Category: Costs Management

An Insight into the General Principles and Rationale of the Costs Budgeting Process

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Introduction

The judgement of Master Brightwell in Atlantic Ways Holding SA v Freetown Terminal Holding Ltd [2025] EWHC 674 (Ch), provides an insight into the costs budgeting process and emphasises the importance of proportionality in the costs management process, regardless of whether costs in the first instance were reasonable in nature.

Background of the case

A cost management hearing took place on 25 February 2025, where there was a disparity between the budgets of the Claimant and the Defendant. The Claimant’s budget had been agreed at £449,000 and the Defendant’s budget was drawn at £808,000 and was disputed. Due to this disparity, Master Brightwell set out the general principles of each parties’ proposals, in comparison to the principles of costs management.

The Judgement

Master Brightwell made clear that a budget is set by the Court without undertaking a detailed assessment in advance. However once set, the Court would not depart from this without adequate reason, and it is the role of the Court to set the budget “with an eye to what would be permitted on a detailed assessment on the standard basis” meaning any doubt will be resolved in favour of the paying party. It was also highlighted that the Court is to avoid comparing parties’ budgets, whilst acknowledging that it remains impossible to fix one budget and ignore the other. The Master went on to confirm that the budgeted costs are still considered reasonable and proportionate if they fall at the outer end of the range.

In respect of hourly rates, Master Brightwell emphasised that it is not for the Court to set or approve the charging rates or the time spent by each level of fee-earner and Counsel. However, if the charging rates are not within a reasonable range, then this would affect the reasonableness and proportionality of the budget. The rates used in the Defendant’s costs budget significantly exceeded even the London 1 rates which are for “the heaviest corporate and commercial work,” and whilst the claim was not insignificant, it still was not the most substantial case type dealt with by the Court. Therefore, the London 1 guideline rates would be the maximum permitted.

Master Brightwell then explained his rationale for the budget set for the Defendant by applying the principles of reasonableness and proportionality to each phase.

Each phase of the budget was reduced. However, whilst the amount sought by the Defendant for the expert reports is unclear, the Master granted the Defendant’s budget for this phase at £55,000 in comparison to the Claimant’s budget at £40,000 to allow margin for error. This itself is another useful insight into the budgeting process and acknowledges that the Courts are willing on occasion, to allow variations during a hearing where developments justify it.

Duplication and involvement of multiple fee-earners was addressed by the Court, with reductions made due to fears regarding duplication. The Master noted Practice Direction 57AC, highlighting that witness detailed investigations of documents were not to be conducted and what was said in documents was not to be recited, rather the idea of the witness statement phase is to take the witness’ own evidence. Attendance at trial by multiple fee earners was also reduced by the Court, with attendance by two fee-earners and another present for assistance being provisioned, as opposed to four fee earners that were sought.

Despite DKH Retail Ltd and others v City Football Group Ltd [2024] EWHC 3231 (Ch) where the court ordered for mediation to occur before trial, Master Brightwell in this case reduced the budget for ADR to exclude the assumption of mediation. Master Brightwell explained that if mediation was to occur, then the budget could be revised on the basis of a substantial development.

Conclusion

Overall, the case provides a useful step by step approach to each phase of a costs budget during the cost management process and emphasises the application of the principle that proportionality trumps reasonableness, even at the cost budgeting stage.

 

Angela Nako is a Paralegal in the Costs and Litigation Funding Department at Clarion Solicitors.  You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Costs Budgeting Pilot Scheme for QOCS Cases

Anna LockyerLeave a comment

PD51ZG3 will apply to Part 7 multi-track claims in the High Court District Registries at Manchester and Birmingham to which CPR 44.13 (Qualified One-Way Costs Shifting) applies. It is not intended to apply to County Court cases and there will be no financial limit on the value of the claims.

The commencement date of this pilot is the 6 April 2025 and it will run for 3 years (subject to Parliamentary approval), aligning with the Business and Property Court Pilot and the less than £1 million non-BPC/non-QOCS Pilot.

