Tag: Costs Budgeting

The Pilot Scheme on Disclosure in the Business and Property Courts – how this affects Case Management

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News story imageThe Judiciary have announced and published a proposed 2 year pilot scheme regarding disclosure across the Business and Property Courts (there are some exceptions that the pilot scheme will not apply to). There are some aspects of the pilot scheme that relate to Costs Management – there will be no obligation to complete the precedent H in relation to disclosure prior to the case management conference. In cases where the cost budgeting regime applies, following the disclosure order that has been made at the case management conference, the parties must complete the disclosure section of the precedent H within the period ordered by the court. The purpose of this delay is to enable parties to be able to reach an informed view regarding the likely costs of the disclosure exercise. A further short hearing may be necessary to approve those costs.

Of course, the decision regarding disclosure may have an impact on other stages within the budget resulting in additional amendments to the budget. The Judiciary recognise that there may be problems surrounding this proposal and have suggested that this may need further consideration, their intention seems to be that the calculations surrounding disclosure are based on sound footing rather than what can sometimes be crystal maze thinking in terms of the estimation of the number of documents that will require considering.

Any questions? Please contact me at sue.fox@clarionsolicitors.com or call me on 0113 336 3389.

 

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Are you J Code ready?

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The J-Codes are a set of electronic codes proposed by Jackson LJ, where time is recorded in phase, task and activity. These codes were first published in July 2014 and over 3 years later the MOJ have now included guidance in their 92nd update to the CPR regarding phase, task and activity time recording. The MOJ have decided not to adopt the full J-Code structure proposed by Jackson LJ and have published an alternative and apparently simpler version of the Phase, Task, Activity (PTA) approach. That said, J-Codes can still be adopted or the Phase, Task, Activity (PTA) method can be used, it is down to choice.

The electronic bill of costs is mandatory for all Part 7 multi-track claims from 6 April 2018 and therefore Phase, Task and Activity codes (PTA codes) are crucial.  J Codes/ PTA codes however are not mandatory, although it is expected that any additional costs associated with the drafting of the electronic bill of costs due to PTA code time recording not being adopted, may not be recoverable on an inter-partes basis.

This only applies to work undertaken from 6 April 2018.
Recording time in line with phase, task and activity will at last enable budgets to be monitored with ease.

Any questions? Please contact me at sue.fox@clarionsolicitors.com or call me on 0113 336 3389.

Proportionality and budget comparisons

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Budgets were once again considered in the case of Red and White Services Ltd v Phil Anslow Ltd & Anor [2018] EWHC 1699 (Ch). This was a competitions claim about a bus company and its parking bays. In summary, the Claimant had the use of more parking bays than the Defendant, the Claimant sued the Defendant for trespass and the Defendant in turn brought, by way of a counterclaim, a competitions Act law claim against the Claimant and pursed a Part 20 Competitions Act claim against the Third Party.

All parties were ordered to prepare budgets with the Claimant’s and Third Party’s budgets being in similar amounts, each in the region of £1.5 million; and the Defendant’s budget coming in at just less than £300,000.00.

The Defendant not surprisingly submitted the Claimant’s and the Third Party’s budgets were seriously disproportionate, given that the damages in this claim were likely to be in the region of £80,000 to £120,000.

Mr Justice Birss commented that “It is essentially, although these are my words not counsel’s, an attempt to create figures for costs which are unrealistically low for the purpose of budgeting and to act as an unfavourable contrast to the figures from the claimant and the third party”

He considered proportionality and commented…

“I do not regard the budget costs figures in this case as proportionate or reasonable, particularly given the relatively limited nature of the disputes between the parties. The individual dispute which is worth the most is the overpayment/overvaluation claim. That will involve some quantity surveying evidence, although experience of such disputes leads me to suspect that this will not necessarily be extensive: the various valuation items in issue will probably fall into a handful of types or categories, so that once an expert has addressed the leading items in each category, there will be little left for the expert to do. The defects are a relatively modest element of this claim, so that even if they required both M and E and architectural experts, the involvement of such experts ought to be relatively limited.

