Mastercigars Direct Ltd v Withers LLP [2007] EWHC 2733 (Ch)

[2007] EWHC 2733 (Ch)Case No SCCO Ref: 06.A.483
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
ON APPEAL FROM THE SUPREME COURT COSTS OFFICE
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 23/11/2007
Before
MR JUSTICE MORGAN
Between
MASTERCIGARS DIRECT LIMITEDClaimantWITHERS LLPDefendant
SITTING WITH ASSESSORS (COSTS JUDGE CAMPBELL AND MR CARTER)
Mr Martin Farber and Mr Simon J Brown (instructed by Crane & Staples) for ClaimantMr Jeremy Morgan QC (instructed by Withers LLP) for DefendantHearing Hearing dates: 11th,12th,15 th and16th October 2007
JUDGMENTThe Appeals and the Application for Permission to Appeal
[1]This judgment concerns three appeals, and an application for permission to appeal, in relation to four orders of Costs Judge Rogers. The first appeal (which I will refer to hereafter as “the first appeal”) is brought by Withers LLP (“Withers”) against a part of the order made on 13th November 2006. Permission to appeal was granted by Lindsay J on 2nd March 2007. The first appeal is in effect conceded by the Respondent to the appeal, Mastercigars Direct Limited (“Mastercigars”), but there remains an issue as to the costs of the appeal. That issue was not argued before me and I understand the parties intend to make submissions on it following the handing down of judgment in these appeals.[2]The application for permission to appeal (which for convenience I will call “the second appeal”) is in relation to the order of 22nd March 2007. The Costs Judge refused permission to appeal. On 22nd March 2007, Lindsay J refused to grant a stay of the order made by the Cost Judge earlier that day. The second appeal is by Mastercigars and its application for permission to appeal was listed for an oral hearing before me, with the substantive appeal to follow if permission were granted.[3]The third appeal (which I will hereafter call “the third appeal”) relates to an order of 25th April 2007. The appeal is brought by Withers. Briggs J granted permission to appeal on the 25th May 2007.[4]The fourth appeal (which I will hereafter call “the fourth appeal”) relates to the order of 15th May 2007. The appeal is brought by Mastercigars. Openshaw J granted permission to appeal on the 7th August 2007.

The Earlier Litigation

[5]The underlying dispute out of which the various appeals arise relates to the bills rendered by Withers to its then client Mastercigars in relation to the litigation to which I refer in more detail below. Some of those bills were ordered to be the subject of a detailed assessment under Section 70 of the Solicitors Act 1974. Before referring to the procedural history of the costs assessment proceedings, it is appropriate to summarise the nature of the earlier litigation.[6]The nature of the earlier litigation was not described in much detail at the hearing before me. I was provided with a copy of a decision of the Court Of Appeal in that litigation; the neutral citation of that decision is [2007] EWCA Civ 176. In addition, I have obtained a copy of the judgment at first instance, which is reported at [2006] RPC 805.[7]I can take the description of the general nature of the litigation from the first four paragraphs of the judgment of the trial judge, Judge Fysh QC (sitting as a Judge of the Chancery Division). The Judge said: [1] This is a trade mark dispute concerning the import into the UK of many well-known brands of hand-rolled Cuban cigars (also known as "habanos"). UK and Community registered trade marks subsist for these brands some of them dating I believe, from Victorian times. The dispute is the upshot of ongoing concern by the single Cuban proprietor of these trade marks (together with its sole and exclusive UK distributor) as to the legitimacy of importing habanos so trademarked which have been purchased from official sales outlets in Cuba and thereafter imported (duty paid) into the UK by persons other than the UK distributor for sale here. A core issue is whether such importation has the implied consent of the trade mark proprietor. [2] In fact, the action has two aspects: first, there is a declaratory action by the Claimant, MasterCigars Direct Ltd (hereafter "MDL"), the importer (and owner) of a particular consignment of habanos (hereafter 'the Consignment) which seeks its release from its present detention under powers vested in HM Customs and Excise ("HMCE"). The declaratory relief sought is broadly based upon the legitimacy claimed for the importation of the Consignment which is said to be neither counterfeit nor infringing within the meaning of the relevant UK statute and Council Regulation (EU). This action (which I shall call "the declaratory action"), is against the trade mark proprietor's UK distributor which instigated the detention by the Customs. MDL's claim is traversed on the basis that some of the material in the Consignment is indeed counterfeit being made in infringement of certain registered trade marks owned by the proprietor. Then there is a Pt 20 claim for infringement of the same trade marks by the Cuban trade mark proprietor against inter alia MDL. I shall refer to this as the "the infringement action". The infringement action in fact has two strands - which are not spelt out as such in the Part 20 claim. First, infringement is said to have arisen on the basis of MDL's "parallel importation" of habanos bearing these trade marks and this has provoked the well-known defence of "exhaustion of rights". I have called this "the parallel imports" case intending thereby to incorporate the defence of exhaustion of rights. As I have said, there is also an allegation in response to the declaratory action that certain cigars in the Consignment (and their associated packaging) are actually counterfeit goods. This is denied by MDL as a matter of fact. I have called this for convenience "the counterfeit case" and to the best of my recollection, this occupied the longest time at trial. It is simply a regular trade mark infringement action, albeit with some unusual features. Though the two strands of the infringement action therefore have a different procedural genesis, I have not sought to differentiate them on that basis. I would also mention at this juncture that the parallel imports case is irrelevant to the detention of the cigars by HMCE, whose powers may only be exercised in relation to goods which are actually counterfeit. [3] The action has greater complexity than the above brief summary might suggest. It is evidently a test case which, as will be seen, bristles with points of law and bitter disputes of fact; it also involves inter alia questions of customs law and procedure, the legal implications of a command economy in the context of "economic linkage", statutory offences incidental to the importation of goods which infringe IP rights - and not least, art 6 ECHR . [4] The owner of most (if not all) of the trade marks in question is Corporacion Habanos SA of Havana, a Cuban company, which, as I have said, is the Pt 20 Claimant. I shall henceforth refer to this company as "HSA". The Defendant to the declaratory action is a UK company, Hunters & Frankau Ltd (hereafter "H & F"), who have been involved in the Cuban cigar trade in this country since 1790. They are HSA's sole and exclusive distributors in the UK.[8]The transcript of the judgment at first instance indicates that the trade mark action was tried in July, September and October 2005 and the Judge’s reserved judgment was handed down on the 10th March 2006. There were various references in the costs proceedings to the number of days of the trial of the action. According to the transcript, the matter was before the trial judge on 16 days with judgment being handed down on a 17th day.[9]Judge Fysh described certain interlocutory steps that were taken in the trade mark action at paragraphs 43-45 of his judgment where he said: [43] Not surprisingly, there have been a number of interlocutory events in these proceedings. Following the abandonment of an application for interim relief, David Richards J ordered that the trial of the declaratory action to be expedited (18 March 2005, A/13). On 15 April 2005, Laddie J was concerned with directions for the conduct of the Part 20 proceedings (A/14). He inter alia directed the Pt 20 Claim to be heard as part of the expedited trial and stayed the question of Mr Kenyon's personal liability pending the determination of the principal issues. There was then a disclosure and security for costs application before Etherton J on 23 June 2005 (A/15). This resulted in (inter alia) an order for substantial further disclosure by HSA, the deficient outcome of which was the subject of ongoing (and in my view justified) complaint by Mr Hobbs. Relatively few of the documents falling within the scope of the Order were ever disclosed and what was produced was both late and usually in Spanish. [44] Finally, there were two pre-trial reviews before Pumfrey J on 29 June 2005 and 4 July 2005. I have mentioned that a "sample" of cigars and packaging was taken from the Consignment by H&F for examination and experiments. On three occasions, once by telephone and twice by letter, Mr John Maycock a partner in Messrs Withers, MDL's solicitors, asked HMCE that this sample be released from custody for use at trial. On each occasion, HMCE refused the request. This matter therefore came before Pumfrey J at the pre-trial review hearing on 29 June 2005. I am told that the judge made it clear that the sample should be made available at the forthcoming hearing and for this purpose, should be delivered into the joint custody of the parties' solicitors. HMCE however stood firm: there would be no handing over of the sample. Indeed, I understand that HMCE indicated that they would even resist the making of an order to that effect. On 4 July 2005, on MDL's application, Pumfrey J made an order requiring HMCE to deliver the sample into the joint custody of the parties' solicitors and this was done on I think, 5 July. Thereafter, the sample has been held at the offices of Messrs Lovells, solicitors, in High Holborn in a capacious plastic bag which was brought to court every day. In the meanwhile, the balance of the Consignment has remained in bond at the PBS warehouse. This incident, trivial though it may seem, is one aspect of what I have come to think is an unsatisfactory procedure as regards the import of allegedly counterfeit goods when a dispute arises as to authenticity. [45] At the first of these hearings before Pumfrey J, the issue of the right to open was also canvassed. Pumfrey J also gave directions regarding the use at trial of the witness statements of MDL's Cuban witnesses who by that time had been 'advised' not to 'collaborate' with MDL: see the third witness statement of Elizabeth Harding of Withers at E1/5. As will be seen, by the time of trial, all MDL's Cuban witnesses had in fact retracted the evidence given in their first witness statements.[10]In the event, the Judge found against Mastercigars on the parallel imports part of the case. In particular, he held that Mastercigars had failed to prove that HSA consented to the importation of the consignment which had been seized or any of Mastercigars’ historic consignments. The Judge then considered the counterfeit case. He said at [133] that this had become the major part of the case, so far as the time at trial was concerned. He proceeded to consider the counterfeit case and dismissed it. He said that it was “riddled with mysteries, lacunae and above all, with procedural unfairness to [Mastercigars]”. Following judgment, the trial Judge made no order as to the costs of the litigation up to that point.[11]Mastercigars appealed to the Court of Appeal. The Respondent to the appeal was HSA, but not Hunters & Frankau Limited. The Court of Appeal (Chadwick, Jacob and Lloyd LJJ) gave their decision on 8th March 2007, allowing the appeal of Mastercigars. The only reasoned judgment was that of Jacob LJ, with whom the other members of the court agreed. Jacob LJ held that HSA had impliedly consented to the marketing of the cigars within the EEA. It was held that none of the consignments concerned involved an infringement of HSA’s trade mark.[12]Paragraph 3 of the order made by the Court of Appeal permitted Mastercigars to proceed in the Chancery Division with an inquiry as to the sum or sums (if any), limited to £75,000, it should recover by way of damages with interest (if any) pursuant to its undertaking recorded in an order made by the trial judge on 10th April 2006. Paragraph 5 of the order provided that sums paid into Court by Mastercigars as security for costs could be paid out to its then solicitors, Crane & Staples. By paragraph 6 of the order, HSA was ordered to pay Mastercigars its costs of the appeal, such costs to be the subject of a detailed assessment if not agreed. By paragraph 7 of the order, HSA and Hunters & Frankau Limited were ordered to pay to Mastercigars and Mr Kenyon their costs of the proceedings at first instance, such costs to be the subject of a detailed assessment, if not agreed, and insofar as those costs were attributable to the counterfeit issues, they were to be assessed on the indemnity basis. By paragraph 9 of the order, the costs referred to in paragraphs 6 and 7 of the order were to carry interest. By paragraph 10 of the order, HSA was ordered to pay Mastercigars the sum of £83,000 on account of the appeal costs; this order was qualified in relation to any period that might be taken up with a possible appeal to the House of Lords. By paragraph 11 of the order, HSA and Hunters & Frankau Limited were ordered to pay to Mastercigars and Mr Kenyon the sum of £300,000 on account of the costs of the proceedings at first instance.[13]I understand that HSA petitioned the House of Lords for leave to appeal to the House of Lords against the decision of the Court of Appeal but the House of Lords dismissed the petition.

