2007, the Solicitors' Costs Information and Client Care Code required a solicitor to give the client 'the best information possible'. This was defined as including:

• agreeing a fixed fee; or
• giving a realistic estimate; or
• giving a forecast within a possible range of costs; or
• explaining to the client the reasons why it is not possible to fix or give a realistic estimate or forecast of the overall costs, and giving instead the best information possible about the cost of the next stage of the matter.

By contrast, the new Code of Conduct sets out requirements about giving information about the cost to clients in Rule 2.03. This includes 'the best information possible about the overall cost of a matter both at the outset and, when appropriate, as the matter progresses'.

The Guidance to this rule however makes it clear that there may be circumstances where it 'would be inappropriate' to provide any or all of the information required by the rule (Paragraph 28). Also in Paragraph 36 of the Guidance it is made clear that: 'It is often impossible to tell at the outset what the overall cost will be'. In such a case it is suggested that the client is given the reasons why this cannot be done.

All of this appears to introduce a much more relaxed approach to the giving of costs information which some will applaud but so far as the client is concerned it is likely to prove unhelpful.

Coupled with that it should be remembered that the CPR require estimates of costs in litigation matters to be given at both the allocation questionnaire and listing questionnaire stages and, where necessary, when ordered by the court and that copies of these estimates must be served on the client. It will be a surprised client who receives such an estimate having been told by his solicitor at the outset that an estimate could not be made.

It would seem in the light of general judicial approval of the control of costs by the use of estimates, the most recent example of which may be found in the comments of HH Judge MacDuff in Dawson and 150 Others v First Choice Holidays and Flights Limited (see Solicitors Journal 15 March 2007 'Judge caps costs in group litigation claim'), that the SRA has missed a real opportunity to establish a sensible cost estimating regime which will not only help to control costs but will ensure that proper and fair costs will be earned by the profession in future thus helping to foil the very real threat posed by the advocates of fixed costs. For costs to be predictable yet not fixed, the establishment of an estimating discipline is surely the only solution.

Some appear to believe that litigation costs can be controlled by providing a fixed costs solution to the costs of successful parties in litigation.

This is so misconceived that it amounts to lunacy. All such a step would do is discourage parties to litigate at all. The least that a successful party should receive is a substantial contribution to its costs.

HH Judge MacDuff said: 'It is becoming ever more necessary for the courts to control the expenditure of costs before they are incurred.' Only in that way will fairness and predictability be assured for solicitors, their clients and for paying parties.

Medway Oil revisited and confirmed

In a judgment handed down on 24 July 2007, Dyson Technology Limited v Mr Ben Strutt [2007] EWAC 1756 (Ch), Mr Justice Patten was asked to consider how common costs of the action should be divided so as to give effect to the order of the trial judge.

In its claim, the claimant had sought an injunction to enforce two specific covenants contained in the contract of employment of the defendant, one relating to confidentiality, the other in connection with non-competition.

In the event the judge granted an injunction enforcing the non-compete clause. Following submissions on costs, the judge ordered the defendant to pay the claimant's costs of the action save for three specific items of costs.

One related to the defendant's costs of the claim for an injunction under the confidentiality clause, the second to the defendant's costs of and occasioned by an application to amend particulars of claim where in both cases the claimant was ordered to pay the defendant's costs. The third related to the costs of expert evidence on which the judge made no order.

The costs judge had decided to apportion costs which were common to both injunction applications, which he described as the 'general costs'. These included for example travelling costs and concerned those costs which would have been incurred anyway if only one of the two claims had been brought.

Costs in proportion to time spent

He apportioned them on a 50/50 basis. So far as costs which covered both issues were concerned, the costs judge considered that these could be divided in proportion to time spent.

Finally, the costs judge held that all of the costs relating to the confidentiality claim were attributable to that arm of the claim and none to the non-competition claim.

Patten J held that the principle in Medway Oil & Storage Co v Continental Contractors Limited [1929] AC 88 which was followed in Cinema Press Ltd v Pictures & Pleasures Ltd [1945] KB 356 should apply to these issues so that where the costs of an action are awarded to one party with the exception of costs relating to a particular matter or issue, the party in whose favour the costs of that issue are awarded is not entitled to recover anything except the extra costs generated by that issue.

Accordingly the decision of the costs judge on the general costs was wrong and the application of the Medway principles in respect of the costs covering both issues was correct in so far as the identification of the fees and charges for time spent on the confidentiality claim excludes work that would have had to be done anyway because it related also to the other claim.

The judge also held that the decision of the costs judge to attribute all of the work on the confidentiality claim to that arm of the claim was incorrect and it was 'simply not open to him. . . to conduct some kind of ex-post facto analysis of what was the minimum amount of evidence needed to support the (non-compete) claim and to disallow the costs of much of the evidence actually used'.

Instead the costs judge should have analysed all of the work done and claimed for in accordance with Medway principles.