In cases where costs management applies, how much your client can recover depends on good negotiation at the costs management stage.
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.
The Court of Appeal decision in Lejonvarn v Burgess & Anor [2020] EWCA Civ 114 has determined that an approved costs budget is irrelevant where indemnity costs are ordered.
The appellant’s case was that whilst there was an approved costs budget of £415,000, her actual costs were £724,265.63. To allow this would effectively reward her for failing to keep within the budget. Interestingly the budget was only partially costs managed and therefore was subject to change in certain phases in any event.
Although Lord Justice Coulson was not persuaded that there was an approved budget in this particular case he made it clear that costs assessed on an indemnity basis are not constrained by an approved costs budget. He even went so far as to say that his obiter comments in the cases of Elvanite and Bank of Ireland v Watts which suggested the contrary, should be disregarded.
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 H guidance notes have never aligned with the precedent S guidance notes (Phases and Tasks Reference and Lookup table in Precedent S (bill of costs)) until the update to the precedent H guidance notes which was made last month, this update has addressed some of those discrepancies.
Please find below the amendments that have been made to the guidance notes:
Pre-action: The precedent H guidance notes states that settlement discussions, advising on settlement and Part 36 offers before proceedings were issued are to be included in the Preaction phase. However, in the Precedent S guidance these discussions are included in the ADR/Settlement phase (task “Other Settlement Matters”) . The precedent H guidance notes must be followed therefore any preaction settlement discussions should be included in the preaction phase.
Issue/statements of case: The precedent H guidance notes have been amended to include “amendments to statements of case” in this phase, the previous guidance stated that these should be excluded from this phase. This amendment has resulted in alignment with the Precedent S guidance.
CMC: The precedent H guidance notes have been amended to include any further CMCs that have been built into the proposed directions order whereas previously the notes stated that any additional CMCs were not to be included in this phase. The position remains regarding any estimated CMCs that have not been proposed in the directions order, these are to be included as a contingent cost. Any disclosure work, i.e. list of disclosure issues, EDQ should be included in the disclosure phase.
Budget – The costs in relation to this phase includes inconsistencies which present numerous difficulties. The Precedent H Guidance Notes includes “correspondence with opponent to agree directions and budgets, where possible”, and “preparation for, and attendance at, the CMC”. The same applies in relation to the PTR phase, which includes “preparation of updated costs budgets and reviewing opponent’s budget”, “correspondence with opponent to agree directions and costs budgets, if possible” and “preparation for and attendance at the PTR”. While the precedent H guidance note specifically excludes preparation of the costs budget for the first CMC, it doesn’t specifically exclude preparation of Precedent R. The Precedent S description of this task is “work on budgeting between the parties following initial completion of the first budget, including the monitoring of costs incurred against the budget and any applications for variation of the budget” – it doesn’t mention the drafting of Precedent R and seems to relate to work post CMC.
Furthermore, in para 7.2 of PD3E the 2% cap relates to all recoverable costs of the budgeting and costs management process other than the recoverable costs of initially completing the Precedent H. If some costs budgeting items are included in the CMC and PTR phases (i.e. following the Precedent H Guidance Note), practically how is the 2% figure on the front page of Precedent H calculated? Should it include the budgeting items which appear in the CMC and PTR phases of Precedent H, or is it exclusive of them? And, what exactly is meant by “budget process” in relation to this 2% cap?
Unfortunately there is no guidance regarding the budget process or “associated material” that is referred to in the guidance notes – does this include composite summaries, breakdowns of costs?
One solution for this phase is to time record in line with the precedent S guidance notes and then when it comes to preparing the budget assess what aspects of the % cap belongs in the CCMC stage. If the time is recorded as CCMC it is a more onerous task to ascertain what element of the CCMC phase is relevant to the % cap.
Trial: The guidance note has been amended to now include counsel’s brief fee in the trial preparation phase rather than the trial phase.
Settlement phase: The precedent H guidance note previously excluded mediation from this phase, this has now been amended to include mediation.
Definition of budgeted and incurred costs – CPR 3.15 and PD 3E para 7.4 Incurred costs are now all costs incurred up to and including the date of the first costs management order, unless otherwise ordered. Budgeted costs are all costs to be incurred after the date of the first costs management order.
Sue Fox is a Senior Associate and the Head of Costs Management 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.
Revising Precedent H Costs Budgets
Don’t delay in applying to revise your Costs Budget if a significant development has occurred in your litigation, and on those occasions where there may have been a delay don’t shy away from applying.
It is not left to a party to choose whether to revise its budget and to take its chances on a detailed assessment, parties must apply to revise their budget if there has been a significant development in the litigation – Sharp -v- Blank & Ors [2017] EWHC 3390 (Ch) (21 December 2017) (hereafter Sharp).
