A Complete Chronological guide to budgeting case law

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

 

 

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Yirenki v Ministry of Defence [2018] 11 WLUK 53 – Are hourly rates a good reason to depart from the budget?

When budgeting cases, the Civil Procedures Rules (CPR) under Practice Direction (PD) 3E para.7.3 provides that, when the Court is approving figures, the approval should “only relate to the total figures for budgeted costs of each phase”.

In this claim, upon costs management, the Judge approved both a number of hours for each phase, as well as individual disbursements in the budget. This approach is clearly contrary to the CPR. Parties often reserve the position in relation to their incurred costs, and the hourly rates on the incurred costs, to be dealt with at detailed assessment. Interestingly, Master Davison reserved the issue of the hourly rates for the future costs to also be dealt with at detailed assessment.

Reduction to the hourly rates

Now, we know from the case of Jallow v Ministry of Defence [2018] EWHC B7 (Costs) that, where there has been a reduction to the hourly rates for the incurred work, this is not a good reason to depart from the budgeted costs. Master Davison clearly differs in his opinion, given that he has reserved the position of the hourly rates specifically for the estimated costs.

This decision has since been appealed and has, not surprisingly, been allowed. It was said by Mr Justice Jacobs QC that the approach of Master Davison was contrary to the CPR. Relying on rule CPR 3.15(2)(b) specifically, he provided that the correct approach is clearly that the approved figure is meant to be a final figure, rather than a provisional one which the other side could later attempt to reduce.

Mr Justice Jacobs QC advised that the cost budgeting process is not meant to be a detailed assessment in advance and that the job of the Court is to approve a proportionate figure which can be relied on. The principle of reserving the position as to the hourly rates of the budgeted figures weakens the reliance that can be placed on the budget itself, supporting the case of Jallow v Ministry of Defence  [2018] EWHC B7 (Costs), in that hourly rates are not a good reason to depart from the budgeted figures.

 

UPDATES – What is a good reason to depart from a budget??

Since Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792 and the ruling that a budget will only be departed from (up or down) if there is good reason to do so, there has existed the issue of what a good reason to depart from a budget upon detailed assessment is. Case law provides authority for what does and does not amount to a good reason, and there has now been time to reflect on this.

The matter of what constitutes a good reason is still subject to much questioning and debate, as there is no distinct definition of what amounts to ‘a good reason’.

The case of RNB v London Borough of Newham [2017] EWHC B15 (Costs), which followed that of Harrison and Deputy Master Campbell, decided that departing from the hourly rates was a good reason to depart from the budget. However, this decision faced criticism, in that the Judges’ role in the budgeting process is to set a total for each phase in the budget and is not to approve or fix the hourly rates.

Therefore, for all intents and purposes, it is irrelevant what the hourly rate is for those budgeted costs, at the time that the budget is set. A Judge may look at it like this: whether a party spends 15 hours at £200.00 per hour, or 20 hours at £150.00, for a total phase of £3,000.00 – the figure is still the same. The total phase is just that: a total amount which the Court believes is appropriate for the work required.

The issue of hourly rates – and a good reason to depart from a budget – was revisited in Bains v Royal Wolverhampton NHS Trust. This decision went against RNB, as it ruled that to reduce the hourly rates in line with reductions made to those of the incurred costs would be to second guess what the Judge was thinking at the point of costs management.

Nash v Ministry of Defence [2018] EWHC B4 (Costs), a high court decision following the decision of Bains, ruled that, if the change in hourly rate for incurred costs was a good reason to depart from the budgeted figures, it would bring about a case of double jeopardy. Thus, the only way to combat this, would be to undertake an assessment of the incurred costs at the costs case management hearing.

Jallow v Ministry of Defence [2018] EWHC B7 (Costs) highlighted matters that do not amount to a good reason to depart from the budget, and how the costs management order (CMO) can impact the detailed assessment. Master Rowley commented that the two factors brought in front of him, namely the settlement figure in comparison to the pleaded value, and the reduction in the hourly rates, do not amount to good reasons for departing from the budget.

The Master concluded that a reduction to rates for incurred costs do not amount to a good reason to depart. To amount to a good reason, something specific is needed to have happened. The change in the hourly rates did not amount to something specific and had it done so, it would have set a precedent for parties to argue good reason every time rates have been reduced, as it is in many cases.

A more recent decision of an appeal case, Barts Health NHS Trust v Salmon (unreported) (2019)delves further into the matter of good reason and provides authority on departing down from the budget where the phase has not yet been completed. HHJ Dight concluded that, where the phase has not been completed, and the receiving party has claimed less than the total figure for that phase, then this amounts to a good reason to depart from the budgeted figure, in order that the indemnity principle not be breached. Interestingly, HHJ Dight then went on to say that once good reason has been established, then the paying party need not put forward any further good reason when additionally challenging the level of the total figure claimed and attempting to reduce the phase.