He further commented that ..

“It is a matter for the defendant to have chosen to join both of those independent companies and therefore the fact that the two budgets together, each of £1.5 million, mean that the defendant could be bearing a cost risk of £3 million, does not seem to me to be a matter of great significance on the facts of this case. The individual budgets are the figures I need to consider, not the net risk to the defendant of aggregating the two.”

The judge, after applying the proportionality test and refusing to make comparisons with the Defendant’s budget, approved budgets for the Claimant and Third Party each in a sum not exceeding £800,000.00.

Any questions? Please contact me at sue.fox@clarionsolicitors.com or call me on 0113 336 3389.

 

 

 

 

What role does the hourly rate play in the budget?

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This continues to spark debate. The rules states that the hourly rate cannot be set (CPR 3 PD 3E, para 7.10), but further explain that the constituent elements of the budget should be considered when assessing the amount to approved (CPR 3 PD 3E, para 7.3). So, with the hourly rate falling under the umbrella of a ‘constituent element’ the hourly rate can be taken into account, but importantly, not fixed. There will usually be a number of factors that contribute to a reduction of the budget and on occasions the level of the hourly rate may be one of those contributing factors.

Parties are often working blind in respect of the logic that the case management Judge applied. If the court did take the hourly rate into account when reducing the amount of estimated costs sought, and no evidence exists to support the Judge’s thought process, what happens when the costs are finally assessed?

At the moment there is conflicting case law in this regard.

In RNB v London Borough of Newham [2017] EWHC B15 (Costs) Deputy Master Campbell said “If (as it is the case) the hourly rate is a mandatory component in Precedent H which is not and cannot be subjected to the rigours of detailed assessment at the CCMC, it makes no sense if it is automatically left untouched when the rates for the incurred work are scrutinised at the ‘conventional’ assessment.”

“Such an approach would offend against the guidance given in Harrison at paragraph 44. Indeed, as [counsel for the defendant] points out, it is only on that occasion that a paying party has an opportunity to challenge the rate.”

This was therefore a “good reason” to depart from the costs allowed in the claimant’s last approved budget.”

However in  Nash v Ministry of Defence [2018] EWHC B4 (Costs) –  Master Nagalingam found that “a reduction in hourly rates of the incurred costs is not a good reason to depart from the budget in respect of the budgeted (future) costs”.

And finally, in Jallow v Ministry of Defence [2018] EWHC B7 (Costs) Master Rowley found “that there is no good reason to depart from the budget by virtue of the reduction to the hourly rates in this case”.

How can the legal profession employ the rules as currently drafted? Is it possible to gain clarity and a clearer view of the blind logic/working approach adopted by the Judges? If, during the course of the CMC, the Judge does comment on the hourly rate, ask him/her to record a note on the case management order that the hourly rate was considered when approving the budget and that it played a role in the reduction to the rates.

Any questions? Please contact me at sue.fox@clarionsolicitors.com or call me on 0113 336 3389.

 

 

Various Claimants v MGN – Some much needed clarity!

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Bespoke budgets in multi-party litigation, proportionality, updating the incurred costs included in the budget prior to the CCMC, including the costs of interim hearings in the budget, disapplying the 2% cap for costs management and the resourcing of fee earners were all points that were dealt with at the most recent CCMC in the latest phone hacking cases (Various Claimants including (1) John Leslie (2) Chantelle Houghton v MGN Limited [2018] EWHC 1244 (Ch)).

MULTI-PARTY LITIGATION – The court’s approach to this multi-party litigation avoided the need for multiple costs management hearings for similar claims. The court applied a structure that was similar to a GLO and directions were made regarding managing the costs of the claim. Common and individual costs were split, and Costs Management was dealt with by the application of template budgets for individual costs and common costs. There were 3 categories of claims for the individual costs and the court could order that there be bespoke individual budgets in place of the template budgets. In this decision the court agreed that bespoke budgets were applicable to two of the Claimants, Leslie and Houghton.