In terms of the new process, all parties (save for Litigants in Person) will file a Precedent Z 21 days before the first CMC. In most cases, the Defendant will then file a Precedent RZ, within a prescribed timescale.  The Claimant will not however be required do so because, apart from in a very small number of cases, they will have QOCS protections and will not be called on to pay the Defendant’s costs. The Claimant does not therefore generally need to comment on the Defendant’s budget.

QOCS protections means there is generally no need to costs manage the Defendant’s costs (because the Claimant will not be called on to pay the Defendant’s costs). The Court retains the power to manage the Defendant’s costs in appropriate cases. The CPRC sub-committee’s view is that this is most likely to happen if the Defendant has pleaded (or otherwise raised) a credible case that the claim (or Claimant) is fundamentally dishonest.

For information relating to the Pilot Schemes under PD51ZG1 and PD51ZG2 see: https://clarionlegalcosts.com/2025/02/10/costs-budgeting-light-pilot-schemes-179th-practice-direction-update/

The new Precedent Cost Forms for all 3 Costs budgeting “light” Pilot Schemes are available here: Precedent Cost Forms – Justice UK

Anna Lockyer is a Senior Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Uplifted Guideline Hourly Rates from 1 January 2025

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The Guideline Hourly Rates have increased with effect from 1 January 2025.

In December 2023, the Master of the Rolls accepted the recommendations of the Civil Justice Council Costs Review, which was published in May 2023. One of the recommendations was to annually review and increase the Guideline Hourly Rates in accordance with the Services Producer Price Index (SPPI).

The Guideline Hourly Rates are now as follows (the brackets reflecting the rates effective from 1 January 2024 to 31 December 2024):

Grade Fee Earner London 1 London 2 London 3 National 1 National 2
A Solicitors and legal executives with over 8 years’ experience £566

(£546)

 £413

(£398)

 £312

(£301)

 £288

(£278)

 £282

(£255)
B Solicitors and legal executives with over 4 years’ experience £385

(£371)

 £319

(£308)

 £256

(£247)

 £242

(£233)

 £242

(£233)
C Other solicitors or legal executives and fee earners of equivalent experience £299

(£288)

 £269

(£260)

 £204

(£197)

 £197

(£190)

 £196

(£189)
D Trainee solicitors, paralegals and other fee earners £205

(£198)

 £153

(£148)

 £143

(£138)

 £139

(£134)

 £139

(£134)

 

 

There has been an average of a 5%  increase to Grade A rates and 4% increase to Grade B, Grade C and Grade D rates.

Ujjaini Mistry is a Paralegal in the Civil and Commercial Costs Team at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Costs Budgeting Light Update

Anna LockyerLeave a comment

As discussed at the CPRC meeting last month, two draft costs budgeting pilots have now been prepared in respect of:

  1. Business and Property Court (BPC) cases; and
  2. Certain other cases valued at under £1m.

A new Precedent costs form (modelled on the existing Precedent H) has been drafted and approved in principle.

Each pilot maintains the exclusions set out in CPR 3.12 (claims of £10m or more and claims brought by children).

The draft BPC Practice Direction provides for where the court does not make a CMO and allows court discretion, incorporating “unless the court orders otherwise” in the interests of clarity.

The BPC Pilot is intended to cover BPC of England and Wales (i.e. the Rolls Building) and at least two BPC District Registries (including Business and Property work in the county courts in those District Registries).

The non-BPC under £1m pilot mirrors the BPC under £1m position.

Various implementation issues, including the pilot courts, numbering of the Precedent and Practice Direction, and the commencement and duration of the pilots are yet to be finalised.

Rahman v Hassan & Ors: guidance from the High Court on the effects of Part 36 offer in non-monetary claims and applications to vary costs budgets after Trial

Katie SpencerLeave a comment

The recent case of Rahman v Hassan & Ors (Re Consequential Matters) [2024] EWHC 2038 provides a useful insight into what constitutes a ‘significant development’ for the purposes of cost budget variation and the application of Part 36 offers in non-monetary matters

The case concerned the beneficial ownership of significant assets of a deceased relating to transactions alleged to have taken place between the Claimant and the late Mr Al-Hasib Mian Muhammad Abdullah Al Mahmood. It was held that these transactions amounted to donationes mortis causa, or “gifts in contemplation of death”.

