Solicitors acting for clients in divorce and financial proceedings have a symbiotic relationship with those clients. They provide the solicitors with fees, which are the lifeblood of any law firm, and in turn the solicitors provide the clients with advice and legal representation at one of the most fraught periods of their life.

The relationship between solicitor and client can become extremely close. When it breaks down, its bitterness can mirror the original proceedings. A common cause of the breakdown of the solicitor-client relationship is a dispute about fees.

This can lead in turn to proceedings under s 70 Solicitors Act 1974 for an assessment of the solicitors’ statutory bills of costs, usually heard and determined by a Costs Judge within the Senior Courts Costs Office. The Costs Judge will be tasked with determining their reasonableness and whether the fees are payable by the client.

In contentious proceedings, costs between a solicitor and client are assessed on an indemnity basis. The test is whether costs have been reasonably incurred and are reasonable in amount. A number of rebuttable presumptions are applied by the Costs Judge when assessing costs, as set out in CPR 46.9(3):

‘(3) Subject to paragraph (2), 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 their 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; and

(ii) the solicitor did not tell the client that as a result the costs might not be recovered from the other party.’

It is difficult to overestimate the importance of the presumptions. If a solicitor regularly informs their client about the level of fees and expenses that have been incurred and are going to be incurred, so as to be able to argue that the solicitor has obtained their client’s express or implied approval to spend that time, then there may be little scope for the solicitor’s bills to be discounted due to the operation of the presumptions. Indeed, when a breakdown of costs is served as part of the assessment by the solicitor, Points of Dispute will be served by the client setting out why the fees are said to be unreasonable in incurrence or amount. Replies to Points of Dispute should expressly plead the application of the presumptions: if it can be shown that the client expressly or impliedly consented to the incurrence of the costs, that argument may be conclusive on the part of the solicitor.

Although every detailed assessment is its own case, and turns on its own facts, some arguments about the reasonableness of fees arise repeatedly. A recent example of a solicitor-client assessment which demonstrates some of these issues is that of Yvia Pulford v Hughes Fowler Carruthers Ltd [2023] EWHC 1429 (SCCO).

In this case which came before Costs Judge Leonard, a dispute arose between the client (the claimant) and her former solicitors (the defendant). The claimant instructed the defendant to initiate divorce proceedings and to deal with the ancillary relief and other matters that arose in consequence.

A series of bills were raised in the sum of £300,569.04 between November 2018 and 7 December 2020. By consent an order was made in February 2022 for the assessment of all the bills rendered by the defendant. The court listed the case for a hearing of preliminary issues concerning matters arising in the Points of Dispute.

The issues concerned the absence and relevance of a costs estimate, the suggestion that the defendant had given an assurance that the claimant would not be responsible for its fees, whether the defendant was entitled to increase its hourly rates and use two partners on the case, and whether the claimant was bound to pay counsel’s fees.

Of these issues, the principal one related to the lack of an effective estimate of the fees and expenses the solicitor intended to incur. The claimant’s evidence, which was not accepted, was that the solicitor had given an estimate that the costs would not exceed £80,000.

Surprisingly, the solicitor’s evidence was that no costs estimate was given at the start of the case, due to the difficulty of hypothesising how matters would unfold.

This is a surprising position to take as advice on costs can always be caveated, and assumptions underlying the figures made clear, but the Code of Conduct has imposed a duty for many years to give a client ‘best possible’ costs advice, throughout the matter.

The question expressly before the Costs Judge was the effect of either an estimate which had been significantly exceeded (the claimant’s case) or the lack of an estimate at all (the defendant’s case). The lack of an estimate had certainly been remedied by the time a Form H was prepared in February 2020, which gave incurred costs of £77,642.60.

The Costs Judge directed himself in these terms:

‘[47] A solicitor undertaking work for a client has a professional obligation, incorporated in the Solicitors Regulation Authority’s Code of Conduct, to provide the client with an estimate of costs and to keep that estimate of costs up to date. (The specific provisions of the Code of Conduct changed during the course of the retainer between the Claimant and the Defendant, but not, for present purposes, in any material way.)

[48] If a solicitor is also contractually obliged to provide a client with estimates of future costs, it does not follow that costs not anticipated by estimates will, on assessment between the solicitor and the client, be irrecoverable. At paragraph 110 of his judgment Morgan J observed:

“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 ...”

[49] If however on the assessment of costs between a solicitor and a client, it is found (a) that the solicitor has never provided the client with an estimate of the costs and disbursements that the client was likely to pay, or that an estimate given was inadequate, and (b) that if a proper estimate had been given, the client would have paid less than the solicitor is claiming, it may be appropriate to limit the amount payable by the client to the solicitor to an amount that it is reasonable, in all the circumstances, to expect the client to pay. That may be less than would otherwise be payable for work reasonably done by the solicitor at a reasonable rate.

