Costs paid by a third party - breach of the indemnity principle?
The case of HMRC -v- Gardiner and Others  EWHC 1716 (QB) is a case concerning an alleged breach of the indemnity principle.
The Respondents were amongst several tax payers challenging penalties imposed by HMRC for incorrect tax returns. EDF Tax Defence Ltd (“EDF”) were the tax advisors.
The Respondents were successful and HMRC were ordered to pay their costs.
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Good news for those that prepare an accurate costs budget
Following on from the Court of Appeal decision in Jacqueline Dawn Harrison v University Hospitals Coventry & Warwickshire NHS Trust  WECA Civ 792 where the Court of Appeal found that:
The budgeted costs will not be departed from in the absence of a “good reason”:
- Incurred costs do not form part of the budgeted costs;
- The good reason test does not apply to those incurred costs;
- The proportionality test can be applied to the final claim for costs, despite the proportionality test having been applied when the costs budget was approved.
As predicted, we have seen that in practical terms this is good news for those that prepare accurate budgets, but not so for those that don’t. The practical implications of this Court of Appeal decision has an impact on the recovery of your legal fees. For practical advice please click here.
Any questions? Please contact Sue Fox on firstname.lastname@example.org or call on 0113 336 3389.
Proactive costs recovery – thinking ahead
The traditional approach to costs recovery has been to prepare a statement of costs for trial, perhaps convert it into a without prejudice schedule of costs for negotiation and, when all else fails, instruct your costs specialist to prepare a formal bill of costs and commence detailed assessment proceedings.
Unsurprisingly, this whole process can take many months and, if the paying party are unwilling to make a payment on account of costs, it can cause difficulties with cash flow. This is particularly noticeable for firms with a large caseload.
However, many firms are starting to think ahead, and we have received an increasing number of instructions to prepare skeleton bills of costs in readiness for JSMs, phased to reflect any Costs Management Orders made. The benefit of such an approach is considered in the full blog here.
Any questions? Please contact Joanne Chase on email@example.com or call on 113 336 3327.
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