The Arrangements made between Mastercigars and Withers

[14]Mastercigars instructed Withers to advise, and to act for, Mastercigars at an initial meeting in May 2004. In relation to the terms of Withers’ retainer and the estimates given by Withers as to their costs, I was asked to consider a letter from Withers to Mastercigars dated 11th March 2005 with an accompanying estimate, the Withers’ standard terms of business referred to in the letter of 11th March 2005 and an e-mail dated 6th May 2005 from Withers to Mastercigars, together with its accompanying estimate.[15]The letter of 11th March 2005 runs to some three and a half pages but it is not necessary to refer to all of it. The letter enclosed Withers’ standard terms of business, which were stated to apply to the matter. The letter stated that Withers had billed Mastercigars monthly up to that point and would continue to do so, so that Mastercigars would be aware of the costs that had been incurred on its behalf. The letter included this statement:
“I take this opportunity to provide you with our best estimate at this moment of the costs that are likely to be incurred in taking these proceedings to trial and conclusion and I refer further to this below.”
[16]The letter of 11th March 2005 included this further paragraph:
“The costs of litigating this matter will depend on a number of circumstances. The most important will be whether the matter settles prior to a trial or whether it will be necessary to have a trial of the issues and one must also take into account the hearing or hearings relating to the determination of the preliminary point. It seems clear that the hearing of the preliminary point will go ahead although it is possible that there may be settlement prior to full trial. Should the matter go to trial, I would estimate that it will last for 3 to 4 days depending on the number of witnesses required on each side and could be longer. I have set out in a schedule details of costs and disbursements to the end of January and thereafter my estimate of costs up to and including a trial. I have made a number of assumptions in this assessment. If for example there were further hearings prior to the trial or disclosure was much more extensive or there are more witnesses – or expert witnesses – than I have anticipated then the costs will increase. Conversely, if matters turn out to be more straightforward than I have anticipated, then the costs will be less. I will update this cost estimate from time to time as events develop. I should add that, as Claimant, it would be most unlikely that you would instruct us to continue this litigation up to and including a trial unless you considered that the risks, including those in relation to costs, were commercially justifiable.”
[17]In the next paragraph of the letter of 11th March 2005, Withers commented upon the possible upside and the possible downside of the litigation. In that paragraph, Withers referred to Mastercigars recovering 70% to 80% of its costs, if it were to be successful, and being liable to pay 70% to 80% of the other side’s costs, if Mastercigars were unsuccessful. The letter went on to state that even if successful Mastercigars would be responsible to pay its own solicitors’ costs. Finally, the letter stated that “as agreed at the outset”, Withers would at appropriate intervals request monies on account of costs and disbursements such that, in principle, the monies so held on account would broadly be equivalent to the estimated costs the following month or appropriate period. Withers stated they would continue this practice with the intention that at any one time outstanding bills were covered and there was also some additional money held on account of forthcoming costs and disbursements.[18]The documents before me do not seem to include a complete copy (but only the first two pages) of the estimate which accompanied the letter of 11th March 2005.[19]As indicated above, the letter of 11th March 2005 referred to Withers’ standard terms of business. These terms were not originally in the documents before me. I requested a copy. The copy with which I was provided is dated July 2005. Accordingly, this cannot have been the version of the terms of business current at the 11th March 2005. However, both parties addressed me on the basis that the document I had been given contained the relevant terms and I will proceed on the same basis.[20]Paragraph 3 of the terms of business states:
“The level of our fees will depend largely on how much time we spend dealing with your case. We record time in units of six minutes. The charging rates of legal staff depend on their experience and how senior they are and we will review these from time to time. We will give you details of rates of those working for you when you first instruct us. Our fees will take account of the rates in force when we carry out the work.”
[21]Paragraph 4 of the terms of business is headed “Estimates and quotations” and reads as follows:
“When you instruct us we will do our best to tell you the likely level of our fees. Unless we tell you otherwise, this will be an estimate only, not a fixed quotation. If you ask for a fixed quotation, we will try to provide one. However, it may not be possible to predict the amount of time we will need to deal with the matter. You may set an upper limit on costs. We will not do any work that will take our fees over this limit without your permission. If we provide a fixed quotation, this will only apply to the work we agree, in writing, at the time. If you then ask us to do extra work, we will charge you for the extra work.”
[22]Paragraph 5 of the terms of business was headed: “Bills”. This stated that the client must pay the bills when the client received them and that Withers might ask for a “payment on account” of its charges.[23]Paragraph 7 of the terms of business was headed:
“Ending your instructions and paying for work”
. This included the following statement:
“If you instruct us on a matter we will assume that you want us to complete it but you may end your instructions at any time. We may stop acting for you at any time but will normally do this only if there is a conflict of interest or if you do not pay our fees.”
[24]Paragraph 18 of the terms of business under the heading:
“Accepting these terms”, stated: “If you continue to instruct us after receiving these terms of business, you will have accepted the conditions set out above.”
[25]On 6th May 2005, Withers sent Mastercigars an e-mail with the heading:
“Estimates and Funding”
. The e-mail included this passage:
“As mentioned this morning, I now seek to provide you with an update on the overall position relating to invoices past present and estimates for the future as well as for security and for costs. The aim is to provide an overview for cashflow purposes.”
The e-mail then discussed outstanding invoices. It said that invoices dated 4th March 2005 to 1st April 2005, totalling some £74,000, were unpaid. It referred to a further invoice for April, about to be issued, in a sum of approximately £65,000. The time involved in the invoices was then broken down and it was stated that not all the time expended had been charged.[26]The e-mail of 6th May 2005 went on to discuss “Revised Estimates for future fees and disbursements (May to Trial)”. The e-mail read:
“I attach a revised estimate for the remaining period to trial. Although the figures are becoming relatively fearsome, it has to be said that the potential fees that might be added by bringing in Geoffrey Hobbs are a heavy burden. However, they are guesstimate only in that we cannot ask his clerk for an estimate since they do not yet have all the papers and cannot assess what will be involved. It is possible that we have over estimated his fees but I would rather err on that side. So far as our own fees are concerned, there are some unknowns in the sense that we really do not have an idea of how much disclosure they will produce (I suspect too little requiring the prising out of the balance, especially at the Habanos end) nor do we have any accurate idea what they will produce in the way of witness evidence. One of the things that was said at the outset was that although the basic framework is relatively simple and clear, the twists and turns of evidence, interim applications and so forth can change the scene out of all proportion very quickly. In our case, the time in Gatwick, Spain, the applications and now in evidence plus the addition of Geoffrey Hobbs is what produces the increase in the estimate.”
[27]The e-mail ended with the sentence: “I am very conscious of the burden it poses and the responsibility that we have to keep costs to the minimum”.[28]The e-mail enclosed an estimate running to two and a half pages. The first line related to time costs to 30th April 2005 and the second line related to total disbursements to 30th April 2005. These two lines together total some £150,000. The estimate then referred to the “Substantive Action” and listed a whole series of steps and items of work that were being costed for the purposes of the estimate. Against most, if not all, of these items of work, the estimated hours for the solicitors and a trainee at Withers were given, with the hourly rate appropriate to that individual, and the result was calculated. In two places in relation to translation, the sum was said to be “approx”. The estimate then referred to disbursements for leading and junior counsel distinguishing between fees for conferences, fees for pleadings and miscellaneous advice, the brief fee and three refreshers (assuming a four day trial). The estimate then referred to one interim motion and identified the hours and charging rates for two solicitors at Withers and a fee for counsel. The estimate then had a figure for photocopying and miscellaneous items and against the word “Total” appeared the figure £206,570. Whilst I have not added up all of the sums which appear from the third line of the estimate under the heading “Substantive Action”, a rough check indicates that those sums totalled the figure of £206,570. In other words this “Total” did not include the first two lines which together amounted to approximately £150,000. If one added the first two lines to the “Total” of £206,570 the figure was more of the order of £356,000.[29]On 10th May 2005, Withers completed a listing questionnaire for the trial. The grand total at the bottom of the listing questionnaire is £461,534.24. This is remarkably different from the figure of £206,570 in the estimate attached to the e-mail of 6th May 2005. However, as I have pointed out, the total in the e-mail is in fact of the order of £356,000. Further, the figure of some £461,000 includes VAT. Precisely what figure one should take off for VAT is not clear. The VAT in part 2 of the listing questionnaire (paragraph 13) has obvious typing mistakes. Paragraph 14 which relates to disbursements is included under VAT but does not seem to relate to VAT. The figure in the summary below paragraph 14 is different from the figure apparently included in the total of £461,000 odd. However, if one takes off the total figure for VAT from the grand total of some £461,000 odd, the figure net of VAT is of the order of £388,000. By and large, the “base costs to be incurred” in the listing questionnaire figures are very similar to, but not identical to, the figures in the estimate of 6th May 2005 relating to the period after the 6th May 2005. There is however a difference in the base costs which had already been incurred, according to the listing questionnaire. Those costs net of VAT are approximately £198,000, whereas the total of the first two lines of the estimate attached to the e-mail of 6th May 2005 is approximately £150,000. It was suggested at the hearing before the Costs Judge that the explanation for this was the rendering of a further bill and, indeed, the e-mail of 6th May 2005 stated that a further bill was about to be sent to Mastercigars. The question whether the listing questionnaire came to the attention of Mr Kenyon on behalf of Mastercigars appears to have been explored at the hearing before the Costs Judge on the 6th March 2005 and the Costs Judge (in his judgment to which I will later refer) said that he treated this suggestion “with caution”.[30]The judgment of Judge Fysh at paragraphs 43 to 45, which I have quoted above, refers to a number of interlocutory hearings between the estimate of 6th May 2005 and the commencement of the trial on or about the 7th July 2005. Judge Fysh refers to hearings on 23rd June 2005, 29th June 2005 and 4th July 2005. In the documents before me I have also seen an order made by a Deputy Master on the 22nd June 2005. The estimate of 6th May 2005 had referred to “one interim motion”.[31]According to the transcript of the judgment of Judge Fysh, the trial before him took place on 16 days and he gave judgment on the 10th March 2006, a 17th day. Withers acted for Mastercigars throughout. Mr Kenyon of Mastercigars gave evidence as did two solicitors at Withers. When Mastercigars brought its appeal against the first instance decision, Withers initially acted for Mastercigars but, in October 2006, they were replaced by a new firm, Crane & Staples.[32]Withers have sent some 24 invoices to Mastercigars in connection with their work in advising, and acting for, Mastercigars in the litigation. When Costs Judge Rogers made his order on 13th November 2006, ordering a detailed assessment of Withers’ bills, he omitted the first 6 of these bills from his order for detailed assessment. Withers have appealed the Costs Judge’s order of 13th November 2006 on the grounds that he should have omitted a further 4 bills from his order for detailed assessment. Withers’ appeal was based on a contention that these further 4 bills had been paid more than 12 months before Mastercigars applied for an order for detailed assessment and so no such order could be made by reason of Section 70 (4) of the Solicitors Act 1974. Mastercigars accept that Withers’ contention on this point is well founded. Accordingly, of the 24 bills, the first 10 will not be the subject of detailed assessment but the last 14 will be.[33]For some reason that was not wholly explained, the parties do not agree on the total figure put forward by Withers in its 24 bills. Mastercigars says that the total figure is £1,054,121.45 and Withers say that the total figure is £1,040,575.71. There is also a dispute as to how much Mastercigars has paid. Withers say that Mastercigars has paid approximately £550,000 and Mastercigars says that it has paid approximately £610,000.

The Proceedings as to Costs

[34]It is now necessary to refer to some of the lengthy procedural history of the costs proceedings. On 17th August 2006, Mastercigars issued a Part 8 Claim Form claiming an order for the delivery of a bill of costs and an order for the detailed assessment of such a bill. The Particulars of Claim referred to the estimate of 6th May 2005 and to the fact that Withers’ invoices were for a figure substantially in excess of that estimate. It was contended that, apart from the additional days in court during the trial, Withers should not have exceeded the estimate without Mastercigars’ express authority and therefore Withers could not invoice any more than the estimate given. It was also pleaded that the charges were unreasonable and in support it was said that they bore no relation to the estimate of 6th May 2005.[35]On the 13th November 2006, the Costs Judge ordered that there should be a detailed assessment of some of Withers’ bills. He explained in a reserved judgment that he was eliminating 6 of the bills because they had been paid more than twelve months before Mastercigars’ application was issued. As explained above, it is now accepted that a further 4 bills must be treated in the same way and removed from the order for detailed assessment. The order of 13th November 2006 includes a direction:
“Until these proceedings are concluded the Defendant must not commence or continue any proceedings against the Claimant in respect of any of the bills [which are to be the subject of a detailed assessment].”
[36]The order of 13th November 2006 also directed that there be a preliminary issue “as to the scope and extent of the Defendant’s estimate dated 6th May 2005”. The Costs Judge then gave detailed directions as to the service of evidence in relation to the preliminary issue.[37]On the 21st February 2007, the Costs Judge gave further directions in relation to the preliminary issue. Paragraph 2 of his order provided as follows:
“For the avoidance of doubt the Preliminary Issue is intended to decide whether the Defendant’s revised estimate of 6th May 2005 was intended to cover a) only a four day trial b) any interlocutory applications that might be made by either side c) the number of expert witnesses d) the extent of the preparation necessitated by the above.”
[38]The trial of the preliminary issue took place before the Costs Judge on the 6th and 7th March 2007. In advance of that hearing, the parties had served evidence which they wished to rely upon. Mastercigars had served more than one witness statement from Mr Kenyon. Withers had served witness statements from two of its solicitors, Mr Maycock and Miss Harding. All three witnesses were cross examined at the hearing of 6th and 7th March 2007. Although the hearing was of a preliminary issue which had first been directed on the 13th November 2006, and which was intended to be clarified by the order of 21st February 2007, the evidence served by the parties appears very wide-ranging. There is evidence as to the involvement of Withers throughout the period of their instruction by Mastercigars. There is evidence which might be thought to go to the question of an explanation for the difference between the estimate of 6th May 2005 and the final bills. There is evidence that might be thought to go to the issue of whether, and if so to what extent, Mastercigars relied upon the estimate of 6th May 2005. I have not seen a complete transcript of the hearing on 6th and 7th March 2007 although I do have a transcript of the cross-examination of Mr Kenyon on the 6th March 2007. Mr Kenyon was cross-examined about certain specific items of work which were carried out by Withers but which might or might not have been included in the estimate of 6th May 2005. During the cross-examination of Mr Kenyon, the cross-examiner began a question indicating that she intended to refer to something that happened after 6th May 2005. The Costs Judge interrupted the question, saying:
“What we are concerned with is the effect, the estimate and its effect on the mind of the defendant. Subsequent events: we all know what happened afterwards but that cannot help me come to a decision on what was agreed or not agreed on 6th May, can it?”
The cross examiner responded:
“The position is that things took place after 6th May which were not included in the estimate of 6th May and which Mr Kenyon knew about.”
To this the Costs

Judge replied:

