Despite all the problems which the legal profession are encountering following the Jackson reforms, the Judiciary continues to feel that Costs Management is working.
It is becoming evident that the Costs Management regime is paving the way in how costs are managed by the Court and that other Courts who are not exposed to automatic Costs Budgeting, are understanding those benefits and are expressing their views.
Sue Fox heads up the Costs Management Team and is supported by 6 Costs Draftsman. The team has extensive knowledge and experience of preparing Precedent H Costs Budgets, continually updating clients on the changes, updates and case-law in relation to Costs Management.
Topics to be covered in this issue include:
- Changes that will be made to the CPR post April 2015, which are relevant to Costs Management;
- Practical tips on Costs Management;
- Recent case-law.
Changes to the CPR
The Fate of ‘Court Fee Only Budget’ post April 2015 – Amendments to the CPR due in April 2015.
Lawyers live in fear of having their Costs Budget reduced to court fees. If a budget is reduced to court fees, the only solution to minimise the impact of this is to obtain an indemnity basis costs order – approved Costs Budgets should not be relied upon at any indemnity basis assessment. Costs Management only applies to standard basis assessments, therefore this is the only way that a somewhat hopeless situation could potentially be rectified. At the moment, the Claimant has the advantage. The Claimant can secure an indemnity basis award by making a well-pitched Part 36 offer, the Defendant cannot. Either party can secure indemnity awards raising arguments such as conduct, however awards made on this basis are much more difficult to achieve.
The Rule Committee have identified this and have amended the rules, which will be implemented in April 2015, to address this disparity. Cases in which the offeror’s costs have been limited to court fees is now governed by CPR Part 36.23.
(1) This rule applies in any case where the offeror is treated as having filed a costs budget limited to applicable court fees, or is otherwise limited in their recovery of costs to such fees.
(Rule 3.14 provides that a litigant may be treated as having filed a budget limited to court fees for failure to file a budget.)
(2) “Costs” in rules 36.13(5)(b), 36.17(3)(a) and 36.17(4)(b) shall mean—
(a) in respect of those costs subject to any such limitation, 50% of the costs assessed with-out reference to the limitation; together with
(b) any other recoverable costs.
The intention of the Rule Committee is to ensure that Part 36 still works in such cases and continues to provide an incentive to make a Part 36 offer. Equally, it is important that the innocent party should not regard itself as having a blank cheque to litigate the case. Sanctions must therefore be imposed for turning down a reasonable Part 36 offer.
Practical Tips on Costs Management
What if your Precedent H Costs Budget has been reduced to Court Fees?
Not all is lost – attempt to secure an indemnity basis order. A budget which has been reduced to Court Fees should not be relied upon if indemnity basis costs have been awarded.
Should the Precedent H Costs Budget be filed after the Court has ordered Directions?
Costing Utopia! A concept where the Precedent H Costs Budget is prepared once the order for directions has been made.
This would enable all parties to cost their budget from the same case plan and then draw the correct comparisons when negotiating. Having an order detailing the directions made would avoid parties drafting budgets with assumptions that differ, which naturally makes drawing comparisons a challenging task and negotiations sometimes impossible. Preparing the budget following the directions order would avoid the inevitable amendments that would be required to reflect the directions made and also the subsequent hearing which may be necessary. Surely a much simpler and more cost effective process – “hear, hear” are the shouts from all the Costs Draftsmen/Costs Lawyers.
Failing to serve the Precedent H Costs Budget
Confusion has reigned regarding the filing of Costs Budgets. The rule change on 22 April 2014 has clarified the position and it is now clear that the budget does not need to be filed with the directions questionnaire if no order has been made to do so. The case of Porbanderwalla v Daybridge Limited also supports this.
Costs Budgeting in the Court of Protection and the Family Courts
It is becoming evident that the Costs Management regime is paving the way in how costs are managed by the Court and that other Courts who are not exposed to automatic Costs Budgeting are understanding those benefits and are expressing their views.
