It is now over five years since Costs Management procedures were introduced as a result of the Jackson reforms. Since then ‘proportionality’ ‘costs management’ and ‘costs budgeting’ have become terms of everyday usage for litigation solicitors, barristers and costs lawyers alike.
In the years since 1st April 2013, a fair swathe of case law has built up in this area of costs law. All practitioners will be familiar with the most famous cases, such as Mitchell v News Group Newspapers (2013) EWCA Civ 1537, which as our Head of costs budgeting, Paul Kay points out, is in fact a case that is often mistakenly thought of as being about costs budgeting. It is not. It is about relief from sanctions and the courts stricter approach to relief from sanctions, after Jackson.
However, there is now a genuine body of case law that relates to costs budgeting. We have at RCostings regularly written blogs and articles on the most prominent cases involving costs budgeting and costs management in general, as they have arisen. We have already covered some of the more high-profile cases that have taken place since the beginning of 2017, on the blogsite section of our website such as;
On the 19th September 2017 our update on some of the latest costs budgeting cases saw us covering the judgments in JSC Mezhdunarodniy Promyshlenniy Bank V Pugachev  EWHC 1853 (Ch), Mott V Long  EWHC 2130 (TCC) and Jagdish Lakhani & Anor V Ibrahim Sheikh Abdullah Mahmud & Ors  EWHC 1713
Our blog of the 2nd April 2018 looked the cases of RNB v London Borough of Newham and Nash v Ministry of Defence .
However, it is unlikely that anyone could ever accuse a practitioner of knowing too much case law on this fast-moving area of costs. Therefore, we have put together brief summaries of some of the perhaps lesser known, but nevertheless still important cases that have been decided in the past 18 months or so.
Asghar v Bhatti 2017 EWHC 1702 QB (Amendments; Case Management; Costs budget; Discretion; Penalties, Failure to file a budget
CPR 3.14 provides that;
“Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees.”
In Asghar, a costs budget had not been filed by the Claimant, so in accordance with CPR r3.14, in 2015 the court had refused an application for relief from sanctions and ordered that accordingly the budget should only consist of the court applicable court fees. The original ELH was considered to be 6 days, but it subsequently transpired that the matter was likely to need 12 days of court hearing time. The parties therefore revised their budgets.
When the matter came before the Master she had to decide whether the Claimant should be allowed to revise to revise its budget given the 2015 order restricting it to court fees only. The requirement for increasing the ELH was due to extra work which became necessary after the 2015 order. When the matter went before the Master, she decided that the preparation required for an extra six days of trial was a significant development which did not undermine the rationale of CPR 3.14 and permitted the Claimants revised budget. The Defendants appeal against this order was dismissed. The question was not what might, on a hypothetical basis, have been allowed if the development had occurred before the original hearing at which the ‘court fees only’ budget was ordered, but whether given the actual circumstances and the timeline of fact, it had been open to the Master to allow the variation in costs budget and the court decided that it had been.
Cliff Richard v BBC 2017 EWHC 1111 (Ch) (Proportionality and Reasonableness)
In a case where the claimants incurred costs that amounted to over £1 million, the Defendant submitted that this figure was unreasonable and wholly disproportionate. The Defendant invited the court to register disapproval. Chief Master Marsh declined to do so on the basis that although a comment about a party’s incurred costs could be considered in subsequent proceedings, it was nevertheless not binding on a costs judge. The costs judge would have far more information available to him than the judge at the costs management conference. Although the Claimant’s costs in the instant case appeared substantial in amount, it was impossible for the court to take a meaningful view as to whether they were disproportionate or unreasonable and a degree of caution should be exercised in making any comment about incurred costs.
Findcharm v Churchill Group 2017 EWHC 1108 (TCC)
Mr Justice Coulson expressly cautioned against those who:
“treat cost budgeting as a form of game, in which they can seek to exploit the cost budgeting rules in the hope of obtaining a tactical advantage over the other side”.
The claim arose as a result of a gas explosion at premises owned by the Defendant.