“With great respect to you, you are trying to widen the scope of the preliminary issue.”
This exchange seems to show a difference in approach being taken by the Costs Judge and by Withers. With respect to the Costs Judge, the point made on behalf of Withers as to what subsequently occurred and whether it was or was not included in the estimate would appear to be within the scope of the preliminary issue as referred to in the order 21st February 2007. Conversely, the Costs Judge’s suggestion as to the scope of the preliminary issue as to the “effect on the mind of the defendant” (by which he meant Mastercigars) does not seem to me to be within the scope of the preliminary issue. The only relevance of the effect of the estimate on the mind of Mastercigars is in relation to a question, which is certainly a relevant question, as to whether Mastercigars relied upon the estimate and if so to what extent. That does not seem to me to be within the preliminary issue, which the Costs Judge was meant to be trying.[39]Before the hearing on 6th and 7th March 2007, the Costs Judge had received skeleton arguments from both sides and at the hearing he requested closing submissions in writing. The submissions of the parties also revealed a difference in approach as to the subject matter of the hearing of the preliminary issue. In the skeleton argument on behalf of Mastercigars, it was contended that Withers should not be entitled to claim costs in excess of the estimate, save to the extent that the costs were incurred with the express authority of Mastercigars and were reasonable. It was also contended that there should be implied into Withers’ retainer a term incorporating the relevant provisions of the Solicitors’ Costs Information and Client Care Code. It was further contended that, as a matter of contract, Withers were not entitled to charge in excess of the estimate, again, save to the extent that the costs had been expressly authorised by the claimant. This skeleton was all about the terms of the contract of retainer and whether it was necessary for Withers to obtain express authority before they did work and incurred charges, and whether they did so. In my judgment, it is difficult to square those submissions with the preliminary issue as defined in the order of 21st February 2007. The skeleton argument on behalf of Withers, served before the hearing on 6th and 7th March 2007, did appear to address the preliminary issue in that it identified work which, it is said, was done in addition to the work summarised in the estimate.[40]In the written closing submissions on behalf of Mastercigars, Mastercigars continued to take the approach identified in its opening skeleton argument. The principal case was, again, based on the interpretation of the solicitors’ retainer, the argument as to an implied term and the argument that work was done without express authority and so Withers were not entitled to charge for it. The skeleton argument then dealt with various points raised by Withers and refered to the involvement of leading counsel, the fees charged by counsel, the question of expert evidence, witness evidence and interlocutory hearings. It also addressed the question as to whether Mastercigars was told that the estimate would be exceeded. Finally, Mastercigars submitted that they had relied upon the estimate.[41]The closing submissions of Withers began by setting out the preliminary issue order on the 21st February 2007 and then sought to address the 4 matters referred to in that preliminary issue, namely, the 4 day trial, the interlocutory applications, the number of expert witnesses and the extent of preparation necessitated by the above. In Withers’ closing submissions, under the heading “reliance”, it was stated:
“Mr Kenyon gave evidence that he had relied on the 6th May 2005 estimate given. This was not an issue in the preliminary issue and any cross-examination to test such reliance was disallowed by the court. In these circumstances it is not anticipated that the court would consider it appropriate to deal with any issue on reliance at this stage.”
My attention was not drawn to any passage in the cross-examination of Mr Kenyon where the court stopped the cross-examiner exploring the issue of reliance with Mr Kenyon. The passage I have referred to above where the Costs Judge discouraged cross-examination may be open to interpretation but, if anything, the Costs Judge seems to be suggesting that the effect of the estimate on the mind of Mastercigars was what the court was concerned with. Mr Morgan QC, appearing for Withers before me, relied on this statement in Withers’ closing submissions to show that the Costs Judge was not investigating the question of reliance at the preliminary issue and this submission was not contradicted by Mr Farber, who appeared on behalf of Mastercigars.[42]The Costs Judge gave a reasoned judgment on the 25th April 2007. He explained that the preliminary issue had been redefined on 21st February 2007 following certain comments made by the Court of Appeal in Lahey v Pirelli Tyres Limited [2007] EWCA Civ 91 as to the importance of a clear definition of a preliminary issue so as to avoid confusion. The Costs Judge then referred to the witness statements put before him from Mr Kenyon, Mr Maycock and Miss Harding. He then referred to the e-mail of 6th May 2005 and the Solicitors’ Costs Information and Client Care Code, which he set out in detail. At paragraphs 34 to 57, he referred to many of the matters discussed in the cross-examination of the witnesses. In those paragraphs, he certainly expressed preference for some witnesses over others in some respects and he indicated that the cross-examination challenged the evidence more successfully or less successfully in certain places. However, with respect to the Costs Judge, he did not set out clear findings of fact on the matters he discussed. I will attempt to summarise some of the Costs Judge’s discussion in so far as it is at present material.[43]In paragraphs 34 to 36, the Costs Judge appeared to accept, or largely accept, the suggestion put by Withers that Withers did much more work in the period from May 2005 until the beginning of the trial, than had been contemplated when the estimate was given. The Costs Judge also accepted that Mr Kenyon on behalf of Mastercigars was involved in the detail of the day to day running of the case. At paragraphs 37 to 39, the Costs Judge referred to the work done in relation to new witnesses from Cuba. He recorded that there was an issue as to the extent to which Withers, as distinct from Mastercigars, were involved in work on that matter. However, as I read this judgment, he did not resolve that issue. At paragraph 40 of his judgment, he dealt with the assertion by Withers that Mr Kenyon was informed by Withers of the additional costs of the additional work. He said that the cross-examiner was “far less successful” in establishing this. Later in his judgment, the Costs Judge stated that Mr Kenyon emerged from cross examination in far better shape than either Mr Maycock or Miss Harding. At paragraph 63, he rejected a slightly different submission that Mr Kenyon should have asked for an updated estimate. This treatment of the evidence came close to the Cost Judge holding that Mr Kenyon had not realised that he would be charged additional costs for the additional work.[44]In the case of Mr Maycock’s evidence, Mr Maycock was asked why the final bills were so greatly in excess of the estimate of 6th May 2005. The Costs Judge plainly felt that Mr Maycock had not done his homework and when Mr Maycock suggested that the level of counsel’s fees was the explanation for the difference, the Costs Judge was satisfied that this was not a reliable explanation. He held at paragraph 50 that Mastercigars had made substantial progress undermining Withers’ case by way of the admissions extracted from Mr Maycock. In relation to Miss Harding’s evidence, the Costs Judge discussed the difference between the estimate of 6th May 2005 and the listing questionnaire. Miss Harding had suggested that the important matter was to win the case for Mastercigars and they had “an open book” to charge what was reasonable to achieve the desired end. Miss Harding apparently conceded under cross-examination that the estimate of 6th May 2005 did not support this. At paragraphs 54 and 55, the Costs Judge appeared to find that there was no evidence that the listing questionnaire was brought to the attention of Mr Kenyon on behalf of Mastercigars.[45]At paragraph 58 of his judgment, the Costs Judge commented that Withers’ closing submissions had tended to concentrate on specific issues. In relation to that I would comment that that is entirely what should have been done. At paragraph 59, the Costs Judge recorded Mastercigars’ closing submission that the matter had to be looked at as a matter of contract and that the evidence showed that there had been no updating of the May 2005 estimate “as there should have been”. The Costs Judge noted Mastercigars’ reliance, for the purposes of this submission, on the Client Care Code and on a passage in Cook on Costs, 2007 Edition, on page 15, which is quoted by the Costs Judge and which appears to suggest that a solicitor will be unable to recover costs in excess of an estimate unless the client is told that the costs are about to exceed the estimate and the client agrees to pay for the further costs.[46]The Costs Judge expressed his conclusions in paragraphs 62 to 72. He concluded that Withers did not comply with the client care code. He rejected the suggestion that Mr Kenyon should have asked for an up to date estimate. He accepted that Mr Kenyon would have been aware that there were “twists and turns” occurring in the case but, said the Costs Judge, that was not the same as Mr Kenyon realising it was going to cost him “a lot more money”. At paragraph 65, he recorded that Mastercigars (and it would seem Withers) were not expecting the extent of the resistance in the trade mark litigation. At paragraph 66 the Costs Judge said:
“I consider, in agreement with Mr Brown’s closing submissions, that this case really turns on the true contractual position as set out in the documents. If and insofar however as it is necessary to come to any conclusion as to the conflicting oral evidence, I have to say that I prefer that of Mr Kenyon to that of Mr Maycock and that of Miss Harding.”
[47]The Costs

Judge went on:

“67. Accordingly, on all the evidence, oral and documentary, that has been presented to me, I conclude that the defendant is bound by the estimate annexed to Mr Maycock’s fax to Mr Kenyon of 6th May, with the exceptions conceded by Mr Kenyon. 68. Obviously, these must include fees of both leading and junior counsel for the additional days to the end of the trial, together with the solicitors’ attendance in court on those days. 69. However it is much more difficult to decide for how much additional preparation the defendant should be paid.”
[48]It can be seen that the Costs Judge accepted Mr Brown’s submissions set out at paragraphs 59 and 60 of the judgment. That submission had analysed the position as being governed by the terms of the contract and the Code and relied on the passage in Cook on Costs, to the effect that the solicitor could not recover costs in excess of the estimated amount, unless the client is asked to agree and does agree to pay in excess of the estimated amount. It should be noted, however, that there is an immediate inconsistency between that submission and a finding that Mastercigars is liable for substantial fees for counsel and for the solicitor for many additional days of trial when there was no material to indicate that Mastercigars had been asked at the time to agree to pay for those costs, nor that they had agreed at the time to pay for those costs.[49]In paragraphs 70 and 71 of the judgment, the Costs Judge referred to Anthony v Ellis & Fairbairn (a case to which I refer below) in support of a submission from Mastercigars that the basis of calculating the extra days’ costs should have regard to the terms of the estimate as regards rates. At paragraph 72, the Costs Judge invited the parties to agree a form of order and at paragraph 73, he stressed that the judgment related exclusively to a preliminary issue and that the detailed assessment of the bills remained to be dealt with.[50]When the Costs Judge handed down his judgment on the 25th April 2007, he was presented with a draft order from each party. In effect, he made the order as drafted by Mastercigars. Paragraph 1 of his order reads:
“The defendants be bound by the sum set out in the Estimate provided by the defendants to the claimant on 6th May 2005.”
[51]Paragraph 2 of his order, which is arguably in contradiction of paragraph 1, states that Withers are to be limited to the sum set out in the estimate save as regards the fees of counsel and the profit costs of solicitors for the further days of the trial. Paragraph 2 of the order then identified the rates to be charged for counsel and solicitors as rates which were not to be exceeded when fixing a suitable sum. Paragraph 3 makes clear that the figures stated in paragraph 2 are maxima and might be assessed downwards, by reference to reasonableness.[52]Withers appealed the order of 25th April 2007. This is the third appeal. It is not necessary to set out all of the grounds of appeal, which are lengthy. Amongst the points made in the grounds of appeal was the suggestion that the Costs Judge did not make an express finding on the preliminary issue as defined, but instead decided a different issue and in that way acted unfairly to Withers. It was also contended that the Costs Judge was wrong to hold that Withers were bound by the precise sum set out in the estimate and that the estimate was not a fixed quotation and whatever his finding as to the scope of the estimate he ought to have allowed a margin over the estimate which “as a matter of general law ought to have been not less than 15%”. It was also contended that the Costs Judge had failed to include in his reasons a finding as to whether Mr Kenyon had relied on the estimate. In paragraph 8 of the grounds of appeal Withers contended that even if Withers was bound by the estimate they were entitled to add a charge for further work which was said to be conceded by Mr Kenyon and in particular 6 categories of work were identified.[53]To finish the story in relation to the procedural history of the costs proceedings, I will refer in outline to the other orders which have been made although I will need to refer to those matters in more detail when I consider the second and fourth appeals, brought by Mastercigars.[54]Following judgment being given by the Court of Appeal in the trade mark litigation on 8th March 2007, Withers applied for a charging order under Section 73 of the Solicitors Act 1974 and pursuant to the inherent jurisdiction of the court. That application was heard by the Costs Judge on 22nd March 2007, when he made a charging order in favour of Withers. The benefit of the charging order was expressed to be in relation to Withers’ taxed costs incurred after 31st May 2005 in relation to the trade mark litigation, rather than the entirety of the costs claimed by Withers. The reason for this was that Withers wanted to maintain the stance that costs incurred before 31st May 2005 could not be the subject of a detailed assessment, by reason of Section 70(4) of the Solicitors Act 1974. The matters which were charged in this way were the party and party costs payable to Mastercigars by Hunters & Frankau Limited and by HSA and it was further provided that this charge extended to the two orders made by the Court of Appeal for payment on account of costs, namely, the sum of £83,000, on account of the costs of the appeal, and the sum of £300,000, on account of the costs of the first instance proceedings.[55]On the 15th May 2007, the Costs Judge varied the order of 22nd March 2007 so that the sum of £75,000 should be released from the charging order and paid to the solicitors for Mastercigars.[56]On the 18th July 2007, the Costs Judge considered a further application from Mastercigars for the further relaxation of the charging order of 22nd March 2007 and he dismissed that application.[57]On the 31st August 2007, the Costs Judge made a further order varying the charge of 22nd March 2007 so as to permit the release of £40,000 for the purpose of Mastercigars being represented in the detailed assessment proceedings.[58]I will deal with the third appeal (against the order of 25th April 2007) before I deal with the second and fourth appeals (against the orders of 22nd March 2007 and 15th May 2007).