If adopted by the Courts properly, Costs Management can successfully ensure that costs remain proportionate. It is essential in both the Court of Protection and the Family Courts that cases are managed properly and costs do not escalate as a result of poor management. The OPG have made recommendations to parliament for Costs Budgeting to apply to the Court of Protection. Watch this space!
The allowance of out of scope work in relation of Precedent H Costs Budgets –AND- Increased reliance is being placed on the Costs Budget when quantifying the level of the payment on account of costs - Excelerate Technology Ltd –v- Lindsay Cumberbatch & Anor and Thomas Pink v Victoria Secrets UK Ltd.
The importance of detailed assumptions has now been seen in practice in the case of Excelerate Technology Ltd –v- Lindsay Cumberbatch & Anor  EWHX B1 Mercantile. Without these detailed assumptions, establishing and formulating an argument to support any out of scope work would have been a challenging and perhaps impossible task.
Interestingly, when assessing a reasonable percentage for an interim payment the Court allowed a substantial payment on account of costs in the sum of £155,409.66, despite the fact that this was disproportionate to the judgment debt of £158,243.00.
This is a further instance of a budget being the determining factor when quantifying the level of the payment on account of costs, adding weight to the decision in the case of Thomas Pink v Victoria Secrets UK Ltd  EWHC 3258 (ch) where a payment on account of costs of 90% of the budget was awarded.
Failure to update the Budget and failure to serve the Statement of Costs - Simpson v MGN Limited & Anor  EWHC 126 (QB).
In Simpson v MGN Limited & Anor  EWHC 126 (QB), the Claimant failed to submit a revised costs budget to include the costs of a preliminary issue trial and failed to serve a costs statement on the Defendant.
The Defendant argued that the costs relating to the preliminary issue trial should not be allowed on the basis that the Claimant had failed to seek a revision. The Judge considered the sequence of events, which included the Claimant providing the Defendant with an updated budget to include the preliminary issue phase. Despite the Claimant failing to request a revision from the Court, the Judge found that disallowing the costs would be an unjustly disproportionate sanction, not sufficiently justified by the overriding objective.
The Judge also correctly applied the principles in the CPR regarding failure to serve a statement of costs and used his discretion to reduce the statement of costs by 10%.
When a Costs Budget is appealed - Havega –v- Gateshead NHS Foundation Trust.
We now have some guidance regarding the approach which the Court may adopt regarding appealing the amount of an approved costs budget.
Although the Judge did feel that he may have been more generous in some areas of the budget, he considered that as a whole, the budget was both reasonable and proportionate and the appeal was dismissed.
Perhaps this approach will avoid unnecessary and unreasonable requests for appeals and will ensure a cost effective and pragmatic approach to costs budgeting.
Pre-Budget costs are highly relevant - Redfern –v- Corby Borough Council (QBD 03.12.14).
It is quite clear within the CPR that any costs which have been incurred should be considered when assessing future costs, however as we are all aware, these costs can neither be approved or disapproved, only comments can be recorded (CPR Part 3, para 7.4 of PD 3E). As part of the costs management process the Court may not approve costs incurred before the date of any budget. The Court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all subsequent costs.
In the case of Redfern –v- Corby Borough Council (QBD 03.12.14), the Judge applied this principle and relied upon the incurred costs in accordance with PD 3E when assessing future costs.
Estimates of Expert’s Costs - Sloutsker –v- Romanova  EWHC 8 (QB).
In the case of Sloutsker –v- Romanova  EWHC 8 (QB), the Claimant, when seeking to adduce expert evidence, failed to make a formal application and did not comply with CPR 35.4(2) regarding providing an estimate of the costs of the proposed expert evidence.
CPR 35.4 (1) states that parties may not call an expert or put in evidence an expert’s report without the Court’s permission and CPR 35.4 (2) states that parties must provide an estimate of the costs of the proposed expert evidence.