Penalty for failing to serve a costs budget is variable

The sanction for failing to file a costs budget is clear under CPR 3.14; court fees only, unless the court otherwise orders. The CPR is silent however on the penalty for failing to serve a costs budget.

An unreported case was referred to recently in the ACL Costs News bulletin which described how a claimant who failed to serve their budget had their CMC costs cut in half as a penalty. The result of the failure to serve the budget led to the opponent having a reduced timeframe to prepare the budget discussion report but it did not prevent the CMC from going ahead. In this instance the Claimant did not need to seek relief from sanctions as the requirement to do so, where the CPR is silent, is not automatic.

In Djurberg v London Borough of Richmond and Others [2019] EWHC 3342 (Ch) it was held that a party in breach does not need to apply for relief from sanctions where it is not expressly required. At paragraph 32 Chief Master Marsh stated:

“it would be wrong for the court to search out reasons for imposing sanctions that do not obviously arise out of the terms of the CPR or an order made by the court.”

The judgement in this case also explored the possibility of the order containing an implied sanction, a concept that R (Hysaj) v Secretary of State for the Home Department [2014] EWCA Civ 1633 referred to in relation to filing an appeal in time. In circumstances where there is an implied sanction, a sanction where relief from sanctions is not necessary but where it has become common practice to impose the same sanction as if it were, the consequence would be the same.

To rely on submissions that the opponent was not prejudiced by any failure to serve a budget does not therefore come without risk, and so to avoid any penalty whatsoever, the best approach to take when filing a budget is to serve it too.

This does not preclude parties agreeing to the mutual exchange of budgets and for certain cases this can be the best strategy to adopt. If this approach is accepted by the parties then any agreement of mutual exchange should be made prior to the final date for filing to avoid facing any criticism.

Bethany Collings is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at Bethany.Collings@clarionsolicitors.com and 0113 227 3607, or the Clarion Costs Team on 0113 246 0622

Lock Up and Cash Flow: How the Precedent H Costs Budget can assist – updating and monitoring is key

Please see our Costs Management team’s first of many podcasts. We include useful tips regarding how the precedent H Cost Budget can assist with lock up and cash-flow. We also discuss the statement of truth and the importance of the incurred cos. To view please follow this link.

Featured in this podcast is Sue Fox, who is a Senior Associate and the Head of the Costs Management team in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389.

And, Anna Lockyer who is an Associate in the specialist Costs Management team in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at anna.lockyer@clarionsolicitors.com and 0113 288 5619.

Mis-Certification of a Bill of Costs – Be careful!

Back in May, I posted a Vlog about the SRA’s decision following the Court of Appeal’s Judgment in Gempride v Bamrah [2018] EWCA Civ 1367. You can view that Vlog here.

I was therefore very interested to read the recent decision of Master James in the case of Farmer v The Chief Constable of Lancashire [2019] EWHC B18 (Costs) and to share it with you. Here are the key points:

  1. Mr Farmer (“the Receiving Party”) had the benefit of a costs order against the Defendant (“the Paying Party”).
  2. A Bill of Costs was prepared, and detailed assessment proceedings were commenced. The original Bill of Costs totalled £174,565.79.
  3. There were issues over the validity of Conditional Fee Agreements, recoverability of success fees and incorrect hourly rates which led to the service of an amended bill in the sum of £116,192.50.  That total was also incorrect, and the Court found that the bill should have been drawn in the region of £66,000 to £69,000.
  4. The Bill of Costs had been certified as accurate and true. Certain points/items were also maintained through Replies and a Witness Statement.
  5. Had the Bill of Costs been prepared correctly, then the matter would have been dealt with under the Provisional Assessment scheme. This would have saved substantial time and cost for each party and the Court.
  6. There were also costs included in the Bill of Costs which were not recoverable inter-partes.
  7. The Paying party applied to strike out the remainder of the Bill of Costs, pursuant to CPR 44.11.
  8. The Court struck out the remainder of the Bill of Costs; the Receiving Party was entitled to nothing.
  9. The Receiving Party was ordered to pay the costs of the detailed assessment and re-pay the payments on account received.

In Gempride the penalty reduction was 50%. In this case the penalty reduction was a full strike out of the remainder of the costs (circa. £66,000.00 – £69,000.00).

It is fundamentally important to ensure a Bill of Costs has been prepared correctly before you certify it. Mis-certification of a Bill of Costs is a serious issue.

Mistakes happen and the Court will look more favourably on innocent mistakes which are rectified quickly. In this case, the Receiving Party pursued the matter to detailed assessment and maintained retainers that were clearly not enforceable.  

In my Vlog in May, I provided 5 tips to help ensure that you avoid any mis-certification issues. Please view the Vlog to help you check a Bill of Costs (or a costs budget or statement of costs for summary assessment) correctly and to stay clear of any mis-certification arguments and costs penalties. You might want to use my 5 tips to create an internal check-list.

