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A law firm was in breach of its professional obligations by failing to keep its client updated on the estimated costs of a case after they escalated far beyond what was initially agreed. The firm issued bills in excess of £130,000 for work on a matter originally estimated at £10,000.

The costs judge, Master Leonard, said however that the claimant’s liability could not be limited to the original estimate as it would “have been clear to everyone concerned that the strategy upon which the £10,000 estimate had been based had failed”. The claimant, Adam Newman, had been paying the firm’s earlier bills, and had paid over £70,000 by the time of the costs hearing.

Adam Newman was in dispute with his family business and had instructed Gordon Dadds LLP to act on his behalf. The initial strategy was to settle the dispute by mediation. When this failed the case developed into one involving substantial, multiple litigation.

As the case developed, Gordon Dadds did not update its original retainer letter which quoted the figure of £10,000 for limited work relating to the attempted mediation.

Mr Newman asked the court to limit costs to the initial £10,000 estimate. He claimed there had been hardly any discussion and no written advice about the likely level of costs for the litigation.

He argued that this failure prevented him from making a decision to seek less expensive legal advice.

The judge concluded that there was insufficient evidence given of the costs of appointing an alternative solicitor and therefore ruled that it was wrong to limit the recoverable costs to any specific figure.

However the judge concluded that Gordon Dadds was in breach of its professional and contractual obligations to Adam Newman by failing to keep him properly informed about costs.

James Burgoyne, Director – Claims & Technical, Brunel Professions says the case demonstrates how important it is for firms to keep their retainer letter under review, and not just about costs. “It’s common for matters to evolve during the course of a retainer, and it is easy to fall into the trap of assuming that the client has consciously grasped and accepted the implications of those changes. In this case, it related to the firm’s fees, and the court determined that it was not enough to rely on the fact that the client was paying the firm’s bills to assume that they were properly aware of mounting costs,” he said.

Reports about the case have been published by the Association of Costs Lawyers, Law Society Gazette and Thomson Reuters Dispute Resolution Blog

Brunel Professions is a leading provider of PII insurance broking to the legal profession. To find out more call Mark Sommariva on 0203 475 3275.