[50] In order to demonstrate that it is right to limit the solicitor’s recoverable costs in that way, it is not necessary for the client to prove on the balance of probabilities that they would, if adequately advised, have acted in a different way which would have turned out more advantageous for the client. It may be sufficient that the failure to provide adequate advice deprived the client of an opportunity of acting differently, though that is likely to carry less weight, particularly where it is not possible to do more than speculate as to the way in which the client might have acted, if properly advised.

[51] The ultimate aim will always be to identify the sum that, in all the circumstances, it is reasonable for the client to pay.’

As he disbelieved the claimant as to the giving of an estimate of £80,000, that point fell away. However, he had to go on to consider the effect of the absence of an estimate at all. In this respect the claimant’s intended course of action would have been crucial. But the Costs Judge noted:

‘[94] What the Claimant does not say is that, had she anticipated the full level of costs attendant on recovering the Defendant to conduct divorce proceedings, she would have found alternative solicitors or changed her mind about the divorce.’

This meant in turn:

‘[106] Even if there had been any material failure on the part of the Defendant to provide the Claimant with adequate estimates of costs for her divorce proceedings, I do not accept that it would have had any material effect upon the Claimant’s choices. Notably the great majority of the future costs estimated in the form H of 24 November 2020 (which the Claimant accepts she saw) were counsel’s fees; £221,400 of the total figure of £356,520. That reflected the Claimant’s choice of counsel.

[107] The Claimant evidently believed that Mr Pulford was concealing his assets from her, and she was prepared to spend whatever was necessary to obtain a satisfactory divorce settlement. As is evident from correspondence with the Defendant (to which I will refer in more detail, when considering the Claimant’s assertion to the effect that she was given to understand that she would never have to pay the Defendant’s fees) she did not want to pay for that herself, and thought that her husband should have to do so. Nonetheless, as Ms Hughes stated in evidence and as the Defendant’s file reflects, the Claimant did have sufficient assets at her disposal to raise the required funding if necessary.

[108] All that aside, it is not possible to reconcile any of the Claimant’s various statements about what she might have done if she had had a better idea of future costs, with her assertion that she thought that she was ultimately not going to have to pay anything, or at least anything that would not be refunded in full. If that were the case, she would not have been concerned about accruing or future costs. For reasons I shall give, I do not accept that she did think that, but the point is that it is not possible to rely on any of her assertions about what she might have done if the Defendant had been in a position to, and had, provided more advance costs information.

[109] For those reasons, I do not think that it would be right to find that the overall amount payable by the Claimant to the Defendant for its services should be limited on the basis that inadequate costs information was provided.’

Conclusions

The principal point of dispute by the claimant failed, but had the claimant been believed on the estimate and had she given evidence that if she knew the costs would have been circa £300,000, she would not have pursued the divorce, or instructed cheaper solicitors, then it might have been a different story. The Costs Judge could have moved to sharply reduce the costs sought from the client.

In the event, the Costs Judge found against her on virtually every issue: there was no estoppel, waiver or cap given by the defendant which displaced the claimant’s obligation to pay. She was found to have signed the retainer and therefore was bound by its terms, including those providing for increases. She was found liable for counsels’ fees, as she had approved the instruction of her preferred counsel.

But coming back to the estimate, or lack of one in this case; the limited role and weight to be given to inaccurate estimates of costs, or a failure to give an estimate at all, points to a clear lacuna in the consumer protection regime that might apply.

In relation to a solicitor’s client, there is a clear obligation in the Code of Conduct at rule 8.7 to do the following:

‘You ensure that clients receive the best possible information about how their matter will be priced and, both at the time of engagement and when appropriate as their matter progresses, about the likely overall cost of the matter and any costs incurred.’

Yet breach of this requirement is common, and rarely do consequences follow. The contrast with the position inter partes in civil litigation is stark: in substantial litigation, costs are now either fixed or subject to a stringent regime of costs budgeting to protect the paying party from having to pay unreasonable fees.

In effect, costs are now primarily set prospectively rather than being assessed retrospectively. Given that solicitors continue to exercise a quasi-monopoly on the conduct of litigation, it seems bizarre that their own clients are more vulnerable to their charges than their opponents in litigation. It might be pointed out that a solicitor’s client has freedom of contract to control the charges they face, whereas their opponent does not.

But that is to miss the point that most clients in the context of divorce and financial proceedings are not serial litigants, they may have varying degrees of sophistication and the notion that the majority of these individuals can use freedom of contract effectively to control their liability for costs is more likely to be illusory than real.