Application to vary Costs Budget after Trial dismissed

The Claimant sought to vary his costs budget, which had previously been approved in the sum of £320,648.50 in accordance with the procedure under CPR 3.15A, after the trial had concluded and judgment had been handed down.

The matter was proceeding to a consequential hearing following written submissions which were ordered following the final hearing, when an increase of £134,931.55 was sought by the Claimant.

Five significant developments in the litigation were advanced by the Claimant in support of his request.

CPR Rule 3.15A Explained

Under CPR rule 3.15A, “a party must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions.”

If revisions cannot be agreed between the parties, “the revising party must submit the particulars of variation promptly to the court, together with the last approved or agreed budget, and with an explanation of the points of difference if they have not been agreed.” The effects of failing to submit variations promptly were considered at length in the decision in Persimmon Homes Ltd and Anor v Osborne Clarke LLP and Anor [2021] EWHC 831 (Ch) and are discussed here.

Claimant’s application

The Claimant contended that there were five significant developments which warranted the costs budget to be changed. These are summarised as:

(1) Involvement in a road accident after the close of evidence and before closing submissions in the trial. The latter were postponed by just under a week.

(2) The fact that the Claimant’s Particulars of Claim were amended during the trial and additional costs were incurred.

(3) Additional costs were incurred as a result of the order made for written submissions at the conclusion of the trial

(4) There was an interval of some 5 1/2 months between the end of the closing submissions of the circulation of the draft judgment, and additional costs were incurred by the Claimant once that draft judgment was circulated.

(5) Work on the judgment in the period 29 May 2024 to 14 June 2024 resulted in additional costs being incurred by the Claimant.

The Court’s decision

The Court refused the Claimant’s request to vary. It was acknowledged that each of the five grounds referenced by the Claimant could be considered a development, they were not significant.

HHJ Paul Matthews (sitting as a Judge of the High Court), confirmed, “I do not regard any of these five matters any of these five matters as a “significant” development in the litigation which should justify a variation of the budget. The use of the word “significant” in the rule is deliberate. It is not every development that requires variation in the budget. Otherwise large amounts of pre-trial preparation time would be taken up with making applications for budget variations.”

The application of CPR Part 36 in non-monetary claims

HHJ Matthews also considered the application of CPR 36.17 to non-monetary claims. Initially the Court had determined that the Claimant had been the successful party in view of him taking beneficial ownership of significant assets of a deceased.

The claimant had made a Part 36 offer in January 2023 Part 36, in respect of the whole claim and counterclaim. The offer was that the Claimant would receive furniture and personal chattels of a property, as well as some bank accounts. At trial, the Claimant was awarded two properties, which were deemed to be significantly more valuable than the contents of the offer. The 21-day period applicable to the offer expired on 13 February 2023. The offer was not accepted, but the defendants agreed that this offer was a claimant’s Part 36 offer within CPR rule 36.17.

CPR 36.17 explained

The rule provides that where a Claimant obtains judgment against the Defendant is at least as advantageous to the Claimant as the proposals contained in a Claimant’s Part 36 offer, then the Court must, unless it considers it unjust to do so, order that the claimant is entitled to:

(a) interest on the whole or part of any sum of money (excluding interest) awarded, at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;

(b) costs (including any recoverable pre-action costs) on the indemnity basis from the date on which the relevant period expired;

(c) interest on those costs at a rate not exceeding 10% above base rate; and

(d) provided that the case has been decided and there has not been a previous order under this sub-paragraph, an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—

(i) the sum awarded to the claimant by the court; or

(ii) where there is no monetary award, the sum awarded to the claimant by the court in respect of costs—

Amount awarded by the court Prescribed percentage
Up to £500,000 10% of the amount awarded
Above £500,000 10% of the first £500,000 and (subject to the limit of £75,000) 5% of any amount above that figure.

 

CPR 36.17(2) states that, “in relation to any money claim or money element of a claim, “more advantageous” means better in money terms by any amount, however small, and “at least as advantageous” shall be construed accordingly.”

The decision

The Defendant had disputed the application of CPR 36.17(4)(a), on the basis that no monetary award had been made and the provisions of (2) restricted the application of the rule to money claims only.