This raises some significant questions about the importance of the assumptions of the budget, following approval of the figures at the costs case management conference. The only page required for filing is the front page of the approved budget. However, should it now be required to submit updated assumptions, to reflect what the figures are based on, should any part argue a good reason to depart in relation to whether a phase has been completed. I suspect, as further good reasons become apparent, the use of the assumptions to show what the phase total was based on will become a much more widely used tool, in proving good reasons to depart, where assumptions widely differ from the actual outcome, and could come to benefit both receiving and paying parties, For example, where there has been more work assumed than has actually been undertaken, regardless of a party is claiming the total of the phase, or where the total of the phase is much lower than budgeted, regardless of whether the number of witnesses was much lower than the number anticipated.

There remains uncertainty as to what does amount to a good reason. With some guidance, I suspect there will be many more cases to come; however, will reluctance be shown by Judges to make those decisions given the gravity of those rulings?

Ensure consistency between your Costs Budget and Bill of Costs

Consistency and a true connection between Costs Management and Detailed Assessment is essential for the successful recovery of costs on Detailed Assessment.

If a costs budget is prepared incorrectly, which creates a disconnection between the costs budget and bill of costs, then you can expect a costs law obstacle course and a heavy migraine on detailed assessment.

The case of MXX -v- United Lincolnshire NHS Trust [2018] is a great example, which is summarised below:

Background, Retainer and Hourly Rates

The Claimant instructed her Solicitors in 2012 and the matter was funded by way of a Conditional Fee agreement with the rate for the conducting lawyer (Grade A) agreed at £335 per hour.

In August 2013 the rate for the conducting lawyer increased to £460 per hour (this was an error). In January 2015 the hourly rate was reduced to £350 (effective from May 2014). It was increased to £360 in 2015 and £365 in 2016.

The substantive proceedings related to a high value injury claim, with quantification being resolved in November 2016. The claim was subject to a Costs Management Order dated 2 March 2015.

Detailed Assessment Proceedings were commenced in March 2017 and the bill of costs totalled circa. £1.3 million.

Background to the Costs Management Order

At the CCMC, the District Judge dealt with estimated costs and correctly stated that the incurred costs were for detailed assessment. The hourly rate included in the costs budget for the conducting lawyer was £465 per hour.

In respect of the estimated costs, the Judge indicated a composite rate of £280 per hour, which the parties then used to agree the estimated costs for each phase.

Discrepancies between Budget and Bill

Following the commencement of detailed assessment proceedings, the Defendant compared the costs budget (Costs Management Order) with the bill of costs and noted the following discrepancies:

  • Substantial differences in relation to hourly rates.The hourly rate included in the costs budget for the conducting fee earner was £465.00 per hour, but in the bill of costs hourly rates of £335.00 and £350.00 were claimed; and
  • The bill of costs included roughly 144 to 147 hours less time for incurred costs than the costs budget.

The Defendant had legitimate concerns and made an Application for an Order pursuant to CPR 44.11, arising out of what the Defendant described as a mis-certification of the Claimant’s costs budget in the substantive proceedings.

Decision

It is well worthwhile reading the Judgment and the very articulate submissions advanced by both parties. This will help you to fully understand the decision, which was as follows:

  1. The Master did not find that the errors regarding the rates for the conducting fee earner (in respect of estimated costs) or the significant time discrepancies in relation to the time included in the costs budget and the bill of costs amounted to improper conduct.
  1. However, the Master did find that there was improper conduct in relation to the inflated rate/s claimed within the budget (as incurred costs).The Master had previously dealt with a case with some similar issues (Tucker v Griffiths & Hampshire Hospitals NHS Trust 2017) and decided to apply the same sanction in this case as he did in that case, which was to disallow the items claimed in the bill of costs which related to the Costs Management Order.The Defendant had submitted that the Claimant’s bill of costs should be reduced by 75% due to the errors, but the Master said:“Whilst those behind the Defendant in both cases may have considered the sanction in Tucker to be insufficient, it seemed to me to be the only appropriate sanction. There is nothing wrong with the Bill in terms of the indemnity principle. The problem lies with the budget. I consider it to be entirely appropriate to impose a sanction in respect of the work which caused the problem.That work is the non-phase time spent creating and maintaining the budget. It would be wrong in my view retrospectively to disallow some of the budget itself”.

    The decision in this case (and in the case of Tucker) are both cases which were before Master Rowley at the Senior Courts Costs Office. Another Court/Judge could reach a different conclusion and I certainly expect to see this issue again before the Courts for the following reasons:

Lawyers do not time record consistently within their respective departments and firms, which means that discrepancies between budgets and bills will continue to regularly occur and a different Judge/Master may well adopt a more stringent approach;

Costs Budgets are regularly being prepared by non-specialists and prepared very “late in the day”, which leads to errors; and

There is a misconception that the costs budget is a more flexible document than a bill of costs i.e. the statement of truth to a bill of costs carries more weight than a statement of truth to a bill of costs.It is very important that all lawyers (and law firms) approach Costs Management consistently and understand the importance it has on detailed assessment. If that is done, then it leads to a consistent bill of costs, less obstacles on detailed assessment and no migraine – but maybe a headache!