In the event that there has been a significant development in the litigation, parties are not able to defer the determination of additional incurred costs to detailed assessment – those incurred costs form part of the request for additional costs:
Master Marsh “I do not consider the rules and practice direction intended that only certain elements of the costs relating to significant developments must be dealt with as revisions with the other elements, those pre-dating the hearing or, on another view those pre-dating the application, being dealt with on a detailed assessment. This approach would run contrary to the purposes of costs management and lead to unnecessary fragmentation of the costs dealt with at a detailed assessment.”
Master Marsh found that the costs incurred from the costs management order and up to the application to revise the Cost Budget were not incurred costs for the purpose of the revision, they were future costs. Master Marsh focussed on the language of the CPR referring to the choice of the use of “future” rather than “budgeted costs”, as follows:
“The language used in paragraph 7.6 is of critical importance because it provides the jurisdiction, on the defendants’ case to make the revisions they seek. It is notable that the language is at variance with the remainder of the rules and PD3E. It refers throughout to the revision of a “budget” (not, in accordance with the new wording, “budgeted costs”). It is explicit, however, that revision is in respect of future costs. The final sentence of this paragraph gives the court a discretion to approve, vary or disapprove the revisions “… having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed”. On one view, such language points towards the last approved or agreed budget being the jumping off point for a revision because it is the budget that is being revised”.
Master Marsh concluded that the “Costs which have been incurred since the date of the last agreed or approved budget (or the antecedent date) that relate to significant developments are, for the purposes of revision, placed in the estimated columns of the revised Precedent H in one or more phase. In some cases, it may not be obvious where they go (for example a late application for security for costs) but I can see no reason why Precedent H may not be adapted as necessary to accommodate work that does not easily fit in”.
He also considered that there would be a degree of retrospectivity if the costs management regime was to work.
It is essential that you apply to revise your Costs Budget if a significant development has occurred in your litigation, to not do so puts you at risk of not being able to recover any costs that are in excess of your budget.
Sue Fox is a Senior Associate and the Head of Costs Management 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.
There are many case authorities in relation to budgeting since the process was implemented, it is hard to keep track of them all. Here is a complete list of cases.
2014
Appeals
Havenga -v- Gateshead NHS Foundation Trust [2014] EWHC B25(QB)
General guidance
A & B (Court of Protection: Delay & Costs) [2014] EWCOP 8)
Hegglin -v- Persons Unknown & Google Inc [2014] EWHC 3793 (QB)
Thomas Pink Ltd -v-Victoria’s Secret UK Limited [2014]
Yeo-v-Times Newspapers Ltd [2014] EWHC 2853 (QB)
2015
General guidance
BP -v- Cardiff & Vale University Local Health Board [2015] EWHC B13 (Costs)
(GSK Project Management Ltd -v- QPR Holdings Ltd [2015] EWHC 2274 (TCC)
Stocker -v- Stocker [2015] EWHC 1634 (QB))
Tim Yeo MP -v- Times Newspapers Limited [2015] EWHC 209 (QB))
Various Claimants -v- Sir Robert McAlpine & others [2015] EWHC 3543 (QB)
Judicial guidance cases
GSK Project Management Ltd -v- QPR Holdings Ltd [2015] EWHC 2274 (TCC)
Tim Yeo MP -v- Times Newspapers Limited [2015] EWHC 209 (QB)
Late filing of a budget
Simpson -v- MGN Limited [2015] EWHC 126 (QB)
Overspending on the budget
CIP Properties (AIPT) Limited -v- Galliford Try Infrastructure Ltd [2015] EWHC 481 (TCC)
Excelerate Technology Ltd -v- Cumberbatch [2015] EWHC B1 Mercantile)
Parish -v- The Danwood Group Ltd [2015] EWHC 940(QB)
Simpson -v- MGN Limited [2015] EWHC 126 (QB)
Proportionality in budgeting
(BP -v- Cardiff & Vale University Local Health Board [2015] EWHC B13 (Costs)
Various Claimants -v- Sir Robert McAlpine & others [2015] EWHC 3543 (QB)
2016
General guidance
Agents’ Mutual Limited -v- Gascoigne Halman [2016] CAT 21
Campbell -v- Campbell [2016] EWHC 2237 (Ch)
Group Seven Limited -v- Nasir [2016] EWHC 629 (Ch)
Merrix -v- Heart of England NHS Foundation Trust [2016] EWHC B28 (QB)
Signia Wealth Limited -v- Marlborough Trust Company Limited [2016] EWHC 2141 (Ch) –
Agents’ Mutual Limited -v- Gascoigne Halman [2016] CAT 21
Late filing of a budget
Jamadar -v- Bradford Teaching Hospitals NHS Trust [2016] EWCA Civ 1001
Murray -v-BAE Systems PLC (Liverpool County Court, 1st April 2016)
Outcome of budgets and costs of assessment
Sony Communications International AB -v- SSH Communications Security Corporation [2016] EWHC 2985 (Pat)
Proportionality in budgeting
(Considers Agents’ Mutual Limited -v- Gascoigne Halman [2016] CAT 21
Group Seven Limited -v- Nasir [2016] EWHC 629 (Ch)