THE BUDGET AND PROPORTIONALITY – Chief Master Marsh applied the proportionality test to the Claimants’ budgets commenting that “I would emphasise that the court is not required to have regard to the constituent elements of each budget phase (it may do so) and the court’s task is to decide whether the total for each phase falls within a range of reasonable and proportionate costs…. And the court is not looking to establish what the budget figure should be objectively ascertained, but rather a figure that falls within the applicable range applying the reasonableness and proportionality tests alongside each other.”

“The court must apply both the reasonableness and proportionality tests, but the former may yield to the latter. And, in practice, although PD3E, paragraph 7.3, requires the court to consider each budget phase separately, and therefore to consider the proportionality of each phase total, the task has to be undertaken with an initial overall review of proportionality by reference to the factors in CPR44.3(5)…

The costs in the budget phases must not only be reasonable but must also bear a reasonable relationship with the proportionality factors I have indicated. The proportionality factors that are relevant are to be taken together and given notional weight as a whole. In these cases, the sums in issue are not large for High Court claims when taken in isolation. But when the proportionality factors are put together, the financial value of the claims proves to be relatively unimportant because of the wider factors. The budgets substantially exceed the sums in issue but is not a reason to conclude that the overall budgeted sums and the totals per phase are disproportionate.

It seems to me that the wider factors I have summarised, in particular the public importance and test case factors, will have the effect that if the costs are reasonable they are proportionate. That conclusion chimes with the approach the parties have adopted and avoids the court wielding a concept of uncertain application.”

UPDATING INCURRED COSTS – There was a considerable time period between the date that budgets were required to be filed and when the CCMC was listed. Mr Leslie updated his budget prior to the CCMC to include incurred costs up to 1 May 2018, however the other parties did not. The Master recognised the problems of one party updating the incurred costs and the other parties not, explaining that this approach resulted in Mr Leslie having “ousted the court’s jurisdiction to consider a significant amount of expenditure” and consequently found that “the relevant date for the purposes of incurred costs as being 17 January 2018.”

This can be avoided by agreeing a date that the incurred costs are included up to and in turn obtaining the court’s permission to update the incurred costs.

HOURLY RATES – Chief Master Marsh refused to be drawn into the debate regarding hourly rates and instead considered the allocation of work in the budget between different grades of fee earner and the total figure claimed for each phase was of greater importance.

INTERIM HEARINGS – An amount for specific disclosure had been included in the disclosure phase, the Master found that the inclusion of interim hearings in the budget were wrong in principal as they may be subject to an inter partes costs order, the costs were moved into the contingency phase.

COSTS MANAGEMENT COSTS – The costs associated with costs management are subject to a 2% cap. Chief Master Marsh was asked to consider lifting the cap, he agreed on the basis that the complexities surrounding the multi-party litigation warranted exceptional circumstances in this case.

Any questions? Please contact me at sue.fox@clarionsolicitors.com or call me on 0113 336 3389.

The format of the precedent H budget and precedent R are working well, claims Mr Justice Birss

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At February’s Civil Procedure Rules Committee meeting Mr Justice Birss reported that “work was ongoing to make certain that the new bill costs, Precedent H and Precedent H Guidance are consistent and accurate and that N260 the summary costs statement follows the same format. The content of Precedent H itself would not be changing. The Chair added that in his experience having settled down, Precedent H and R are working very well“. Therefore no changes are expected to the precedent H budget or the precedent R budget discussion report, the remaining changes relate to the bill of costs and statements of costs.

The wholesale changes to costs that we have encountered over the last 5 years were made as a result of Sir Rupert Jackson’s report whereby he likened the current bill of costs to a “Victorian style account book” making it “relatively easy for a receiving party to disguise or even hide what has gone on”. His purpose was to create transparency and unison with time recording systems and costs related documents, hence the need for the new electronic bill of costs, which is the final piece of Jackson’s jigsaw.