The Submissions in relation to the Third Appeal

[59]Mr Morgan prepared a detailed skeleton argument in support of his original application for permission to appeal the Costs Judge’s order of 25th April 2007. Permission to appeal was granted on paper by Briggs J on 25th May 2007. Following the grant of permission to appeal, Mastercigars conceded the appeal in relation to paragraph 2 of the order of 25th April 2007. Paragraph 2 of that order was favourable to Withers in the sense that it allowed Withers to add some costs for the trial after the fourth day but was thought to be unfavourable to Withers in that it contained limitations in other respects on the recovery of costs after the fourth day of the trial. As I understand it, the concession by Mastercigars of the appeal in relation to paragraph 2 of the order is not intended to take away from Withers the benefit of the Master’s decision that Withers could add costs for the litigation after the fourth day of the trial and to that extent Withers are not bound by the figures in the estimate of 6th May 2005 (notwithstanding what paragraph 1 of the order appears to say).[60]At the hearing before me, Mr Morgan explained that in view of the concession in relation to paragraph 2 of the order, some parts of the appellant’s notice and the supporting skeleton argument did not need to be pursued. His skeleton argument addressed in detail the scope of the preliminary issue ordered on the 21st February 2007 and he submitted that the Costs Judge did not decide that preliminary issue but instead decided something else and in so doing acted unfairly to Withers. Mr Morgan cited Wong v Vizards [1997] 2 Costs LR 46 and Anthony v Ellis & Fairbairn [2000] 2 Costs LR 277 and submitted that the Costs Judge should, at the very least, have allowed a margin above the estimate of 6th May 2005. He suggested a margin in the present case of 20-25%. Mr Morgan then addressed the Solicitors’ Costs Information and Client Care Code 1999. He submitted that a solicitor should not be restricted to the figures in an estimate where work outside the estimate was carried out and that work could not reasonably have been anticipated at the date of the estimate. As to the suggestion from Mastercigars that there should be a term implied into the contract which would in some way limit the solicitors to the figures in the estimate, Mr Morgan submitted that no such term was necessary and therefore should not be implied. Ground 8 of the appeal had listed some six matters which, it was submitted, fell outside the scope of the estimate and Mr Morgan made a detailed submission by reference to the cross examination of Mr Kenyon to the effect that Mr Kenyon had conceded that those 6 matters were outside the estimate.[61]At the hearing, Mr Morgan made further submissions supplementing his skeleton argument. He explained that what Withers wanted to achieve with its appeal was an order that the total costs to be allowed to Withers on a detailed assessment in respect of the period from 6th May 2007 to the end of the fourth day of the trial should be capped at the amount of the estimate namely £206,750 plus VAT subject to: a) the allowance of a percentage margin over the estimate (he suggested a margin of the order of 20-25%) and b) the allowance of a reasonable amount to be determined on a detailed assessment in respect of the matters set out in paragraphs 8(b) to 8(f) of the grounds of appeal, which were not reasonably anticipated at the date of the estimate. Mr Morgan explained that this result would require there to be a further hearing. He said that Withers accepted the Costs Judge’s findings in his reasoned judgment of 25th April 2007 to the effect that Withers did not bring home to Mr Kenyon of Mastercigars the fact that there would be additional costs over and above the estimate and so it was accepted that the estimate had “a limiting effect” on the amount recoverable. On the facts, he submitted that the estimate was provided some two months before a hearing which had been ordered to be an expedited hearing. This had the result that there was a great deal of work concentrated into the two month period and the solicitor’s primary focus during that busy period was on the litigation, rather than involving itself in the constant process of updating the estimate. He also submitted that in relation to the period from 6th May 2005 to the end of the fourth day of the trial, the disparity between the estimated figure and the actual figure was not as great as had been portrayed. The actual costs for that period claimed by Withers were £279,000 approximately compared with £207,000 approximately in the estimate. I should say that this comparison was not said to be wrong by Mastercigars but was said to be very misleading. Some of the fees for counsel in the estimate were significant over-estimates. If one compared Withers’ profit costs as between the estimate and the actual bill, the estimated figure for profit costs was said by Mastercigars to be £59,000 and the figure claimed was £166,000. Mr Morgan then addressed me in detail as to the legal relevance of an estimate given by a solicitor to a client. In particular, he explained Withers’ position as to the part played by the Code, the common law as to reasonableness, the law as to implied terms and the suggestion of Mastercigars that the estimate in some way defined the ambit of the retainer. He cited the decision in Garbutt v Edwards [2006] 1WLR 2907. He placed considerable reliance on the decision in Wong v Vizards, both as to the discussion in that case which dealt with charges outside the estimate, which the client must have appreciated he would be expected to bear, and the discussion of the question of a margin over the estimate.[62]Mr Farber and Mr Brown prepared a detailed skeleton argument on behalf of Mastercigars. They relied on Rule 15 of the Solicitors’ Practice Rules and the Solicitors’ Costs Information and Client Care Code. They submitted that a term was to be implied into the contract of retainer that Withers would abide by the terms of the Code, in particular paragraph 6, dealing with updating costs information. Such a term was necessary to give efficacy to the contract because without such a term the client had no contractual means of controlling costs. It was submitted that the Costs Judge had accepted this argument and had found there was such an implied term. It was further submitted that costs which exceeded an estimate were necessarily unreasonable unless authorised by the client. They submitted that the preliminary issue was not limited to what was ordered on the 21st February 2007 but included the preliminary issue ordered on the 13th November 2006 which required the court to decide “the scope and extent” of the estimate. The basic question before the Costs Judge was as to the effect of the estimate. It was submitted that the witness statements and the cross examination went beyond the four issues specified in the order of 21st February 2007. It was then submitted that there was now no need to determine the four issues in the order of 21st February 2007. Wong v Vizards was not an authority which enabled Withers to charge for work not anticipated at the time of the estimate and/or to recover a margin over and above the estimated figure. Further, in Wong v Vizards there was no margin as the Judge did not allow an increase above the maximum figure in the estimate. The skeleton argument contained detailed submissions as to Mastercigars’ reliance on the estimate and made further submissions as to the individual items listed in ground 8 of the appellant’s notice.

Matters requiring Consideration in relation to the Third Appeal

[63]It seems to me that it is appropriate to deal with the many issues arising in relation to the third appeal by considering the following matters in turn. I will first consider the terms of the retainer in this case (apart from the suggested implied term put forward by Mastercigars). I will then consider in some detail the normal function of an estimate provided by a solicitor to a client and will refer to the statutory and regulatory background and the case law. I will then deal with Mastercigars’ case as to an implied term and finally deal with the Mastercigars’ case as to the limitation on the retainer, or the suggested inability of a solicitor to charge a sum not stated in the estimate, unless there is prior express authority to do so.

The Terms of the Retainer

[64]Speaking generally, an estimate as to cost or price is a statement that the charging party expects that the work will consist of this or that item and will take a stated amount of time, to which an identified rate of charging will be applied. The estimate of 6th May 2005 referred to a number of categories of work which were expected to need to be carried out between 6th May 2005 and the trial. Examples were the preparation of expert evidence and the consideration of the defendants’ expert evidence. The estimate stated that it was for an identified number of hours on the part of Mr Maycock and a different number of hours on the part of Miss Harding, and their hourly charging rates are given. In these respects, the estimate involved a prediction of something which was not wholly predictable and under the control of Mastercigars and Withers. It might turn out to be the case that less work was required than was estimated for. It might turn out to be the case that the solicitor with the lower hourly rate could do a greater proportion of the work than the estimate envisaged. Of course, the converse of both of these might well be the case.[65]I have referred to the Withers’ standard terms of business provided with the letter of 11th March 2005. Paragraph 4 of those terms made it quite clear what the estimate was not intended to be. It was not a fixed quotation. Therefore the retainer was not a contract under which the solicitor was to do a fixed amount of identified work in return for which they were to recover an agreed fixed price whether the work took less time or more time than predicted. Equally, the estimate was not an upper limit on costs. If the parties had agreed an upper limit on costs then Withers would be entitled to say when that upper limit was reached that they did not intend to do any further work unless and until the client agreed terms for that further work and, in particular, terms as to payment for it. Equally, Withers would not be entitled, without consulting the client, to do the further work, or at any rate would not be entitled to charge for the work, if they did so.[66]The contact of retainer in this case was subject to Section 15 of the Supply of Goods and Services Act 1982. Section 15(1) states that where, under a contract for the supply of a service, the consideration for the service is not determined by the contract (or otherwise determined), there is an implied term in the contract that the party contracting with the supplier will pay a reasonable charge. Section 15(2) states that the amount of the reasonable charge is “a question of fact”. Accordingly, the express and implied terms of the retainer in the present case entitled Withers to claim a reasonable fee for the work they have done within the scope of the retainer. Nonetheless, Mr Morgan accepts that the estimate in this case has a limiting effect of some kind. Before addressing the specific effect he contends for, it seems to me to be appropriate to discuss, as a matter of general principle, precisely what is the impact of an estimate upon a service provider’s ability to recover a reasonable fee.[67]Finally, in relation to the terms of the retainer, I will deal with the effect of the statement made in Withers’ letter of 11th March 2005 that they would “update this cost estimate from time to time as events develop”. Mastercigars referred to this statement at the hearing before me but they tended to emphasise their case as to the possible implication of a term into the retainer (a topic which I consider later in this judgment) rather than this express term. There is obviously some scope for argument as to precisely what was required pursuant to this reference to “updating”. For example, it might be possible to argue that a new estimate did not have to be provided before every single item of additional work was undertaken, no matter how insignificant the work was and no matter what pressures there were on the solicitors to do the work first and explain the cost consequences second. Nonetheless, subject to possible qualifications of that kind, I would be minded to regard the statement in the letter as a contractual promise which would give Mastercigars a remedy if the promise was broken.[68]What remedy would Mastercigars have if the promise to update the estimates was not complied with? The obvious remedy would be a claim to damages. Such a claim would require the client to prove on the balance of probabilities that it would have been in a better position if an estimate had been provided. That would be quite a difficult thing for a client to prove. The promise to update estimates was not, in my judgment, a condition precedent to Withers recovering any sum in addition to the sums set out in the estimates which had been provided.