Revising the budget
Warner -v- The Pennine Acute Hospital NHS Trust (Manchester County Court 23rd September 2016)
The budgeting procedure
Agents’ Mutual Limited -v- Gascoigne Halman [2016] CAT 21
Merrix -v- Heart of England NHS Foundation Trust [2016] EWHC B28 (QB)
2017
Departing from the budget on detailed assessment
RNB v London Borough of Newham [2017] EWHC B15 (Costs)
General guidance
Harrison -v- University Hospitals Coventry & Warwickshire Hospital NHS Trust [2017] EWCA Civ 792
MacInnes -v- Gross [2017] EWHC 127 (QB)
Napp Pharmaceutical Holdings Ltd v Dr Reddy’s Laboratories (UK) Ltd & Ors [2017] EWHC 1433 (Pat)
Judicial Guidance cases
Findcharm Ltd -v- Churchill Group Ltd [2017] EWHC 1109 (TCC)
Woodburn v Thomas (Costs budgeting) [2017] EWHC B16 (Costs)
Late filing of a budget
Asghar -v- Bhatti [ 2017] EWHC 1702 (QB)
Mott & Anor v Long & Anor [2017] EWHC 2130 (TCC)
Outcome of budgets and costs of assessment
Harrison -v- University Hospitals Coventry & Warwickshire Hospital NHS Trust [2017] EWCA Civ 792)
Merrix -v- Heart of England NHS Foundation Trust [2017] EWHC 346 (QB)
Part 36 in budgeting
Car Giant Limited -v- the Mayor and Burgesses of the London Borough of Hammersmith [2017] EWHC 197 (TCC)
Proportionality in budgeting
Rezek-Clarke -v- Moorfields Eye Hospital NHS Foundation Trust [2017] EWHC B5 (Costs)
Revising the budget
Asghar -v- Bhatti [2017] EWHC 1702 (QB)
Sharp v Blank & Ors [2017] EWHC 3390 (Ch)
Sir Cliff Richard OBE -v- The BBC & Chief Constable of South Yorkshire Police [2017] EWHC 1666
2018
Departing from the budget on detailed assessment
Jallow v Ministry of Defence [2018] EWHC B7 (Costs)
Nash v Ministry of Defence [2018] EWHC B4 (Costs)
General guidance
Yirenki v Ministry of Defence, [2018] 5 Costs LR 1177
The CPR committee have been hard at work again coming up with solutions to the problems that have been encountered by the legal profession since the Jackson reforms nearly 6 years ago. Following the scratching of many heads, a few of those creases have been ironed out and the following proposals have been made:
Statements of costs
A voluntary 2 year pilot scheme for the new statement of costs will be implemented, starting from 1 April 2019.
The current proposals are for two new forms of costs statements, namely N260A and N260B which may be used for summary assessment. These new forms will include a VAT declaration and the forms will now include the signature of a legal representative, which is in line with the rules, as opposed to a company partner. The Form N260A will cross refer to the document schedule in the summary. No model forms are available yet.
Master Howarth has suggested that the precedent Q, the document that identifies whether there has been an under or overspend in a phase of a budget, is incorporated into the statement of costs. This will create transparency at the summary assessment stage regarding the amount incurred in comparison to the approved budget – supporting the need for a well drafted budget.
The committee is to give consideration to lower value cases and the relevance of statements of costs for those cases where there will never be a summary assessment, as there was concern regarding the wasted costs incurred in those instances.
Costs management
The precedent H costs budget will remain the same, but there will be some adjustments to the guidance notes to align costs budgeting with the new electronic bill approach.
There has been many a debate regarding what date the incurred costs should be included up to in the budget and there is tension in the wording of the rules in that regard. The committee have recognised this and have debated the very same problem. They have understood that differing practices appear to be in place and that overall there is value in a consistent approach. It has been advised that this issue should be resolved as part of a future review of the practice direction.
There will be some adjustments to the precedent R, however that is the only guidance that has been provided at this stage, so the amendments remain unknown for the time being.
Sue Fox is a Senior Associate and the Head of Costs Management 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.
We have incorporated a collection of our blogs into a Blog booklet. The blogs were current at the
date of publication, however these may have now been superseded. Please visit our blog
(https://clarionlegalcosts.com/) for continuous updates on all costs law.
• Page 1 – Introduction
• Page 2 – Good news for those that prepare an accurate costs budget by Sue Fox
• Page 4 – Fixed Costs – the effect of acceptance of a Part 36 offer by Matthew Rose
• Page 6 – Payment on Account or Final Invoices? – another solicitor/own client costs
battle… by Andrew McAulay
• Page 7 – The Disclosure Pilot Scheme – what roles do costs estimates and precedent H
costs budgets have? by Sue Fox
• Page 8 – Proportionality – a flurry of cases by Andrew McAulay
Joanne Chase
• Page 9 – Part 36 offers, the basis of assessment, and knowing your expert by
Joanne Chase
Please click here
For any assistance, please contact the Costs and Litigation Funding Team at Clarion Solicitors 0113 246 0622.