Findcharm’s budget was £244,676.30 (not including costs already incurred) and it made a number of assumptions to explain how the budget had been prepared. For example, Findcharm had assumed that no expert evidence was necessary on one key issue, namely the cause of the explosion, because no positive defence had been pleaded to that issue, and that when it came to quantum, there would be a single joint accountancy expert. When it came to witness evidence, the Judge noted the need to explain the background to and circumstances of the explosion, together with detailed factual evidence of how the claim for loss of profits was made up. Churchill’s cost budget was for £79,371.23, a sum described by the Judge as:
“completely unrealistic. It is designed to put as low a figure as possible on every stage of the process, without justification, in the hope that the court’s subsequent assessment will also be low. In my view, therefore, it is an abuse of the cost budgeting process.”
The Judge approved Findcharm’s budget figures as being reasonable but also noted that Findcharm had not unreasonably accepted the Churchill estimate. As a consequence, Churchill were bound by the figure (significantly less than that of Findcharm’s) that they themselves had put forward.
Kalma v African Minerals Ltd 207 EWHC 1471 (Costs budget; Cost management order; group litigation; proportionality)
In determining whether costs budgets should be approved in a case involving 142 Claimants in Sierra Leone, the court considered not just the value of the claims, but the complexity of the legal arguments, the public interest in the events, the human rights considerations and reputation issues. Those factors weighed more heavily than the monetary value of the claim. There were 142 claims for personal injury for personal injury and false imprisonment. The claims of 101 claimants had been settled for £4500 each. The settlements for the remaining Claimants were in the sum of £30,000 each. The solicitors for the claimants had to visit each claimant in person as they lived in remote parts of Sierra Leone. They were illiterate, spoke little English and had no access to internet or phone. The Claimants’ costs budget totalled £7.25 million against the Defendant’s budget which was for £3 million.
Applying proportionality was difficult because of;
- The complexities of case managing the number of claims
- The modest accounts claimed
- The vulnerable nature of the claimants
- The logistical difficulties of communication
- The public interest as this was a claim against the police
- The fact that the events occurred in a foreign estate and against an arm of the state
- The application of the law of Sierra Leone to the claims
As a result of these factors the court was unable to conclude that the incurred costs of £2.9 million for the Claimants was unreasonable. In respect of the estimated further costs of £4.2 million by the Claimants as opposed to £2 million for the Defendant, the above-mentioned factors weighed more heavily in the consideration of whether the costs were reasonable and proportionate, than the monetary value of the claims.
Woodburn v Thomas SCCO unreported 11 August 2017 (Costs Management, Costs Budgeting Guidelines)
Despite the word ‘guidance’ in the Precedent H guidance notes it is mandatory in nature and an unspecified sanction could be applied if the costs judge disapproved of a departure. Master Macleod said “The assumptions in the Precedent H are the starting point. Those evidence the basis on which the judge has made their budgeting decision or on which the parties agreed the budget. Here the assumptions included in the CMC phase (and PTR phase) included some costs referable to budgeting and costs management, which is as the guidance requires.
‘The costs lawyer drafting the Precedent H must, unless the guidance changes, follow the guidance as to which costs of costs budgeting they include in the CMC (and PTR) phases and which they include in the non-phase elements as being the “other” costs of costs budgeting.’
‘In my judgment (whether or not the guidance has been followed, albeit it was in this case), where a budget is approved or agreed then the assumptions on which it was approved or agreed are the best guide as to how the relevant budgeting costs should be treated in the bill, so as to avoid the difficulty of argument over the extent to which those budgeting costs may be subject to the CMC phase’s budget limit (thereby requiring “good reason” if in excess of budget) as opposed to or as well as the “2%” cap imposed by PD 3E 7.2(b).
‘Ensuring that the bill phases include (wholly and exclusively) the costs which were budgeted in the corresponding identical Precedent H phases could avoid the confusion as to “what goes where and how to treat it” which was encountered here and took some time in court to resolve item by item in the “non-phase” part of the bill.’
As the summer draws to a close and the court wheels grind back up to full speed, before the year is out, we are certain to see another swathe of costs budgeting and costs management decisions in an area that it is hard to believe, has only been in existence for 5 years, such is the impact it has created already in its short life to date.