The Effect of an Estimate

[69]It is appropriate to begin by considering the rules which govern a solicitor’s conduct in relation to the provision of an estimate of legal costs to his client.[70]The Solicitors Practice Rules 1990 were made pursuant to Section 31 of the Solicitors Act 1974. The rules have the force of subordinate legislation: see Swain v Law Society [1983] AC 598. Before turning to the rules themselves, it is relevant to refer to some other provisions in the Solicitors Act 1974. Section 37A of the 1974 Act gives effect to Schedule 1A to the 1974 Act, with respect to the provision by solicitors of services which are not of the quality which it is reasonable to expect of them. Under Schedule 1A, the Council of the Law Society may take any of the steps mentioned in paragraph 2 of Schedule 1A with respect to a solicitor, where it appears to them that the professional services provided by him in connection with any matter in which he or his firm have been instructed by a client have, in any respect, not been of the quality which it is reasonable to expect of him as a solicitor: see paragraph 1(1). The Council is not to take any of these steps unless they are satisfied that in all the circumstances of the case it is appropriate to do so: paragraph 1(2). In determining whether it is appropriate to take any of the steps, the Council may, in particular, have regard to the existence of any remedy which it is reasonable to expect to be available to the client in civil proceedings: paragraph 1(3). Under paragraph 2(1)(a), the Council may determine that the costs to which the solicitor is entitled in respect of his services are to be limited. Further, the Council may direct the solicitor to comply with the “permitted requirements”, defined in paragraph 2(2), which refer to a refund or a remission or a waiver of costs. Under paragraph 2(1)(b), the Council may direct the solicitor to rectify the deficiency in question. Under paragraph 2(1)(c), the Council may direct the solicitor to pay such compensation as the Council sees fit. Paragraph 3(1) specifies the maximum amount of compensation that may be ordered under paragraph 2(1)(c). Before 1st January 2006, the maximum figure was £5,000 and this was increased to £15,000 from 1st January 2006. Paragraph 4 deals with the taxation of the solicitor’s costs. The purpose of paragraph 4 is to ensure that any limit on recoverability of costs imposed by the Council under paragraph 2(1)(a) is reflected in the taxation.[71]Rule 15 of the Solicitors Practice Rules 1990 provides that solicitors shall give information about costs and other matters in accordance with a Solicitors’ Costs Information and Client Care Code made from time to time. The Law Society published notes by way of a commentary on Rule 15 and these notes form part of the Rules. The notes distinguish between three different levels of culpability as regards breaches of the code. The lowest level of culpability concerns “non-material breaches of the code”. These are not a breach of Rule 15 and are not evidence of inadequate professional services under Section 37A of the 1974 Act. An intermediate level of culpability concerns “material breaches of the code which are not serious or persistent”. These breaches will not be a breach of Rule 15 but may be evidence of inadequate professional services under Section 37A. The highest level of culpability concerns “a serious breach of the code or persistent breaches of a material nature”. Breaches at this level will be a breach of Rule 15 and may also be evidence of inadequate professional services under Section 37A of the Solicitors Act 1974. It follows from the above that there is no identified consequence for “non-material breaches of the code” and the identified consequence for other breaches of the code depends upon the degree of culpability.[72]The current code which is relevant for the purposes of Solicitors Practice Rule 15 is the Solicitors Cost Information and Client Care Code 1999, which came into force on the 3rd September 1999. This code has been amended since 1999 and the copy provided to the court showed the provisions of the code when Withers were acting for the client and, as stated in Practice Rule 15, were required to “give information about costs”. (The 1999 Code has now been replaced by the Solicitor’s Code of Conduct, with effect from 1st July 2007.) The provisions of the 1999 Code are important and detailed. In view of the detail, I will not set out the provisions verbatim but will draw attention to the more important features. Paragraph 1(b) of the Code identifies that the main object of the Code is to make sure that clients are given the information they need, to understand what is happening generally, and in particular on the costs of legal services at the outset and as the matter progresses. Paragraph 1(d) of the Code states that it is good practice to record in writing all information required to be given by the Code and the reasons why information required by the Code has not been given in a particular case. Paragraph 2(b) of the Code identifies certain circumstances in which the full information required by the Code may be inappropriate. These cases include cases of repetitive work and also refer to the point of time being an insensitive or impractical one for giving such information, in which case the information should be given as soon as reasonably practicable. Paragraph 3(a) refers to costs information which must not be inaccurate or misleading. Paragraph 3(c) states that the information required for paragraphs 4 and 5 of the Code should be given at the outset of, and at appropriate stages throughout, the matter. Paragraph 4(a) states that the solicitor should give the client the best information possible about the likely overall costs. Under paragraph 4(b), the solicitors should explain clearly to the client the time likely to be spent in dealing with the matter, if time spent is a factor in the calculation of the fees. Paragraph 4(c) identifies four possibilities relevant to the concept of “giving the best information possible”. The first possibility is a fixed fee; the second possibility is “a realistic estimate”; the third possibility is a forecast within a range; and the fourth possibility is an explanation as to why it is not possible to do any of the above, in which case the solicitor should give the best information possible about the cost of the next stage of the matter. Paragraph 4(d) refers to the possibility of the solicitor explaining to the client that the client may set an upper limit on the costs for which the client may be liable without further authority and so that the solicitors should not exceed the agreed limit without first obtaining the client’s consent. Under paragraph 4(e), the solicitor should make it clear at the outset if an estimate is not intended to be fixed. Under paragraph 4(g), the client should be told that charging rates may be increased. Paragraph 4(h) states that the solicitor should explain what reasonable foreseeable payments the client may have to make either to the solicitor or a third party and when those payments are likely to be needed. Paragraph 4 also deals with the client’s ability to pay the solicitor’s costs. Paragraph 4(k) states that the solicitor should discuss with the 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. Paragraph 5(b) sets out in detail the explanation a solicitor is required to give a client as to the potential liability to pay the opponent’s costs in certain cases. Paragraph 6 of the Code deals with updating costs information. The solicitor must keep the client properly informed about costs as a matter progresses and in particular must explain to the client and confirm in writing any changed circumstances which will affect, or which are likely to affect, the amount of costs, the degree of risk involved, or the cost-benefit to the client of continuing with the matter. The solicitor must also inform the client in writing as soon as it appears that a costs estimate or agreed upper limit may or will be exceeded.[73]The Guide to the Professional Conduct of Solicitors 1999 draws attention to Part III of the Consumer Protection Act 1987, which deals with misleading price indications. The Guide states that to give an estimate which has been pitched at an unrealistically low level solely to attract the work and subsequently to charge a higher fee for that work is improper because it misleads the client as to the true or likely cost.[74]As stated above, under section 15 of the Supply of Goods and Services Act 1982, it is an implied term in law in the contract of retainer of a solicitor that the solicitor will be paid reasonable remuneration for his services. Under Section 70 of the Solicitors Act 1974, a client is entitled, in the circumstances therein specified, to a detailed assessment of the solicitor’s bill. CPR Rule 43.2(2)(a)(iii) provides that the costs, to which the rules in Parts 44 to 48 apply, include costs payable by a client to his solicitor. CPR Rule 48.8 deals with the basis for detailed assessment of solicitor and client costs. Rule 48.8(2) provides, so far as material, the costs are to be assessed on the indemnity basis but are to be presumed: a) to have been reasonably incurred if they were incurred with the express or implied approval of the client; b) to be reasonable in amount if the amount was expressly or impliedly approved by the client; c) to have been unreasonably incurred if – i) they are of an unusual nature or amount; ii) the solicitor did not tell his client that as a result he might not recover all of them from the other party. Rule 48.8 is also summarised in 48PD, paragraph 54.[75]It is also relevant to refer to the Practice Direction in relation to Part 43. Section 6 of 43PD deals with estimates of costs. This is not directly relevant to the position as between solicitor and client because it is principally relevant in connection with an assessment of costs between the parties. However, it is not confined to inter parties matters because paragraph 6.1 states that Section 6 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”. This seems to include the concept of a solicitor keeping his own client, one of the parties, so informed. Of course, Section 6 of 43PD is not a complete statement of the obligations on the solicitor to keep his own client informed, as is apparent from the terms of the 1999 Code, made pursuant to the Solicitors Practice Rule 15. In any case, it is relevant to consider the terms of Section 6 of 43PD because of the part it plays in one of the decisions of the Court of Appeal to which I will later refer.[76]Section 6 of 43PD refers to the occasions under CPR when a party should serve an estimate of costs as defined in Section 6. Before Section 6 was amended on the 30th September 2005, paragraph 6.6 of 43PD read as follows:
“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.”
[77]Section 6 of 43PD was amended on 30th September 2005 and paragraphs 6.5A and 6.6 now read: “6.5A 1) if there is a difference of 20% or more between the base costs claimed by a receiving party on detailed assessment and the costs shown in an estimate of costs filed by that party, the receiving party must provide a statement of the reasons for the difference with his bill of costs.” 2) if a paying party- a) claims that he reasonably relied on an estimate of costs filed by a receiving party; or b) wishes to rely upon the costs shown in the estimate in order to dispute the reasonableness or proportionality of the costs claimed, the paying party must serve a statement setting out his case in this regard in his points of dispute. 6.6 1) 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 and proportionality of any costs claimed. 2) In particular where – a) there is a difference of 20% or more between the base costs claimed by a receiving party and the costs shown in an estimate of costs filed by that party; and b) it appears to the court that – i) the receiving party has not provided a satisfactory explanation for that difference; or ii) the paying party reasonably relied on the estimate of costs; the court may regard the difference between the costs claimed and the costs shown in the estimate as evidence that the costs claimed are unreasonable or disproportionate”. 2) if a paying party- a) claims that he reasonably relied on an estimate of costs filed by a receiving party; or b) wishes to rely upon the costs shown in the estimate in order to dispute the reasonableness or proportionality of the costs claimed, the paying party must serve a statement setting out his case in this regard in his points of dispute. 1) 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 and proportionality of any costs claimed. 2) In particular where – a) there is a difference of 20% or more between the base costs claimed by a receiving party and the costs shown in an estimate of costs filed by that party; and b) it appears to the court that – i) the receiving party has not provided a satisfactory explanation for that difference; or ii) the paying party reasonably relied on the estimate of costs; the court may regard the difference between the costs claimed and the costs shown in the estimate as evidence that the costs claimed are unreasonable or disproportionate”.[78]43PD paragraphs 6.5A and 6.6 refer to reasonableness and proportionality. This is because, when costs are assessed on the standard basis, the assessment has to consider both reasonableness and proportionality. Conversely, when costs are assessed between solicitor and client on the indemnity basis, the assessment does not have to take account of proportionality. This difference must be borne in mind in connection with any suggestion that paragraphs 6.5A and 6.6 of 43PD are directly material to a detailed assessment between solicitor and client.[79]Having described the relevant statutory material and the relevant rules, I will now consider two decisions of the Court of Appeal, namely, Leigh v Michelin Tyre Plc [2004] 1WLR 846 and Garbutt v Edwards (Law Society intervening) [2006] 1WLR 2907. It is necessary to examine both of these decisions in a little detail to see what guidance they offer in the present context.[80]Leigh v Michelin Tyre Plc concerned a detailed assessment on the standard basis of the costs payable by one party to the litigation to the other party to the litigation. The case was a personal injuries action. The claimant’s solicitor had lodged an overall costs estimate of £6,000 plus VAT at the allocation questionnaire stage and had never revised it. The action was then settled apparently on terms that the defendant should pay the claimant’s costs on the standard basis and the claimant lodged a bill of costs claiming nearly £22,000, which the district judge assessed at approximately £20,500. The principal issue in the appeal was the relevance to the detailed assessment of the claimant’s solicitor’s estimate at the allocation questionnaire stage. At the time of this decision, 43PD did not contain paragraph 6.5A and contained paragraph 6.6 before amendment in September 2005. The judgment of the Court of Appeal was given by Dyson LJ. At [15], Dyson LJ explained why the provisions of the CPR as to the giving of estimates of costs were important. Their purpose was 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. At [16], it was stated that costs estimates were an important part of the machinery of case management. At [21] it was stated that the original paragraph 6.6 of 43PD had been “drafted conservatively” by which Dyson LJ meant that paragraph 6.6 said that the court was able to have regard to the estimate and was able to take it into account but paragraph 6.6 did not introduce criteria for the assessment of costs which were inconsistent with or additional to those contained in CPR Rule 44.5 itself. At [22], one of the purposes of the Practice Direction was noted to be a requirement that the solicitors serve the costs estimates on their own clients. At [24], it was pointed out that 43PD gave no guidance as to how the difference between the estimate and the bill should be taken into account in determining the reasonableness of the costs claimed. It was clear that some guidance was needed. Dyson LJ referred to an article which made a comparison between estimates of costs in litigation and estimates of building costs. The article included this statement:
“In project management proper estimating is crucial, contingencies are built in and if the estimate is exceeded the contractor must explain. In cost assessment terms estimation, in effect, should shift the burden of proof onto the potentially receiving party to estimate correctly …… and to re-estimate.”
[81]At paragraphs [26] to [44] of Leigh, Dyson LJ gave guidance as to the relevance of an estimate of costs provided by one party to litigation when that party’s costs came to be the subject of a detailed assessment. The passage is lengthy and repays study. In view of its length I will not set it out verbatim but will refer to what appear to be the key points. At [26], Dyson LJ indicated that the estimate should usually provide a useful yardstick by which the reasonableness of the costs finally claimed may be measured. If there were a substantial difference between the estimated costs and the costs claimed, that difference called for an explanation. In the absence of a satisfactory explanation, the court might conclude that the difference is evidence from which the court can conclude that the costs claimed are unreasonable.[82]At [27], Dyson LJ referred to the possibility that a party might have relied upon the estimate in a certain way. An example would be where a party relied on a relatively low estimate given by the other party and decided not to make an offer of settlement believing that his potential liability for costs was of the order indicated in the estimate. The court could take such a factor into account.[83]At [28], Dyson LJ referred to the possibility that the court itself may have made its case management decisions on the basis of the estimate being realistic.[84]At [29], it was pointed out that these factors could be taken into account when considering reasonableness. However, Dyson LJ thought it would not be a correct use of the power conferred by 43 PD para 6.6 to hold a party to his estimate to penalise him for providing an inadequate estimate. That would be tantamount to treating a costs estimate as a costs cap where the estimate did not purport to be a cap. At [30], it was explained that the court might impose a costs cap but that was a different jurisdiction from a detailed costs assessment where the costs were looked at after the event. At [31], Dyson LJ acknowledged a concern about the danger of satellite litigation. He referred to various questions that might arise as to the fact of reliance on the estimate and the extent of such reliance. He also referred to the need to have an explanation for the difference between the estimate and the costs claimed. He suggested that it would not be difficult for the court to determine whether, and if so how, a paying party had relied upon an estimate without conducting an elaborate and detailed investigation. At [32], Dyson LJ asked the question “by how much should the costs be reduced?” He suggested this would depend on the circumstances of the individual case and was a matter for the judgment of the court to decide what reduction to make. At [33], Dyson LJ suggested that the costs judge should determine how, if at all, to reflect the costs estimate in the assessment before going on to decide on individual items in the bill.[85]At [35] to [38], Dyson LJ dealt with the facts of, and the arguments in, the Leigh case itself. In that case, the defendant had not relied on the claimant’s costs estimate. Further, case management had not been affected by the amount of the estimate. In effect the defendant submitted that the claimant should be bound by the amount of the estimate: see page 860G. Dyson LJ rejected that argument because it was to the effect that the claimant should be penalised because the estimate was inadequate. He had already explained that was not a proper response to an inadequate estimate.[86]Garbutt v Edwards concerned a summary assessment of costs payable by one party to the other. It was submitted on behalf of the paying party that the receiving party was not liable to his own solicitors because those solicitors had not provided their client (the receiving party) with an estimate of the costs of litigation. The hearing was conducted on the basis that hourly rates had been provided but not estimates: see at [13]. The reason why the paying party was concerned to take a point as to the liability of the receiving party to his own solicitors was, of course, because of the indemnity principle. The indemnity principle is a common law principle which means that the receiving party is not entitled to recover from the paying party, pursuant to an order for costs, more than the amount which the receiving party is liable to pay to his own solicitor in respect of those costs. Accordingly, although Garbutt v Edwards concerned a summary assessment between the parties, the primary issue was as to the liability of a client to his own solicitor. The only judgment was given by Arden LJ, with whom Tuckey and Brooke LJJ agreed. Arden LJ referred to sections 31 and 37A of and Schedule 1A to the Solicitors Act 1974. She referred to Rule 15 of the Solicitors Practice Rules 1990 and the Solicitors’ Costs Information and Client Care Code. In that case, Mr Morgan QC appeared for the paying party. As a number of his submissions were accepted by Arden LJ it is relevant to refer to them as set out in her judgment. At [15] to [16], Mr Morgan emphasised the importance of estimates for the information they gave to the client. He appeared to accept that an estimate is only an estimate and the client agrees to pay the whole of the final bill. However, an estimate has an effect in practice on the terms of the contract of retainer in that an estimate cannot be exceeded without adequate notice and explanation. He also submitted that an estimate enables the client to consider whether to proceed with his instructions to his solicitor and it also concentrates the mind of the solicitor. An estimate is important also for the other parties to the litigation because it encourages parties to act cost-effectively. The estimate helps to ensure there is some limit on legal costs, whoever is paying them. Mr Morgan went on to submit that if a solicitor did not provide any estimate to his client the contract of retainer was unlawful and the solicitor was unable to recover any fee from his client.[87]Mr Morgan made alternative submissions which were described as follows. His first submission was that because the client could complain to the regulatory authority under Schedule 1A of the Solicitors Act 1974, and such a complaint could result in a reduction of the client’s liability to his solicitor, the court should take that possibility into account. Alternatively he suggested that the court could imply a form of tariff or penalty. He also relied on CPR44.14 which is not material for present purposes.[88]In Garbutt v Edwards, the Law Society intervened and leading counsel made written submissions on its behalf. The Law Society submitted that the failure to provide an estimate is likely to be relevant in determining what costs clients could reasonably be expected to pay as this was the general approach in, for example, Wong v Vizards [1997] 2 Costs LR 46 (to which I refer below).[89]At [31], Arden LJ stated that the Code made pursuant to Rule 15 of the Solicitors’ Practice Rules was to protect the legitimate interests of the client, and the administration of justice, rather than to relieve paying parties of their obligations to pay costs which had reasonably been incurred. At [33] she accepted Mr Morgan’s submissions about the benefits to the client of having an estimate, as the discipline of producing estimates was one of the strategies adopted to contain legal costs. She then rejected Mr Morgan’s primary submission that recovery of a fee under the contract of a retainer was unlawful where no estimate had been provided.[90]At [43], Arden LJ concluded that it was a question for the discretion of the judge assessing costs in any particular case whether to take into account any failure “by the receiving party” to provide an estimate in the circumstances and of the kind required by the Code. This must be intended to be a reference to a failure by the solicitor for the receiving party. She rejected the idea that the court when assessing costs between the parties should reflect the possibility that the receiving party could take proceedings against his own solicitor under Schedule 1A to the 1974 Act. She thought the receiving party should be free to make its own decision in that respect. At [44], Arden LJ referred to the decision of Toulson J in Wong v Vizards [1997] 2 Costs LR46. She described the decision as one where the solicitors were held to the estimated sum plus 15%, plus the costs of communications with the client which had not been covered by the estimate. She quoted from Toulson J where he referred to regard being had to the level of costs in the estimate. She held that the position in Garbutt v Edwards was different, although the approach in Wong might be justified as between solicitor and client. She declined to apply a tariff, as suggested, as that would be rough justice. The furthest she was prepared to go to allow the paying party to take a point based on the fact that the solicitor for the receiving party had not given the receiving party an estimate was to allow the paying party to contend, if the facts supported it, that if an estimate had been provided lower costs would have been incurred.[91]She then referred to the decision in Leigh v Michelin Tyre Plc. That case did not appear to be material where no estimate had been given but could be material where an estimate had been provided and she referred to the guidance given in [26] of the judgment of Dyson LJ. She recognised that this guidance was at a very general level and was not exhaustive since it was impossible to foresee all the differing circumstances that might arise in any individual assessment. Arden LJ did not quote the other parts of the guidance given by Dyson LJ, for example, the part dealing with reliance by the client on the estimate; that appears to have been because there was no question of reliance in Garbutt v Edwards: see [48]. Finally, Arden LJ referred to the amended form of Section 6 of 43PD (including paragraph 6.5A and 6.6) with their references to 20% and she preferred to express no view on the relevance of that percentage.[92]In my judgment, so far as a statement of legal principle is concerned, these cases are helpful and ought to be applied in the present context in the following way. In a case where a solicitor does not give his client an estimate, the result will not generally follow that the solicitor is unable to recover any costs from his client. In a case where a solicitor does give his client an estimate but the costs subsequently claimed exceed the estimate, it will not follow in every case that the solicitor will be restricted to recovering the sum in the estimate. What these two decisions of the Court of Appeal repeatedly state is that the court may “have regard to” the estimate or may “take into account” the estimate and the estimate is a “factor” in assessing reasonableness. For the reasons given by Arden LJ in Garbutt v Edwards at [50], these two cases do not themselves provide very much detailed guidance as to how one should react on the facts of a particular case because it was felt by the Court of Appeal it was impossible to foresee all the differing circumstances that might arise in any individual assessment.[93]It seems to me that there are, nonetheless, two questions of principle that I need to consider in the present case. The first is whether, in a solicitor and client context, reliance by the client on the estimate is relevant and, if so, in what way. Although Dyson LJ in Leigh v Michelin Tyre Plc plainly thought reliance was relevant, that was a case of reliance by a paying party on an estimate of a receiving party. Accordingly, Leigh v Michelin Tyre Plc does not necessarily decide the point which arises in a case between solicitor and client. The second issue of principle is whether there is any rule as to the addition of a margin to the solicitors’ estimate and whether the solicitor is entitled to add a margin or alternatively whether the client is entitled to cap his liability at the estimate plus such a margin. I will consider those matters having referred to two further decisions at first instance and a decision of a Costs Judge.[94]The decisions at first instance are Wong v Vizards [1997] 2 Costs LR 46 and Anthony v Ellis & Fairbairn [2000] 2 Costs LR 277. Both of these decisions were reached before the Court of Appeal decided Leigh v Michelin Tyre Plc. In Wong v Vizards, a detailed assessment was appealed to Toulson J, sitting with assessors. He allowed three objections (numbers 1, 2 and 12 and disallowed several others). Objection 12 is not material for present purposes. The information given by the solicitors to the client was material for the purpose of determining objections number 1 and 2. Objection number 1 related to the hourly rate charged in the final bill. The assessments under appeal had allowed hourly rates of £125 and £140. However, the last information given to the client by the solicitor in relation to the hourly rate gave a figure of £110. The client was not subsequently told of an intention to charge him at a higher rate. The judge considered it unreasonable that the client should be charged a higher hourly rate than he was led to believe would be the case.[95]The second objection related to the total amount claimed by the solicitors as compared with a fee proposal which the solicitors had given the client. The judge agreed that the fee proposal did not result in a binding agreement but that was not the end of the objection. He held the client was entitled to rely upon the fee proposal and he did rely upon the fee proposal. He then held that regard should be had to the level of costs which the client had been led to believe would be a worst case assessment. As an exception to this, the judge referred to the cost of letters and telephone calls from the solicitors to the clients; they had not been included in the estimate but the client could not have supposed that he would not be charged for them so there was no question of him relying on the estimate for that purpose. The judge also considered whether there was an explanation for the divergence between the estimate and the final bill. He held there was no satisfactory explanation for this. The judge then directed himself by reference to a paragraph in the 7th Edition of the Law Society’s Guide to the Professional Conduct of Solicitors which stated that the final amount of the bill “should not vary substantially from the estimate unless clients have been informed of the changed circumstances in writing”. The judge applied that statement as if it contained a principle of general application. (It should be noted that this statement does not appear in the current edition of the Guide.) The judge then awarded a figure which equated to the solicitors’ fee proposal. This was notwithstanding the fact that the fee proposal had been for a ten day trial and the trial had in fact taken only eight days. He declined to reduce the amount recovered for the two days of trial that were not needed and he said that he had allowed the solicitors a margin of approximately 15% over the worst case estimate given.[96]Anthony v Ellis & Fairbairn also involved a comparison between a final bill and an estimate. The judge, for specific reasons special to that case, declined to allow the client to argue that the estimate had been the subject of an express agreement as to the costs recoverable. There was considerable argument as to what the estimate in that case was meant to cover, that is, whether it was meant to cover part only of the work, or all of the work, that would be needed to take the case to trial. The judge construed the estimate as extending to all of the work that might be involved. The judge was referred to the earlier decision in Wong v Vizards. He said the facts were very different but he did get assistance from it in relation to the statement of Toulson J that the amount claimed ought not to vary substantially from the estimate. It was then stated that it was incumbent on the solicitors to keep the client well informed at each stage. The judge was prepared to add a margin of 15% and allowed the solicitors to recover the amount of the estimate plus 15%, but no more.[97]I should also refer to the decision of Master Gordon-Saker in Tribe v Southdown Gliding Club Limited [2007] EWHC 90080 (Costs). This case concerned an estimate provided by a Defendant at the allocation questionnaire stage. The Claimant discontinued and became obliged to pay the standard costs of the Defendant who had provided the estimate. The Costs Judge directed himself by reference to paragraph 6.6 of 43PD, as amended in 2005. He held that the paying party had reasonably relied upon the receiving parties estimate. In particular, the paying party had not taken out further insurance cover against the possible liability for higher costs. (This is an interesting example of a case where the paying party was able to show actual reliance in a specific way.) The Costs Judge also held that the receiving party had not given an adequate explanation for the difference between the estimate and the bill. It is interesting that, having made those findings, the Costs Judge did not hold the receiving party to the estimate or to such part of it as was appropriate for the period up until discontinuance as compared with the costs in the estimate being taken to trial. Instead, the Costs Judge referred to Dyson LJ in Leigh v Michelin Tyre Plc at [32] as stating that the amount of the reduction was a matter for the judgment of the court assessing the costs. The Costs Judge identified what he regarded as a reasonable figure for the receiving party for the entirety of the case (if there had not been a discontinuance), he then adjusted that total figure to reflect the fact that the case had been discontinued. He added something for additional costs that had been identified and then he used the low estimate to place his assessment towards the lower end rather than the top end of the appropriate bracket for costs.[98]Solicitors are entitled to reasonable remuneration for their services: see Section 15 of the Supply of Goods and Services Act 1982. In considering what is reasonable remuneration, the court will want to know why particular items of work were carried out and ask whether it was reasonable for the solicitors to do that work and for the client to be expected to pay for it. In relation to the time taken on work which it was reasonable to carry out, the court will need to ask whether the time taken was a reasonable time for which a charge can be made. In relation to the charging rates, these too must be reasonable.[99]The first part which an estimate can play in the assessment of reasonableness is the way described by Dyson LJ in Leigh v Michelin Tyre Plc at [26] and repeated again in Garbutt v Edwards. The estimate is a useful yardstick by which the reasonableness of the costs may be measured. If there is a modest difference between the estimate and the final bill, because an estimate is not a fixed price for the work, one may be very little surprised by the modest difference. The greater the difference, the more it calls for an explanation. If there is a satisfactory explanation for the difference then the estimate may cease to be useful as a yardstick with which to measure reasonableness. Conversely, if there is no satisfactory explanation the estimate may remain a very useful yardstick with which to measure reasonableness.[100]The decisions of the Court of Appeal do not determine the attitude which a court should take when carrying out a detailed assessment of costs between solicitor and client and the client asserts that he relied upon the solicitor’s estimate. No doubt, if the client put its case on the basis of an estoppel by representation or a promissory estoppel then that would have to be considered. A client may have difficulty in showing such an estoppel. It might be said that the estimate was not the same as identifying a maximum or fixed price and the client could not rely upon the estimate not being exceeded. Further, in some cases (but perhaps not in all cases) a client may have difficulty in showing that he would have acted differently if the estimate had been for the amount of the final bill. What should the court do where the client does not, or is not able to, contend there is an estoppel but he is able nonetheless to satisfy the court that he took the estimate completely seriously and it is possible he might have approached the litigation differently if he had been given a figure nearer to the figure in the final bill?[101]On the question of reliance, Leigh v Michelin Tyre Plc is authority for reliance being relevant on an assessment of costs between a paying party and a receiving party. Dyson LJ does not spell out in detail what the consequences of such reliance might be but he does not seem to have in mind only those cases where the paying party could show an estoppel. Something less than an estoppel seems to suffice in terms of relevance. Conversely, something more than a belief that the costs are likely to equate to the estimate seems to be needed because Dyson LJ in [31] refers to the question of “how” the paying party relied on the estimate. Further, at the end of the inquiry, the deduction in the costs which is thought to be appropriate is left to the good sense of the court. The decision of the Costs Judge in Tribe v Southdown Gliding Club Limited is an example of the court finding there was reliance by the paying party, finding in what way the paying party relied and then using the estimate to scale down the amount of the recoverable costs.[102]Wong v Vizards is an authority at first instance, prior to Leigh v Michelin Tyre Plc, of a case where there was reliance by a client on his own solicitor’s estimate. The judge in that case did not approach the matter on the basis of an alleged estoppel. Instead, he indicated that “regard should be had” to the level of costs which the client had been led to believe he would have to pay. The question was then expressed as to whether it was reasonable for the client to pay much more than the estimated costs. In my judgment, the proper response to this decision is to hold that the court in that case was finding that, for the purposes of assessing reasonable remuneration payable to the solicitor, it is relevant as a matter of law to ask:
“what in all the circumstances is it reasonable for the client to be expected to pay?”
Thus, even if the solicitor has spent a reasonable time on reasonable items of work and the charging rate is reasonable, the resulting figure may exceed what it is reasonable in all the circumstances to expect the client to pay and, to the extent that the figure does exceed what is reasonable to expect the client to pay, the excess is not recoverable.[103]The next question to be addressed is whether the addition of a margin on top of the solicitors’ estimate constitutes a useful approach in this context. As I have endeavoured to explain, in some cases, the solicitors’ estimate will be a useful yardstick with which to measure the reasonableness of the final bill and in other cases the amount of the estimate will be a factor in considering what sum it is reasonable to expect the client to pay. Those considerations, prima facie, cannot be easily converted into an approach which says that the solicitor should be able to recover the estimate plus a margin but, conversely, should not be able to recover more than an estimate plus a margin. The decisions of the Court of Appeal in Leigh v Michelin Tyre Plc and Garbutt v Edwards are not, in my judgment, any authority which gives the solicitor any kind of automatic entitlement to add a margin to the estimate nor are they authority for allowing the client to cap his liability at the estimate plus a margin.[104]This is not to say that I would reject altogether the idea that a margin might offer something useful. As I indicated earlier, when saying that an excess of the final bill over the estimate calls for an explanation, this reaction is heavily dependant upon the extent of the excess. A modest excess does not call for much explanation and a substantial excess calls for a great deal of explanation. In some cases it might be useful to say that anything below a norm or margin does not require much if any justification whereas anything above that norm or margin should be expected to be explained in detail. Another function which the notion of the margin might play is in relation to reliance. Because an estimate is not a fixed price or a maximum price, even where a client relies on the estimate, it will often be the case that the client appreciates that there is some room for movement so that he would not be very surprised if the final bill turned out at a figure somewhat above the estimate. A figure somewhat above the estimate might therefore be perfectly reasonable to expect the client to pay. If the final bill is a little above the estimate then a court might routinely hold that the excess does not prevent it being reasonable for the client to be expected to pay the full bill. Conversely, if the final bill is significantly above the estimate, a court might routinely feel that the bill had increased by too much so that it was no longer reasonable to expect the client to pay all of it. The court may then be required to exercise its judgment as to what figure could properly be added to the estimate so as not to exceed the sum which it would be reasonable to expect the client to pay.[105]Beyond these comments on the possible relevance of an approach by reference to a margin, I do not feel it is possible to go. The decisions of the Court of Appeal do not address the possibility of using a margin. The decisions in Wong v Vizards and Anthony v Ellis & Fairbairn were reached before the two decisions of the Court of Appeal. In Wong v Vizards, Toulson J was influenced by the statement in the Law Society’s Guide to the Professional Conduct of Solicitors as to the final amount varying “substantially”. The 15% figure in that case was not identified by Toulson J as the normal amount by way of margin which one could add to the estimate. The figure of 15% fortuitously selected itself because the trial had taken two days less than the estimated length. The decision in Anthony v Ellis & Fairbairn recognised that the decision in Wong was a decision on its own facts and in the absence of any other pointer the court in Anthony was prepared to add an uplift to 15% to the estimate.[106]I recognise that paragraphs 6.5A and 6.6 of 43PD give some credence to the suggestion that use of a margin is a convenient approach. The difference of 20% referred to in those paragraphs is very much a starting point rather than a final conclusion. The difference of 20 % is given in the first instance to identify the cases in which an explanation ought to be provided. In paragraph 6.6(2), the difference of 20% is regarded as being relevant in deciding what to do where there is no satisfactory explanation or there was reasonable reliance. But even then, there is nothing automatic about the judgment the court will reach in the individual case. The court still must have “regard” to the difference and the extent to which the court has regard is a matter for its judgment.

