Using estimates to influence awarded costs

In December 2003, the Court of Appeal gave guidance on how the Court can use estimates filed at the beginning of a dispute, to influence the way in which it assesses costs at the end.

In this case, the Claimant's solicitor filed a costs estimate of £6,000. However, at the end of the dispute the Claimant had legal costs of some £22,000 which were claimed from the Defendant. The Defendant appealed saying that the amount of costs paid to the Claimant should be limited to his costs estimate.

The appeal was unsuccessful, but the Court did give guidance on the circumstances in which a costs estimate might be taken into account when assessing the costs one party had to pay to the other. That is:

• a solicitor's estimate of the likely overall costs of the litigation should be a useful yardstick by which the Court can measure the costs finally claimed.
• the Court can take the estimated costs into account if the other party can show that it relied upon this estimate in making decisions about how to conduct the litigation e.g., a low costs estimate persuaded the other party to continue to litigate rather than settle.
• the Court can take an estimate into account if it would have given different directions for the litigation had a more realistic estimate been given.
• it was not correct to penalise a party for giving an inadequate costs estimate.

I suggest this decision is likely to trigger new Court rules:

• possibly paving the way for costs capping on the basis of estimates
• empowering the Court and parties to use costs estimates as an increasingly powerful weapon in the conduct of litigation.

More importantly, it compels solicitors to give more effective, frequent and updated costs estimates.

Jan Arkwright
Associate

15 January 2004