This blog was written by Andrew McAulay. Andrew is a Partner at Clarion and the Head of the Costs and Litigation Funding Team. Andrew can be contacted on 0113 336 3334 or at andrew.mcaulay@clarionsolicitors.com

Underspend, not good reason to depart from budget, unless phase substantially incomplete

The Costs Budget remains essential to costs recovery and monitoring continues to play an all-important role. The courts have previously ruled that an underspend of any phase constitutes a good reason to depart from the budget, however during a recent detailed assessment of costs in Utting v City College Norwich [2020] EWHC B20 (Costs) Master Brown adopted a different approach, agreeing with DJ Lumb in the case of Chapman v Norfolk & Norwich University Hospitals NHSFT [2020], as he commented:

“if an underspend were to be a good reason for departing from a budget it would be liable to substantially undermine the effectiveness of cost budgeting. As the Judge effectively observed, solicitors who had acted efficiently and kept costs within budget would find their costs subject to detailed assessment, whereas less efficient solicitors who exceeded the budget would, absent any other “good reason”, receive the budgeted sum and avoid detailed assessment.”

Consequently, the opportunity to secure a full recovery of budgeted costs (i.e. those estimated costs that have been incurred), is increased if the costs incurred fall within the budget.

Master Brown largely sided with DJ Lumb’s approach in the case of Chapman when he determined that underspending in a phase was not a good reason to depart from the budget. A budgeted phase coming up short is limited to the sum spent because of the indemnity principle, but that does not open it up to scrutiny more generally in the absence of further “good reason”.

Counsel for the Defendant in Utting submitted that if the amount of a phase does not match the budgeted sum then the costs of that phase are subject to detailed assessment including where there has been an underspend. The claim had settled some 20 days before trial following an unsuccessful joint settlement meeting. The bill claimed costs slightly lower than those budgeted but Master Brown deemed all phases to be complete, save for the Trial Preparation phase and Trial phase. For the phases regarded as complete he opined:

the fact that a party has spent less than its budget for a phase does not mean there is therefore in fact a good or appropriate reason for any further reduction and I was not satisfied that there was any additional “good reason” for any such reduction.

The Defendant was however given permission to argue “good reason” for departure in the Trial Preparation and Trial phases on the grounds that these phases had not substantially been completed and described this as:

“a clear and obvious distinction between an ‘underspend’ and the situation that arose in respect to the Trial and Trial Preparation phases where plainly there was, at the very least, substantial non-completion

This was the key difference to the approach taken by DJ Lumb in Chapman. The thrust of the ruling in Chapman seemed to be that once a budget was set, a party could spend a budgeted phase however it chose.

In Utting the Defendant sought to rely on the 2019 ruling in Barts Health NHS Trust v Salmon where not spending the totality of the budgeted figure for a particular phase, by virtue of the indemnity principle itself, did constitute “good reason”. The point of settlement of this case was pre-agreement of joint expert meeting agendas and before any JSM and so unsurprisingly the sums claimed in the Expert and ADR phases were less than the sum which had been budgeted for. Master Brown made reference to the fact he sat as an assessor in Barts Health NHS Trust v Salmon but justified taking a different tack in Utting on the basis that in Barts Health  “the assumptions upon which the budget had been prepared were not fulfilled”.

The approach taken in Barts health essentially incentivised a receiving party to overspend to avoid detailed assessment. DJ Lumb recognised this in Chapman and highlighted how it was problematic. Although Master Brown in Utting agreed with DJ Lumb as to the overall effect of the ruling in Barts Health, Master Brown went on to comment:

“There is however nothing per se unjust if a receiving party were to receive a sum by way of costs which is less than the budgeted sum. This is, of course, to be contrasted with the situation where a phase is not substantially completed, where it would, to my mind, be unjust for a receiving party to receive the full amount of a budgeted sum in circumstances where only a modest amount of the expected work had been done.”

As none of the cases referred to above are binding there remains an absence of clarity surrounding “good reason” to depart from a budget when the receiving party has underspent. The decision in Utting does however seem to have refined the approach in Chapman, causing Barts Health to appear to be more of an anomaly, further highlighting the importance of budgets and budget monitoring.

Anna Lockyer is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at anna.lockyer@clarionsolicitors.com and 0113 288 5619, or the Clarion Costs Team on 0113 246 0622

Filing a Costs Budget Late: High Court Decisions in 2020

Back in January of this year Lionel Persey QC, sitting as a Deputy Judge of the High Court, took a fairly lenient approach towards the defaulting party in the case of Manchester Shipping Ltd v Balfour Shipping Limited & Anor [2020] EWHC 164 (Comm) when he granted relief from sanctions to Defendants who filed a costs budget 13 days late.

The Judge took the stance that “The breach, although serious in terms of lateness, did not prevent the litigation from being conducted efficiently or at proportionate cost. No inconvenience was caused to the court or to other court users”. This ruling seemed to mark a shift from the strict application of CPR 3.14 which 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.