The Court disagreed with this approach, and that they did not “read rule 36.17(2) as so restricting the scope of rule 36.17. I read that rule saying that, in the application of this rule to money claims, ‘more advantageous’ and ‘at least as advantageous’ have a money-based meaning, and no other. That is a far cry from saying that no other kinds of claims are within the rule. On the contrary, it means that, in non-money-based claims (such as this one) the phrases ‘more advantageous’ and ‘at least as advantageous’ do not have a money-based meaning but are to be construed in the ordinary sense of the words. Any other reading would mean that the words “or money element of a claim” were redundant.”

Assessment of costs on the indemnity basis, and the other benefits outlined in CPR 36.17 were subsequently agreed by the Defendants, save for a dispute on the amount of interest.

Conclusion and discussion

This case underpins the importance of demonstrating not just ‘developments’, but significant developments when seeking to vary a costs budget under CPR rule 3.15A, and the Court’s decision highlights the high bar for such applications. The Court did comment in this matter that, whilst no formal application to vary was required, the lack of evidence in support of the variation was troubling and suggests that parties seeking to vary in future cases, could prepare short witness statements in support of requests.

Comments were also made obiter dicta regarding the fact that costs budgets are not limits on costs being incurred, and there was nothing to prevent additional sums being sought at an assessment is which takes place later. This would be on the grounds of there being ‘good reason to depart’ from budgeted sums, pursuant to CPR 3.18 (b). Albeit it can be argued that the bar for seeking such departure is a high one to overcome.

The fact that the costs which were subject of the request for variation were to be assessed on the indemnity basis, brings into question the benefit to Claimant in making requests pursuant to CPR 3.15A after Trial. It should be remembered that prima facie, cost budgeting is only relevant when costs are to be assessed on the standard basis, and reference is made to the decisions in Lejonvarn v Burgess & Anor [2020] EWCA Civ 114 and Denton and Others v TH White Limited [2014] EWCA Civ 906.

This blog was co-written by Daniel Murray.

We are regularly instructed to advise on costs budgets and variations. Please contact us if you have any questions.

Katie Spencer is a Paralegal in Clarion’s Costs and Litigation Team and can be contacted on 07741 988 925 or at katie.spencer@clarionsolicitors.com.

Daniel Murray is a Senior Associate and Costs Lawyer in Clarion’s Costs and Litigation Funding Team and can be contacted on 07918 271 397 or at daniel.murray@clarionsolicitors.com.

Costs Budgeting Reform Gains Momentum

Anna LockyerLeave a comment

Flexible budgeting recommendations made by the CJC’s report of May last year have been accepted by the Master of the Rolls and more recently discussed at last month’s CPRC meeting.

Key points:

  • A new Precedent H costs form has been proposed, modelled on the existing Precedent H
  • A draft new Practice Direction includes budgeting claims with a value of over £10m
  • A draft pilot Practice Direction provides for 5 categories of case, each limited in certain courts:

– Business & Property Courts (BPC) claims with a value of £1m or more;

– BPC claims with a value of less than £1m;

– Qualified One-Way Costs (QOCS) claims;

– Non-QOCS claims; and

– Certain other non-BPC claims.

It was agreed in principle that each case category may have its own Practice Direction and the implementation dates need not be the same.

Watch this space for further updates…

Litigant in Person required to file and serve a costs budget

Bethany CollingsLeave a comment

In a recent Judgment, Cotham School v Bristol City Council & Ors [2024] EWHC 824 (Ch) it was held that a Litigant in Person (“LIP”) was required to file a costs budget as they instructed Direct Access Counsel. HHJ Paul Matthew handed down a judgment following an application for a costs capping order under CPR rule 3.19.

HHJ Paul Matthew stated:

“It seems to me that, if there is any risk, let alone a substantial risk, that disproportionate costs would be incurred in this case, the better instrument for preventing that undesirable event is effective costs management orders, rather than the ‘blunt instrument’ of a costs capping order. In the circumstances, I propose to order pursuant to rule 3.15(1) and (3)(a) that, although this is a Part 8 claim, and although the second defendant is a litigant in person (albeit employing counsel on a direct access basis), all parties must file and exchange costs budgets not later than 21 days before the first case management conference. Having so ordered, the preconditions for a cost capping order under rule 3.19 are not satisfied, and I decline to make such an order.”