An Implied Term?

[107]Mastercigars submits that there should be implied into the contract of retainer in this case a term that Withers must comply with the Solicitors’ Costs Information and Client Care Code and in particular paragraph 6 of it which refers to the solicitor updating the costs information as the matter progresses. This term is said to be one which should be implied in fact in order to give business efficacy to the contract of retainer.[108]The first thing to note about the suggested implied term is that it is not necessary in order to make the solicitor subject to the requirements of the Code. The solicitor is already subject to the requirements of the Code, pursuant to Solicitors Practice Rule 15. Further, the notes to Rule 15 distinguish between three different levels of breach of the Code. If there were implied into the retainer a term that the solicitor would comply with the Code then any non-compliance would be a breach of contract whereas the notes to Rule 15 contemplate that there can be some breaches of the Code which will not be a breach of Rule 15 and will not be evidence of inadequate professional services under Section 37A of the Solicitors Act 1974. Accordingly, the implied term would go further than Rule 15 in precisely those cases where the need for an implied term is arguably at its lowest, that is, in relation to non-material breaches of the code.[109]The next question in relation to the suggested implied term is what would be the contractual consequence of non-compliance? It seems to me that Mastercigars’ case was that compliance with the Code was a condition precedent to recovery of any payment for any work which was not the subject of an estimate complying with the Code. Mr Farber did not accept the term “condition precedent” when I put it to him but that is what his submission in effect amounted to. That goes beyond implying a term that Withers shall comply with the code and implies a much more onerous requirement that they are not entitled to be paid if they do not comply with the Code. Formulated that way, it does not seem to me to be possible to say that the implication of a condition precedent of that kind is necessary to give business efficacy to the contract. Non-compliance with the Code carries with it the consequences set out in section 37A and Schedule 1A to the Solicitors Act 1974. Further, an estimate from a solicitor can have a limiting effect on the detailed assessment of a reasonable fee to be paid to the solicitor and it is not necessary to give business efficacy to the contract to imply a condition precedent which would disentitle the solicitor from recovering any fee not the subject of an estimate, even though a Costs Judge was entirely satisfied that the fee claimed was reasonable, that there was an explanation for the departure from the estimate and that the client had not relied on the estimate.[110]The alternative consequence of the suggested implied term would be that non-compliance would be a breach of contract. The breach of contract would not necessarily disentitle the solicitor from recovering a reasonable fee. A breach of contract would have the normal consequence that the client could sue for damages caused by the breach of contract. That would require the client to prove on the balance of probabilities that it would have been in a better position if an estimate had been provided. That would be quite a difficult thing for a client to prove and places on the client a heavier burden than appears to be placed on the client who wishes to moderate the amount of the recoverable fee by saying that he relied on the estimate so that it is not reasonable for him to be expected to pay the full amount of the fee claimed.[111]Having regard to the above considerations, it seems to me that the case for an implied term fails. Such a term is not necessary to give business efficacy to the contract and would operate in a somewhat unpredictable and often unreasonable way. Further, Mastercigars’ case is not consistent with the existence of such an implied term as Mastercigars accepts that it is liable for the costs of the litigation after the end of the fourth day of the trial even though there was no estimate covering that period.