More recently however, His Honour Judge Simon Barker QC in Heathfield International LLC v (1) Axiom Stone (London) Ltd & (2) Medecall Limited [2020] EWHC 1075 (Ch) determined that the defaulting party, in this case the second Defendant, was to be treated as having filed a budget comprising only the applicable court fees.

The surrounding circumstances were that the defaulting party failed to file a Budget 21 days before the originally listed CCMC. This first CCMC was vacated 4 days before it was due to take place as a result of the parties making applications in respect of security for costs. The second Defendant attempted to excuse the fact it had not filed a budget on the basis that the parties had agreed for the CCMC to be relisted. The timing of this agreement was ambiguous and could not be substantiated. The second Defendant then failed to file and serve its budget 21 days before the relisted CCMC and did so late by at least 5 days. Furthermore, they did not file and serve a Precedent R or engage in budget discussions. Relief from sanctions was subsequently applied for 2 days before the re-listed CCMC.

Counsel for the second Defendant attempted to use Manchester Shipping in support but it was found to be incomparable on the facts.

HHJ Barker QC commented on the fact that the first Defendant’s response to the Claimant’s claim had been the cause of the second Defendant on a secondary alternative basis “but that does not entitle D2 to take a more relaxed or casual approach to participation as a party in this litigation”.

The sums of money in issue, at approximately £260k plus £100k for interest and statutory penalty, and the type of litigation as a claim for unpaid invoices were also referred to in the context that “costs may easily become disproportionate” thus “costs control and costs budgeting are all the more important”.

Reference was also made to the court’s discretion under CPR 3.14 being “entirely open”.

A form of hybrid relief was contemplated but ultimately it was decided that the defaulting party should be treated as having filed a budget comprising of court fees only.

Anna Lockyer is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at anna.lockyer@clarionsolicitors.com and 0113 288 5619, or the Clarion Costs Team on 0113 246 0622

The Precedent T; a new Costs Management precedent, watch this space!

The CPRC have released minutes of their latest meeting.  The committee has provided further information regarding the proposals and options relating to revisions to CPR r3.15 and PD 3E, please follow this link to see our previous update.

CPR r3.15 will be re-drafted stating that revisions to budgets are made promptly rather than the initial suggestion that revisions are made without delay. There will be further amendments to practice direction 3E with the introduction of a precedent T and accompanying rules in relation to the completion of the same. The precedent T will provide much needed structure regarding the process of revising budgets and we are expecting that it will outline how to revise budgets. The intention is that these updates will feature in the October 2020 update to the rules.

Please do not hesitate to give me a call or email if you have any queries regarding revising your budget or any other cost management requirements.  More detail regarding the importance of revising the budget can be found in our previous blog here. Remember that the rules provide for incurring 2% of your budget in respect to all cost management matters which includes monitoring and revising budgets.

Sue Fox is a Senior Associate and the Head of the Costs Management team in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.

Costs Budgeting following the 109th CPR update

The 109th update has clarified what falls within the “incurred” costs, and made some changes to the guidance regarding which phase costs fall into. Watch the video for more detail and some tips on how to manage the period between the drafting of the budget and the date of the costs management hearing.

Anna Lockyer is an Associate and Costs Lawyer in the Clarion Costs Department. You can contact her by email at Anna.Lockyer@Clarionsolicitors.com, or by phone on 0113 288 5619.

 

COVID 19 update: face to face hearings

HMCTS are consolidating the work of the courts and tribunals into fewer buildings. It has been announced that from Monday 30 March 2020 there will be a network of priority courts that will remain open during the coronavirus pandemic to make sure the justice system continues to operate effectively.

Fewer than half of all court and tribunal buildings will remain open for physical hearings, with 157 priority court and tribunal buildings remaining open for essential face-to-face hearings. This represents 42% of the 370 crown, magistrates, county and family courts and tribunals across England and Wales.

To help maintain a core justice system that is focused on the most essential cases there will be open courts, staffed courts and suspended courts.

The Judiciary recommend that you check which courts are open before you travel.  For information regarding the category of each court please follow this link.

Lord Chancellor Robert Buckland has said that it is vital that we keep our courts running. and that:

An extraordinary amount of hard work has gone into keeping our justice system functioning. Technology is being used creatively to ensure that many cases can continue. Not everything can be dealt with remotely and so we need to maintain functioning courts.

These temporary adjustments to how we use the court estate will help ensure that we can continue to deal with work appropriately in all jurisdictions whilst safeguarding the well-being of all those who work in and visit the courts”.

Staffed courts will support video and telephone hearings and progress cases without hearings and ensure continued access to justice.

The remaining courts and tribunals will close temporarily and these measures will be kept in place for as long as necessary.

Sue Fox is a Senior Associate and the Head of the Costs Management team in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.