Under CPR 3.12(1), LIPs are exempt from complying with costs budgeting. However, the Court retains discretion to order a person to file and serve a costs budget, even if they are not obliged to do so pursuant to CPR rule 3.12(1A).

HHJ Paul Matthew referred to the case of Campbell v Campbell [2016] where Chief Master Marsh confirmed:

“Furthermore, the court may decide to make a costs management order in relation to a litigant in person’s budget. Indeed, in a case in which a litigant in person is likely to be seeking a substantial costs order, whether because there will be fees of counsel under the Direct Access scheme or otherwise, it may well be desirable to do so.” 

Conversely, HHJ Paul Matthew referred to the case of CJ and LK Perk Partnership v Royal Bank of Scotland [2020] EWHC 2563 (Comm), where it was held that LIPs with direct access Counsel should not file and serve costs budgets.

In this case, although the LIP had instructed Counsel under the direct access scheme and did not instruct solicitors, HHJ Paul Matthew concluded that due to the potential significant claim for costs if successful, all parties, including the second Defendant (the LIP), should file and serve a costs budget, regardless of the nature of Part 8 proceedings.  

Bethany Collings is a Paralegal in Clarion’s Costs and Litigation Funding Team and can be contacted on 07774 951949 or at bethany.collings@clarionsolicitors.com

COP Costs Case Law

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Following submission of a Bill of Costs, the Costs Officer will assess the same to ensure that the costs charged are fair and reasonable, and will often refer to case law to justify the decisions they make with regard to reducing/excluding entries.

Please see below some of the most common case law that is applied on a regular basis by the Costs Officers:

R v Legal Aid Board Ex Parte Bruce (1991)

This case dealt with the issue of two or more fee earners at one attendance.

It was stated that “Solicitors are not to be expected to carry knowledge of all the law in their heads… if the problem is outside the scope of their experience they will wish to discuss it with others who are more qualified… But knowledge of the law, however acquired or recalled, is their stock in trade… In so far as expense is involved in adding to this stock in trade, it is an overhead expense and not something that can be charged to the client”. 

Garylee Grimsley (1998)

This case was a continuation of the issues in R v Legal Aid Board Ex Parte Bruce (1991), in which two fee earners at one attendance was reduced on the justification of duplication. As such, it is recommended that two fee earners at an attendance are only claimed in exceptional circumstances and where reasonable to do so, such as where there is a safety risk.

Trudy Samler (2001)

This case dealt with attendances upon the Protected Party and reductions due to an excessive amount of contact.

In the case of Trudy Samler 2001, it was stated “The practice…. is easy for a receiver to justify one visit to the patient each year but that each succeeding visit must be justified…. Could the progress made by the meeting have been achieved more economically by way of a telephone call or correspondence?”.

The case also looks into the costs incurred when contact is instigated by the Protected Party and whether the Deputy should be expected to be paid for such contact. Master O’Hare advised that part of the Deputy’s duty is to prevent such expenses being incurred as it is their responsibility to look after the Protected Party’s financial affairs and to manage contact with clients as best as possible, so expect reductions to excessive contact with the Protected Party or other parties to reflect this decision. If there are high levels of contact with P, this should be justified and explained as best as possible within the narrative of the bill of costs to set out why and what steps were taken by the Deputy to best manage this.

Jamie Walker (2002)

This case dealt with incoming correspondence.

Master O’Hare applied the following provision for time spent perusing incoming correspondence: “Routine letter out and routine telephone calls will in general be allowed on a unit basis of 6 minutes each… The unit charge for letters out will include perusing and considering the relevant letters in and no separate charge should be made for incoming letters”.

This decision also impacted time claimed for arranging payments and considering invoices which are routinely reduced to 3 minutes at Grade D rate on assessment.

Leighanne Radcliffe (2004)

This case dealt with enclosure letters whereby 6-minute claims for letters enclosing invoices were reduced to 3 minutes.

Costs Officer Sainthouse referred to Master O’Hare’s decision which had been made in the matter of Jamie Walker in that the time spent checking the invoice, arranging payment and preparing the appropriate letter/cheque was non-fee earner work.