The Effect of the Estimate on the Retainer

[112]Mastercigars also made submissions as to the scope of the solicitors’ retainer. As I understood the submissions, it is necessary for me to deal with two particular aspects of them. The first aspect is the contention that Withers were retained to do the work in the estimate and no other work. If Withers did other work then it was outside the retainer and they were not entitled to be paid for it. A second aspect is the contention that the client only agreed to pay the costs in the estimate and was not liable to pay anything beyond the estimate unless it was asked to, and expressly agreed, to do so. I reject both these contentions. As to the second, it is clear from Withers’ standard terms of business that the estimate was not placing an upper limit on costs and much less was it placing a definition on the work required of Withers. As regards the first contention, I hold that the estimate did not define the extent of the work to be done. Withers were instructed to do what was reasonably necessary on behalf of the client in the litigation as it evolved. Further, there was no suggestion from Mastercigars that any of the items of work which were done by Withers on its behalf were not within Withers’ retainer in the sense that they were unauthorised and should not have been done. It follows that Withers is entitled to a reasonable fee for work within the retainer and the estimate does not define the work for which a charge may be made.

Applying the above Reasoning to the Third Appeal

[113]The next step is to apply the above reasoning to this particular case. In paragraph 66 of his judgment, the Costs Judge stated that in agreement with Mr Brown’s closing submissions for Mastercigars, the case really turned on the true contractual position as set out in the documents. The closing submissions were recorded by the Costs Judge at paragraphs 59 and 60 of his judgment, which included the reference to Cook on Costs, 2007 Edition, page 15. The passage in Cook on Costs stated that unless the client was notified of the further sums payable, preferably before they were incurred, then the solicitor would be unable to recover costs in excess of the estimated amount. In my judgment, that passage does not correctly state the law. It seems to me that on a fair reading of the judgment, the Costs Judge was relying on this passage in Cook on Costs. In so far as the Costs Judge relied upon that passage in Cook on Costs, he was led into error in making his finding as to the contractual position. The contractual position is that the solicitors are entitled to a reasonable fee and in the present case, in respect of certain bills, that fee is to be the subject of a detailed assessment. At the stage of the detailed assessment, the estimate has the relevance which I have described above as a yardstick and in respect of any case raised by the client as to reliance on the estimate. Although the Costs Judge referred in paragraph 67 to “all the evidence, oral and documentary”, it seems to me that I must inevitably find that his reasoning is based on his analysis of the contractual position, which for the reasons I have given was incorrect. It follows that I must allow the third appeal and in particular the appeal against paragraph 1 of the order of 25th April 2007, which held that Withers were bound by the sum set out in the estimate of 6th May 2005.[114]The next question is what course should now be taken? Mr Farber on behalf of Mastercigars put forward one possibility and Mr Morgan put forward another. For the reasons which I will attempt to give, I am not able to take either of the courses suggested. Mr Farber submitted that if I reached the conclusion, as I do, that the relevance of the estimate in this case should be assessed in accordance with the yardstick issue and the reliance issue then I should hold that the Costs Judge has determined those matters in favour of Mastercigars, alternatively, that I should decide those matters myself on the basis of the material before the Costs Judge. I am unable to hold that the Costs Judge has already correctly directed himself on the yardstick question and the reliance question and has decided those matters. The position is clear in relation to the reliance question. The Costs Judge does not make any finding on that issue. In relation to the yardstick question, the Costs Judge did refer to some of the evidence as to the explanation for the difference between the estimate and the final bill. He rejected Mr Maycock’s suggestion that the explanation related to an escalation in counsel’s fees. However, I do not find that he rejected altogether the suggestion that there was additional work between the 6th May 2005 and the fourth day of the trial which additional work was not referred to in the estimate. I have already analysed the relevant parts of the judgment.[115]I therefore turn to Mr Farber’s second suggestion that I should decide these matters on the basis of the material before the Costs Judge. Again I start first with the reliance question. On the material before me, I can see that this could prove to be an important issue which will need careful consideration. Mr Kenyon in his witness statements certainly addressed the question of reliance. At any future detailed assessment, that evidence of Mr Kenyon will have to be given proper attention. However, the question of reliance was not one of the matters required to be investigated by the Costs Judge on the hearing of the defined preliminary issue. Indeed, the Costs Judge does not appear to have considered that question. I have already stated that he made no findings on it and I have already noted that the closing submissions on behalf of Withers stated that the Costs Judge stopped cross-examination on that question. In those circumstances, it would be quite unfair to Withers for me to make findings on the basis of Mr Kenyon’s witness statements when those witness statements have not been tested in cross-examination. Similarly, in relation to the yardstick question. Whilst I have the benefit of the Costs Judge’s finding that the increase in the fees was not attributable to an escalation in counsel’s fees I do not have the Costs Judge’s finding in relation to the other additional work. I will refer later to the findings that I am able to make as to whether such additional work (if it had been done) came within the four corners of the estimate but even with those findings, I am not much further forward in assessing, as a matter of judgment, whether a figure should be allowed for the additional work and if so, what figure. It seems to me that that can only be done in the context of a detailed assessment which considers the charges being claimed for the additional work.[116]The course urged on me by Mr Morgan is that I should order that the total costs to be allowed to Withers should be, first, the sum in the estimate, secondly, a margin expressed as a percentage which I should choose (or leave the Costs Judge to choose), thirdly, a reasonable amount for the matters referred to in paragraphs 8(b) to 8(f) of the grounds of appeal and, fourthly, a reasonable fee for all the work done after the fourth day of the trial. There appears to be no issue as to Withers’ entitlement to a reasonable fee for the work done after the fourth day of the trial. The live questions therefore relate to the inclusion of a margin and the inclusion of a reasonable amount for the suggested additional work between 6th May 2005 and the fourth day of the trial.[117]Mr Morgan’s approach relies heavily on the decision in Wong v Vizards. In Wong v Vizards, the judge (who was deciding on the figure to be awarded by way of a final assessment) noted that he had effectively allowed a margin of 15% above the worst case estimate given. Mr Morgan also relies upon a comment in Wong v Vizards that no one had suggested that there was any unexpected development in that case between the date of the estimate and the date of the trial. This leads Mr Morgan to submit that where the facts show that there was an unexpected development, the solicitor should be entitled to a reasonable sum for the work involved.[118]I do not regard the decision in Wong v Vizards as laying down general legal principles which apply in all subsequent cases. In that case, the judge sitting with assessors was determining the final figure payable on a detailed assessment. He had to make a number of judgments as to matters of reasonableness and his findings as to reasonableness in that case involved matters of fact, rather than matters of legal principle. Further, Wong v Vizards was decided before the guidance given by the Court of Appeal in Leigh v Michelin Tyre Plc and Garbutt v Edwards, which I have analysed in detail above. Wong v Vizards is referred to at [12] in Leigh v Michelin Tyre Plc as part of a recitation of the decision of the District Judge in that case but the Court of Appeal did not offer any comment on the approach in Wong v Vizards. In Garbutt v Edwards, Arden LJ at [44] and [45] referred to a submission made by Mr Morgan in that case by reference to Wong v Vizards. Her quotation from the judgment of Toulson J in Wong v Vizards is as follows: “It is open to Mr Wong to argue that in determining what is a reasonable amount for him to pay for the work done, regard should be had to the level of costs which he had been led to believe represented a worst case assessment of his potential liability”. (My emphasis) Arden LJ said somewhat tentatively that “that approach may be perfectly justified as between solicitor and client” but then went on to distinguish that approach in a case involving opposing parties to the litigation. I have already explained that the quoted statement from Toulson J represents my understanding of the law also. In considering what is a reasonable fee to be paid to the solicitors, one is entitled to take into account what the client was led to believe would be the sum payable in addressing the question what is a reasonable fee which one can expect the client to be asked to pay. I cannot read the reference to Wong v Vizards in Garbutt v Edwards as any kind of endorsement at Court of Appeal level of a principle to the effect that the specific “regard” which is to be had to an estimate involves capping the solicitor’s entitlement by the use of a margin or, conversely, conferring on the solicitors a prima facie entitlement to the full amount of a margin on top of the estimate. I have already explained that when the Costs Judge comes to do the detailed assessment, calculations or cross checks involving the use of a margin may play some part but I decline to rule as a matter of legal principle or even by reference to the facts of this case (to the extent that they have so far been explored) that Withers’ recovery will be capped by reference to a margin or that Withers are prima facie entitled to the estimate plus a margin. If Withers wish to concede that they will not claim anything above the estimate plus a margin of a stated percentage or offer any other upper limit on their recovery, they do not need an order from the court for that purpose, as it is essentially a matter for them. Conversely, the court is not prepared to indicate that Withers are prima facie entitled to a margin of any specified amount above the estimate of 6th May 2005. Withers’ entitlement can only be arrived at on a detailed assessment when the guidance from the Court of Appeal has been applied to the facts as found.[119]I turn to consider the position in relation to the suggested additional work as described in paragraph 8 of the grounds of appeal. I will set out what I understand to be the basic facts in relation to those matters and indicate the consequences.[120]Paragraph 8(a) refers to “all work done and disbursements incurred by [Withers] after the fourth day of trial”. I understand that there is no dispute as to Withers’ entitlement to a reasonable sum in relation to that matter.[121]Paragraph 8(b) refers to “interlocutory hearings in excess of one”. The estimate of 6th May 2005, so far as relevant, contained an item:
“Interim Motions x 1”
. I have already referred to the hearing before Etherton J, the two hearings before Pumfrey J and the hearing before a Deputy Master. Accordingly, there were four interlocutory hearings and not one. Mr Farber draws attention to the e-mail of 6th May 2005 referring to “interim applications”. I do not think I can use the fact that the reference is in the plural to contradict the figure “one” in the estimate itself. Further, the reference to interim applications in the e-mail appears to be saying that the estimate might be overtaken by events such as interim applications.[122]Paragraph 8(c) refers to:
“a journey by Mr Maycock to Montreal”
. Mr Maycock refers to this journey in his witness statement of 27th October 2006 at paragraph 17. Mr Kenyon was cross-examined on the matter on 6th March 2007: see pages 17 and 18 of the transcript. He was prepared to concede that the work was not in the estimate but he conceded this only “for the sake of argument”. The trip to Montreal appears to have been in an attempt to find evidence relevant to the case. The part of the estimate that might be material is the part which refers to “preparation of witness statements”. Mr Maycock’s time is given as nine hours. It is fairly plain that that does not include a trip to Montreal.[123]Paragraph 8(d) refers to “work related to actual or potential witness of fact for [Mastercigars] over and above Mr Kenyon, Peter Craggs, Jeremy Castagli and John Maycock”. I was referred to the witness statements and the cross-examination of Mr Kenyon on this point. Mr Kenyon appeared to accept that at the date of the estimate, the four witnesses named in paragraph 8(d) were the witnesses who were expected to be called on behalf of Mastercigars. It also seems clear that in time further witness statements from Cuban witnesses were prepared. Mr Kenyon gave a number of answers to the effect that, although there were extra witnesses, Withers did not have to do any work in relation to them and so should not be able to charge for those witness statements. The Costs Judge referred to this question in paragraphs 37 to 39 of his judgment. If Withers did any work in relation to the Cuban witnesses then it was not work they had estimated for on the 6th May 2005.[124]Paragraph 8(e) referred to “work related to the evidence of witnesses of fact for the opposing parties served after the exchange of witness statements”. The submissions made on behalf of Withers to the Costs Judge referred to a correspondence bundle which, it was said, showed that HSA served further witness statements on 1st July 2005 and again on 6th July 2005, which was after exchange of witness statements as originally directed. Mr Kenyon does not appear to challenge these facts but asserted that Withers should not be entitled to add to the estimate on account of them.[125]Paragraph 8(f) refers to “work relating to potential expert witnesses as to Cuban law Messrs Goderich and Suchliki”. This topic was raised with Mr Kenyon during his cross-examination: see page 31 of the transcript. What was put to him was that Mastercigars had originally used Cuban lawyers who were to be replaced and Mr Goderich and Mr Suchliki were approached. Mr Kenyon does not appear to dispute the facts put to him in that regard but makes a different point, namely, that Withers would not have had any real work to do in relation to the two potential new witnesses.[126]I have referred albeit briefly to the facts in relation to paragraph 8(b) to 8(f) of the grounds of appeal. Mr Morgan contends that those facts mean that the Costs Judge should add to the estimate of 6th May 2005 a reasonable fee for the work in 8(b) to 8(f). I should comment that if Mr Kenyon is right that very little work was done or very little work was needed then that will have an effect upon the reasonable fee chargeable (if Mr Morgan’s submission is correct). However, in my judgment, I am not able to rule as a matter of principle that Withers must be entitled to recover a reasonable fee for the work in paragraphs 8(b) to 8(f). The Costs Judge doing the detailed assessment will have to apply the guidance to which I have referred more than once from the decisions of the Court of Appeal. In relation to the yardstick question, if there were any significant work in relation to those items, then Withers will be able to give that explanation as to why their final bill exceeded the estimate in those respects. But that still leaves the reliance question. As can be seen from Mr Kenyon’s responses in cross-examination, there seems to be a live issue not yet resolved as to whether Mastercigars was continuing to rely upon the estimate in relation to the matters of which it was aware or whether, as Withers would contend, Mastercigars could not possibly have been relying on the estimate because it must have appreciated that this was additional work that had not been estimated for and would have to be paid for.[127]The result in relation to the third appeal (against the order of 25th April 2007) is that I allow the appeal and set aside paragraph 1 of the order. I am not minded to attempt an answer to the preliminary issue as directed on 21st February 2007 although the parties have my comments in relation to paragraphs 8(b) to 8(f) of the grounds of appeal. In my judgment, it is not appropriate for the preliminary issue as so defined to be remitted to the Costs Judge for determination. I regard an attempt to answer the preliminary issue as of limited utility to the parties. What is required is a detailed assessment having regard to the guidance given by the Court of Appeal. In Leigh v Michelin Tyre Plc at [33], Dyson LJ suggested that a costs judge should determine how, if at all, to reflect the costs estimate in the detailed assessment before going on to decide whether for other reasons there were elements of the costs claimed which were unreasonably incurred or unreasonable in amount. So far as the yardstick question is concerned, it may not be necessary to look again at the facts relevant to paragraphs 8(b) to 8(f) or, for that matter the facts referred to in paragraph 8(a) of the grounds of appeal before proceeding to a detailed assessment.[128]For the avoidance of doubt, I wish to make it clear that my judgment does not mean that Withers will necessarily be entitled to recover the full amount of their bills. Mastercigars have contended that it will not be reasonable for them to pay the full amount of those bills, because they relied upon the estimate in various ways. That case has not been determined by the Costs Judge and I am not determining it. In those circumstances, it would obviously be inappropriate for me to comment on the strength or weakness of that case and I do not do so. The parties should consider, following the release of this Approved Judgment, whether there is anything to be gained by having a preliminary question as to the reliance issue in this case and I will hear submissions on that matter following the handing down of judgment.[129]Finally, in relation to the third appeal, I have been asked by my Assessors to state that they do not agree with my decision as to the outcome of the third appeal nor with all of my comments in relation to the margin. I have obviously had the benefit of a lengthy debate with my Assessors on these points but, having considered everything they have said and having given, I hope, due weight to their great experience in these matters, I have reached the conclusions which I have expressed. It may be unusual to reveal these differences in a judgment of this kind and I can see that it might not be helpful so far as the ultimate disposal of the dispute is concerned but in deference to the views expressed by my Assessors and the care and attention they have given to the case, I have decided that it is right to do so.

