Recent Costs Budgeting Developments

With case decisions in costs budgeting arriving at a rapid pace, Bob Hanlon, Costs Lawyer & Advocate, pauses for thought and summarises what has been so far a turbulent 2017 in costs management and assessment of phased bills.

Following the seminal decision in Harrison v University Hospitals Coventry and Warwickshire NHS Trust 2017 EWCA CA 792, the courts have been busy in handing down  decisions on the procedural and practical aspects of cost management.

In RnB v London Borough of Newham (2017) EWHC B15 (Costs), Deputy Master Campbell assessed costs in a matter which had been budgeted.

He reduced the hourly rates of incurred costs and held that he had good reason to do the same for the estimated costs. The paying party submitted that the allowances in the costs budget were made by reference to the phases without the court having commented on hourly rates either in respect of the incurred or estimated costs. The receiving party’s submission was that the allowance made on the CCMC is the costs permitted for the phase and it is up the solicitor how that sum is spent.

The Deputy Master did not accept the receiving party’s submissions and noted that the hourly rate was a mandatory component of Precedent H that was not subject to the rigours of detailed assessment at CCMC. It made no sense if it is automatically left untouched when the rates for the incurred work are scrutinised at the assessment.

The Deputy Master found that that approach would offend against the decision in Harrison at para 44. He found that the detailed assessment was the only opportunity that the paying party had to challenge the rates. This was therefore deemed a ‘good reason’ to depart from the last approved budget.

In Woodburn v Thompson 2017 EWHC B16 (Costs), Master McCloud dealt with the practicalities of Precedent H, the Notes for Guidance and detailed assessment. The claimant drafted a phased bill which corresponded with the phases in the Precedent H. The CMC phase of the bill set out all the CMC costs (and did not include the costs of costs budgeting which were set out in a separate non-phased part of the bill).

Costs relating to costs budgeting were included in the non-phased part of the Bill, comprising the costs of the  budget preparation (capped at 1%) and other costs of  budgeting (capped at 2%) pursuant to PD 3E 7.2 a and b.

The paying party’s objection to this approach was that the non-phased costs included in the costs budgeting part of the bill were, to ‘a large but imperfect degree,’ costs which had actually been budgeted in the CMC phase of Precedent H.

The Defendants’ arguments (accepted by Master McCloud) were thus:

“This was material since the costs claimed in the CMC phase of the bill had been budgeted and were, even leaving out of account the costs now appearing in the non-phase section  already  in excess of the budgeted  sum allowed for in the CMC phase.

“Including the relevant parts of the budgeting costs in the CMC phase consistent with the Precedent H and guidance would mean the total in that phase of the Bill exceeded the  budgeted total for that phase  by a still wider  margin.”

The Master’s approach was that the costs lawyer must follow the Precedent H Guidance as to which costs of costs budgeting were included in the CMC phase. The assumptions were the key to the Precedent H and should explain the matters included in the phases.

The Master therefore directed that the items in the ‘non-phase’ part of the Bill which fell within the CMC phase assumptions of the approved Precedent H (and Guidance) should be treated as if they had been pleaded in the CMC phase of the Bill, and that all other costs of costs budgeting and costs management should remain in the non-phase part of the Bill and be subject to the 2% (and 1%, as appropriate) caps.

JSC Mezhdunarodniy Promyshlenniy Bank & Anor v Pugachev & Ors (2017) EWHC 1853 (Ch) involved an application to increase an already approved costs budget. The case was part of large litigation involving the Claimant Bank, a Russian oligarch and his children as beneficiaries of certain trusts.

The budget for the infant children had been approved in the sum of £1.8 million. Since then the ELH of the trial had increased from 8.5 days to 10 days. The children applied to increase the budget by a further £84,000.00.

The application was opposed by the claimants who maintained that the work required was already included in the existing budget.  The judge found that more work would need to be done, particularly in relation to the written closing submissions and allowed the variation. He also found that the hourly rates of solicitors and daily charges of counsel were reasonable, for the purposes of approving the budget.

Mott & Anor v Long & Anor (2017) EWHC 2130(TCC) was yet another case in a long line of relief from sanctions applications arising from late filing and service of a budget.

The defendants had filed their costs budget 10 days after the deadline but nine days before the CCMC. The solicitor conducting the case believed that an earlier budget had been served and filed in time. However unexplained IT issues meant that it had not been served or filed at all.

The judge, applying the principles set out in Denton v TH White, held that the delay was ‘serious and significant’ in part because ‘lateness in serving a costs budget has the capacity to prejudice the very process of co-operation in the costs budgeting process which the rules are designed to achieve’.

He also found that whilst IT problems can amount to good reason, the defendants had not provided any evidence that there was an IT problem.

The judge was however prepared to grant relief having taken into account all the circumstances. There was huge disparity between the parties’ budgets- the claimant’s budget of £281,000.00 and the defendant’s of £48,000.00 because of the difference in the parties  approach to experts and length of trial.

The judge found that it was it was unlikely that the budgets could have been agreed and that the parties would have to make oral submissions at the CCMC in any event – i.e. the additional time would not have wholly benefited discussions and was unlikely to have led to agreement of budgets.

He said:

“In those circumstances the process of costs budgeting would have been completed today in any event . The fact that the parties are now in precisely the same position in which they would have  been so far as costs budgeting is concerned  had the defendants served their  costs budget in time is a highly significant  circumstance  and one to which the court should have proper regard.”

Costs budgeting, costs management and the relationship with detailed assessment remain areas of significant complexity.

Victoria Square Chambers is able to assist and advise on all aspects of costs management and detailed assessment. Please do not hesitate to contact us.

bobBob Hanlon is a Costs Lawyer & Advocate at Victoria Square Chambers. 

To contact him about any of the matters raised in this article, 

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