If the legal profession were to embrace time recording as Jackson intended, i.e. recording time in phase, task and activity, then astonishingly some 5 years after the publication of his legendary reforms, Sir Rupert Jackson may achieve his aim. However, Sir Rupert narrowly missed having his vision fully formalised and embedded into the rules during his working lifetime, his retirement has pipped him to the post.  He can now sit back and watch from afar, how his intended co-ordinated approach to costs will work in reality!

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.

 

Sharp v Blank and Ors – What development in litigation is deemed significant enough to warrant a revision to the precedent H costs budget?

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The case of Sharp v Blank and Ors addresses the difficult question – what development in litigation is deemed significant enough to warrant a revision to the precedent H costs budget?

The key points of the claim relate to the approach to be taken when applying to revise a budget and are as follows:

  • Future costs – The court found that the language used in paragraph 7.6 is of critical importance and that it is explicit – the revision is in respect of future costs.
  • Range of reasonable and proportionate costs – The court is only required to set figures that are within a range of reasonable and proportionate costs. A range suggests that the process is designed to produce figures for each budget phase in a way that is not a slave to arithmetical calculation. The court is approving, or the parties are agreeing, figures that are not ‘right’ as such, but rather figures that are within a range of acceptability.
  • Interim applications – The costs of interim applications may fall outside the budget, however the incidental costs are a significant development and a revision to the budget is required for those costs. However, interim applications may also be significant developments in addition to the consequences that flow from an interim application.
  •  Modest increases – A significant development must be understood in light of the claim – its size, complexity and the manner in which the litigation has unfolded – and also from the likely additional costs that have been, or are expected to be, incurred. The amount of the additional expense is not determinative, but it is difficult to conceive that a development leading to modest additional legal expenditure, that is modest in proportion to the amount in the relevant budget phase or phases, is likely to be significant development.
  • A development in litigation may not be immediately obvious – In some cases it may not be immediately obvious that a development in the litigation is significant development; a development which appeared at first sight not to be significant may change character.
  • Mistakes in the preparation of the budget – A mistake in the preparation of a budget, or a failure to appreciate what the litigation actually entailed, will not usually permit a party to claim later there has been a significant development because the word “development” connotes a change to the status quo that has happened since the budget was prepared. If the mistake could have been avoided, or the proper nature of the claim understood at the time the budget was prepared, there has been no change or development in the litigation. By contrast, if the claim develops into more complex and costly litigation than could reasonably have been envisaged, that may well be the result of one or more significant developments.
  • Retrospectivity – Some degree of retrospectivity is inevitable if the costs management regime is to be made to work – parties cannot be expected to down tools until a decision is made regarding the revision, however any request for a revision should be made asap.
  • Claiming additional costs at detailed assessment – If there have been significant developments, the budgets must be revised. A claim for additional costs should not be left until a detailed assessment because the parties need to know what is their exposure to costs and the costs of detailed assessment should be minimised.

Following application of the above the court found as follows:

Extension to the trial timetable – yes, it was found that the court had to ask itself at a relatively high level the essential question, namely is this a significant development. Costs management has to be, at least in part, an impressionistic exercise. It seems to me that is the right approach when considering whether there have been significant developments.

Change in number of documents for disclosure – yes under the circumstances of this case.

Application for permission to rely on additional expert and the incidental costs – yes.

Cs 3rd party disclosure application – no – The application was part of the claimants’ task in preparing the case of a trial and it did not lead to work that can properly be characterised as giving the court jurisdiction to revise the defendants’ budget

Questions to three of the Defendants’ experts – Allowance has to be made for future events and, as they unfold, there will be pluses and minuses; some items are more expensive and some lead to savings. It is not appropriate only to take work which has cost more than was originally anticipated and to say that there has been a significant development. There must be something more than merely a modest increase in the anticipated cost of the work to amount to a significant development.

Response to Mr Ellerton – Mr Ellerton sought to include additional evidence, consequently the Defendant had to produce additional witness evidence and supplemental notes form 2 experts. The court found that this was a development, but that in the context of the claim and the modest additional sums claimed that this was not a significant development.

A significant development will depend on the impact that change has on that case and will be case specific.

Sue Fox is a Senior Associate and the Head of Costs Budgeting 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.