The Second and the Fourth Appeal

[130]I now turn to the second appeal (the application for permission to appeal against the order of 22nd March 2007, with the appeal to follow if permission is granted) and the fourth appeal (against the order of 15th May 2007). The application for permission to appeal and the fourth appeal are brought by Mastercigars. The applications before the Costs Judge which led to the orders of 22nd March 2007 and 15th May 2007 were heard in private as the applications, in part, concerned matters which were privileged as between solicitor and client. The application for permission to appeal and the appeal were similarly heard before me in private. The application and the appeal raised some issues of more general interest which need not involve a discussion of privileged material. Accordingly, in this present judgment which is intended to be delivered in open court, I will deal with the application for permission to appeal (with appeal to follow if permission is granted) against the order of 22nd March 2007 but only insofar as I can avoid referring to privileged material. I will give a second judgment, in private, dealing with the remainder of the matters arising in relation to the order of 22nd March 2007 and the appeal against the order of 15th March 2007.[131]Following the various orders for costs made by the Court of Appeal in the trade mark litigation on the 8th March 2007, Withers applied to the Costs Judge on the 12th March 2007 for a charging order pursuant to Section 73 of the Solicitors Act 1974 in relation to the benefit of the costs orders made in favour of Mastercigars. Mastercigars made several points by way of opposition to the application, which was argued on the 21st March 2007 with judgment being given on 22nd March 2007.[132]In his judgment, the Costs Judge considered whether the application included an application for a charge over the sums of £83,000 and £300,000 which had been ordered to be paid on account of the costs to be assessed. The Costs Judge ruled that the application did so extend and Withers amended the draft Order they were seeking to put that point beyond doubt. The Costs Judge then dealt with the question whether a charging order under Section 73 could be made when the costs had not been assessed. He directed himself, correctly, by reference to Fairfold Properties Limited v Exmouth Docks Co Limited (Number 2) [1993] Ch196 that an order for costs which remained to be assessed constituted “property” within Section 73. Although that point was initially challenged in the appellant’s notice, the challenge is not now pursued.[133]The Costs Judge then considered a submission by Mastercigars that an order under Section 73 could not be made by a Costs Judge but only by a Judge of the High Court. That submission was rejected but it has been repeated in the appellant’s notice. The Costs Judge then considered Mastercigars’ submission at paragraph 5 of the order of 13th November 2006 (which stated that Withers should not commence or continue any proceedings against Mastercigars in respect of any of the bills which were directed to be assessed) prevented the application for a charging order under Section 73. The Costs Judge rejected that submission and it is repeated in the appellant’s notice. The Costs Judge also directed himself that a charging order was not the same as a freezing order under CPR Part 25 and so Withers were not required to give an undertaking in damages. The Costs Judge also stated that there was a safeguard for Mastercigars in that if circumstances arose which justified a variation of the charging order, they could seek an appropriate variation.[134]The Costs Judge then dealt with the discretion as to whether to make a charging order. As that topic raises matters which are privileged between solicitor and client, I will defer consideration of it until I give judgment on the matter in private.[135]Mr Farber summarised the intended grounds of appeal against the order of 22nd March 2007 as the following three: 1) a contention that the Costs Judge did not have jurisdiction to make an order under Section 73 of the Solicitors Act 1974; 2) a submission that Withers were not entitled to apply for such a charging order by reason of paragraph 5 of the order of 13th November 2006; and 3) a submission as to the exercise of the discretion in this case.[136]I should first deal with the question whether to grant permission to Mastercigars to appeal the order of 22nd March 2007. In my judgment, the submission in relation to paragraph 5 of the order of 13th November 2006 deserves the grant of permission to appeal. I reach this conclusion partly because of the arguability of the point but also because it discloses a disparity between the words of Section 70 of the Solicitors Act 1974 and the words of the order of 13th November 2006, which is the same as the wording in the model form of order, precedent L referred to in paragraph 56.3 of 48PD. This disparity deserves to be considered in this case. I am far from clear that, if they had been the only points, it would have been right to grant permission to appeal on the point as to the jurisdiction of the Costs Judge or the submissions as to discretion. In relation to the latter, the fact that Mastercigars has been granted permission to appeal against the order of 15th May 2007 which also raises points as to the discretion of the Costs Judge might have been a factor in favour of granting permission to appeal in that respect also against the order of 22nd March 2007. Overall, in my judgment, the fair thing to do here is to grant permission to appeal generally against the order of the 22nd March 2007 and rule on all the points arising which have been argued in full by both sides before me.[137]Section 73 of the Solicitors Act 1974 is in Part III of that Act. So far as material, Section 73 provides:
“….any court in which a solicitor has been employed to prosecute or defend any suit, matter or proceedings may at any time …..declare the solicitor entitled to a charge on any property recovered or preserved through his instrumentality for his taxed costs in relation to that suit, matter or proceeding….”
. The suit in question was, of course, the trade mark litigation which was tried in the Chancery Division of the High Court of Justice and was the subject of an appeal to the Court of Appeal. Withers were employed in relation to that suit both as to the High Court proceedings, and for part of the time, as to the appeal to the Court of Appeal. Mr Farber accepts that it will be appropriate for one judge, at the appropriate level, to consider Section 73 in relation to both the costs in the High Court and the costs in the Court of Appeal. He does not suggest that there have to be two orders, one made by a High Court Judge in relation to the High Court costs and a second order made by the Court of Appeal in relation in relation to the Court of Appeal costs. Mr Farber’s approach in this regard is supported by the decision of the Court of Appeal in re: Deakin [1900] 2 QB 489. That decision concerned Section 28 of the Solicitors Act 1860 where the words are not identical to the words used in Section 73 of the 1974 Act. The words in the 1860 Act might have given more support to the argument that where a case went from the High Court to the Court of Appeal, there had to be one order in the High Court as to the High Court Costs and one order in the Court of Appeal as to the Court of Appeal costs. However, the Court of Appeal in re: Deakin rejected that argument.[138]Mr Farber’s point is that the court which was asked to make the charging order in this case was the Supreme Court Costs Office. Withers had not been employed to prosecute or defend a suit, matter or proceedings in the Supreme Court Costs Office. Accordingly, it was submitted that the Supreme Court Costs Office and in particular Costs Judge Rogers did not have power to make a charging order under Section 73 over the orders for costs in respect of work done in the High Court and the Court of Appeal.[139]In my judgment, Section 73 when it refers to “any court” does not purport to identify the judicial level at which the matter might be considered. Section 73 does not say whether the order must be made by a High Court Judge or may be made by a Master or a Costs Judge. That topic is however expressly dealt with in CPR Part 67. Rule 67.1(1)(b) provides that Part 67 applies to proceedings relating to solicitors under Part III of the Solicitors Act 1974. Rule 67.3(3) provides that a claim in the High Court under Part III of the 1974 Act may be determined by a High Court Judge or a Master or a Costs Judge, or, indeed, other specified judges. Part 67 is supported by 67PD. Paragraph 1(15) of the Practice Direction specifically mentions a claim under Section 73 of the 1974 Act. Paragraph 2.1(2) states that such a claim may be issued in the Supreme Court Costs Office and paragraph 3.2 states that such a claim should normally be made to a Master, Costs Judge or District Judge. Only in exceptional circumstances is making such a claim direct to a High Court Judge thought to be justified.[140]In my judgment, Section 73 of the 1974 Act does not say one way or the other whether an order under Section 73 can be made by a Costs Judge but CPR Part 67 and the Practice Direction do say in terms that it can be, and normally should be, dealt with by a Costs Judge. It is quite clear therefore that the Costs Judge did have jurisdiction to make the order which he made on the 22nd March 2007.[141]Mastercigars relied upon paragraph 5 of the order of 13th November 2006 as preventing Withers from making an application under Section 73 of the Solicitors Act 1974 and as precluding the Costs Judge from making the charging order which he made on the 22nd March 2007.[142]It will be remembered that the order of 13th November 2006 ordered that certain bills served by Withers be the subject of a detailed assessment. Paragraph 5 of that order provided:
“Until these proceedings are concluded [Withers] must not commence or continue any proceedings against [Mastercigars] in respect of any of the bills referred to…above.”
When paragraph 5 of the order referred to proceedings being concluded, that should be taken to be a reference to the conclusion of the detailed assessment of the relevant bills. The contrary has not been argued. Those proceedings were obviously not concluded when Withers applied on 12th March 2007 for an order under section 73 of the Solicitors Act 1974.[143]Mr Farber submitted that the position is entirely straightforward. Withers’ application for a charging order involved Withers commencing and continuing “any proceedings” against Mastercigars “in respect of any of the bills referred to….above”.[144]Mr Morgan put forward two contrary arguments. First he drew attention to the difference in wording between Section 70(2) of the 1974 Act which states that the court may order “that no action be commenced on the bill” and the order in the present case which states that Withers “must not commence or continue any proceedings…. in respect of any of the bills”. The order made in the present case uses the words of the standard form of[145]In my judgment, Mr Morgan’s first submission is correct for the reasons which he gives. In essence, paragraph 5 of the order of 13th November 2006 should be construed against the background of the statutory provision which confers on the court the power as described in Section 70(2)(b) to prevent “an action on the bill”, with the result that paragraph 5 means that Withers must not commence an action on any of the bills which have been referred to detailed assessment. In my judgment, on that basis, one can readily hold that an application under Section 73 of the 1974 Act for a charging order is not an action on the bill. If I had not felt able to accept Mr Morgan’s first submission and so held that the phrase “any proceedings…..in respect of any of the bills” was wider than an action on the bill, I would have hesitated before accepting his second submission but, in the event, I need not specifically rule on the second submission.[146]The argument on this point has brought to light the fact that precedent L, when referring to the solicitor being unable to commence proceedings, uses language which is different from the language in which the statutory power is expressed. It seems to me to be desirable that the standard form of order should reflect the statutory wording rather than use different wording. Although I have construed the wording of precedent L so as to mean the same thing as the statutory wording, it should not have been necessary to grapple with a point of this kind. Further, someone reading the precedent without attending to the statutory background could very easily be misled into thinking that the restriction on proceedings is wider than the statute permits the restriction to be.[147]Mr Farber’s third ground of challenge in relation to the order of 22nd March 2007 related to the way in which the Master exercised his discretion on that occasion. I have concluded that this ground of appeal fails. I will give my reason for that conclusion in a separate judgment which is private to the parties.[148]The result in relation to the second appeal (against the order of 22nd March 2007) is that I grant Mastercigars permission to appeal but dismiss the appeal.

order

see precedent L referred to in paragraph 54 of 48PD. The standard order is intended to replicate the statutory provision and not to impose a wider restriction on the solicitor. The purpose of the statutory restrictions in Sections 69(1), 70(1) and 70(2) as to actions on the bill is clear. The intention is to prevent a solicitor from obtaining judgment against a client who has taken appropriate steps to challenge the amount of the solicitor’s bill, at least until the proper quantum of the solicitor’s entitlement has been determined. No such policy consideration exists to prevent a solicitor from obtaining the traditional means of security for his costs in a successful case while the amount of his entitlement is being determined. On the contrary, if a solicitor were precluded from obtaining a charging order when his costs were subject to detailed assessment there would be a hole left in the protection afforded by Section 73. The words in paragraph 5 of the order of 13th November 2006 should be read in the context of the statutory provisions so as to impose the restriction which is permitted by Section 70(2)(b) but not to impose a wider restriction which, in any case, the court may have had no power to impose. Therefore, paragraph 5 should be read so that it precludes an “action on the bill”. An application for a charging order on Section 73 is not an action on the bill. Mr Morgan’s second argument was to distinguish an “action on the bill” or “proceedings ….. in respect of any of the bills” from a claim to a charging order. There need not be a bill at the time when a solicitor applies for a charging order under section 73. It is open to a solicitor to apply for a charging order to be made by the trial judge immediately following judgment in the relevant suit and at that time there is unlikely to have been a final bill.

Cited in 14 later judgments

and 5 more of the most senior