Smith & Others (2007)

This case dealt with hourly rates and determined what Deputies should be charging hourly.

Master Haworth ruled that Court of Protection work should be allowed in accordance with the guideline hourly rates published by the SCCO.

Yazid Yahiaoui (2014)

This case dealt with the introduction of blended rates and stated that “…where work is being carried out either as a team or by an individual that spans work that would normally be dealt with by a Grade B, C or D fee earner, a blended or enhanced rate may be appropriate…”

Philpott (2015 – unwritten)

This case dealt with record keeping.

In the case of Philpott (2015- unwritten), Master Haworth commented in respect of updating the Protected Party’s financial records, stating “It seems to me that the inputting of data into P’s ledger is not fee earning work. At most it is bookkeeping which, to my mind, is an overhead of a solicitor’s practice. This work has to be distinguished from for example, reviewing or perusing the data to come to a decision as to what then needs to be done with a P’s funds. To my mind that may well amount to fee earning work for which the solicitors can charge separately at the appropriate rate.”

Therefore, we recommend avoiding the word ‘updating’ within your work.

Staffordshire v SRK [2016]

This case dealt with welfare work, in particular, work relating to the application for the Deprivation of Liberty Safeguards.

The case stated: “A deputy who agrees to pay for care and treatment of P or for a property for P could not properly ignore the issues (a) whether P was being deprived of his liberty or restrained, and (b) whether that was lawful or needed authorisation under the DOLS or by the making of a welfare order”. As such, this time is always included in the bill of costs. Other welfare work is likely to be reduced or disallowed on assessment.

Tina Jayne Cloughton (1999) and Fuseon Limited (2020)

These cases dealt with delegation of work to a lower grade fee earner.

It was stated that a professional Deputy should delegate suitable tasks to colleagues and employees. The Deputy must be careful not to increase his/her claim for costs by duplicating work done by colleagues.

In 2020, a decision was made in the case of Fuseon Limited which stated that time spend delegating should be fully recoverable. This was a civil decision, and therefore it’s not known whether this same approach will be taken in COP matters. Where delegation has occurred in a COP case which progresses the matter and ultimately saves P money, attempts should be made to recover this time.

The time claimed should be proportionate to the money saved to P, and any work that is delegated should then not require extensive supervision, as this would be considered duplicative.

Understanding the e-bill

If the Costs Officer has applied case law to the Bill of Costs on assessment, they will outline this in Tab Z. Solicitors should be aware of the case law to ensure that they’re not charging the Protected Party unfairly and to understand the reductions applied and whether these are justified.

If you require further information in respect of Court of Protection costs, post-assessment advice or case law, please do not hesitate to contact Ellie Scally.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at costs.support@clarionsolicitors.com.

The Bar Council’s Guidance on the use of Generative AI

Joanne ChaseLeave a comment

The Bar Council has recently issued guidance for barristers on the use of generative Artificial Intelligence (AI), including ChatGPT and other large language model systems (LLMs). The guidance concludes that there is nothing inherently improper about using reliable AI tools to augment legal services, but they must be properly understood by the individual practitioner and used responsibly.

The guidance is not legal advice and is not ‘guidance’ for the purposes of the BSB Handbook I6.4. However,  it highlights the key risks with LLMs and explores the considerations for barristers, and by extension all lawyers, when using generative AI:

  • Due to possible hallucinations and biases, it is important for lawyers to verify the output of LLM software and maintain proper procedures for checking generative outputs.
  • LLMs should not be a substitute for the exercise of professional judgment, quality legal analysis and the expertise that clients, courts and society expect from their legal representatives.
  • Lawyers should not to share with an LLM system any legally privileged or confidential information.
  • Lawyers should critically assess whether content generated by LLMs might violate intellectual property rights or breach trademarks.
  • It is important to keep abreast of relevant Civil Procedure Rules, which in the future may implement rules/practice directions on the use of LLMs, for example, requiring parties to disclose when they have used generative AI in the preparation of materials, as has been adopted by the Court of the King’s Bench in Manitoba.

This Bar Council guidance will be kept under review and updated periodically, however practitioners will need to be vigilant and adapt as the legal and regulatory landscape changes.