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

NB There are some other interesting points and views in the Judgment which I will cover in a further blog.

The new statement of costs goes live on 1 April 2019

I have further updates regarding the new statement of costs following on from our January newsletter. The pilot scheme will operate from 1 April 2019 to 31 March 2021 and will apply to all claims in which costs are to be summarily assessed, whenever they were commenced. There will be two statements of costs which may be used whilst the scheme is in force; the N260A when the costs have been incurred up to an interim application and the N260B when the costs have been incurred up to trial. The N260 will be available in paper/pdf form and in electronic form. Parties are able to use the paper/pdf form only, however if they use the electronic spreadsheet form this must be filed and served in paper form and electronic means. The format has changed and the document schedule now requires the time entries to be dated. 

In cases which have been subject to a costs management order, any party filing the form N260B must also file and serve the precedent Q (which is a summary that details any overspend/underspend for each phase of the budget). Now that the court can identify overspends in the budget, will this additional layer of information result in more costs being summarily assessed and less detailed assessments? Will this assist with applications for payments on account? Will we see the N260B being used at trials that are listed for more than one day, to demonstrate that there hasn’t been any overspend in the budget and resultantly the budgeted costs being allowed in full? Possibly, but only if the incurred costs are identified separately to the estimated costs, please see my earlier blog for a more detailed analysis in that regard.

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.

 

A new year, a new statement of costs. But why stop at that? A few intended changes to Costs Management too

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.

 

Voluntary capped costs pilot scheme in the Business Courts

Following on from my blog and newsletter (see below) over a year and half ago, it has now been announced that the capped costs pilot scheme will go live in January 2019 to coincide with the launch of the disclosure pilot scheme. The capped costs pilot scheme will apply to the Business and Property Courts in Leeds and Manchester (Chancery, Circuit Commercial and the Technology and Construction Court) and the London Circuit Commercial Court.

It is a voluntary scheme that will last for 2 years, with costs capped at £80,000.00.

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Blog published 20.06.17

Fixed Recoverable Costs – the pilot scheme

Following on from my newsletter below, the Civil Procedure Rule Committee meeting notes have been published today. Last month I explained how Jackson LJ had suggested how ‘capped fixed costs’ would work. The meeting notes have now confirmed how the pilot scheme will work, explaining that costs for preaction would be capped at £10,000, for particulars of claim at £7,000 and for defence and counterclaims at £7,000.

Many thanks to John Hyde of the Law Society Gazette who has reported that “Parties can claim up to £6,000 for a reply and defence to the counterclaims, £6,000 for the case management conference, £6,000 for disclosure and £8,000 for witness statements. Expert reports are capped at £10,000, with the trial and judgment costs limited to £20,000.

The working group dedicated to the pilot scheme proposes an overall cap of £80,000 rather than setting an actual fixed amount at this stage.

The proposal, backed in principle by the committee, is to run the pilot in certain specialist civil courts: the London Mercantile Court and three courts in each of the Manchester District Registry and Leeds District Registry. Any cases where the trial will go beyond two days, or where the value is more than £250,000, are excluded”.

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Clarion May 2017 Newsletter

Fixed Recoverable Costs. A taster of how the pilot scheme may work.

The judiciary have released an outline regarding how the fixed recoverable costs regime may work. Jackson LJ attended a costs seminar in Birmingham back in March 2017, which focused on mercantile and business litigation. At that seminar both Jackson LJ and HHJ Waksman outlined their proposals for the fixed costs pilot scheme, those proposals being subject to the approval of the Civil Procedure Rules Committee. The details of their proposals were as follows:

The pilot scheme will run in the London Mercantile court, and Manchester and Leeds specialist courts.

  • It is likely that the pilot will commence in October 2017 and will last for two years.
  • The pilot scheme is optional.
  • There will be a separate fixed costs list.
  • The pilot can be joined at certain stages:
    • The pre-action stage
    • No later than 14 days after service of the defence
    • At the case management conference (CMC)
    • Claimants can commence proceedings in the fixed costs list.

The Defendant has an absolute right to object to this, and if so then the proceedings would be removed from the fixed cost list.

  • The CMC will be the last opportunity to join the pilot.
  • Parties will not be able to withdraw from the pilot, apart from the Defendant if the Claimant issues in the pilot scheme (see above).
  • There will be a shortened process with strict case management .

The pilot is currently a ‘work in progress’, however it is envisaged that these proposals will be making their way to the Civil Procedure Rules Committee in June 2017, so these could be public by July 2017. It is currently predicted that:

  • Parties will be required to file their “core documents” (the documents that are relevant to the issues in the claim) with their statements of case, i.e. the particulars of claim, defence, reply and defence to counterclaim.
  • There will be no need for further disclosure, unless parties can justify this at the CMC.
  • If further disclosure is required, parties will need to apply for the same before the CMC. If the parties cannot agree, an order will be made.
  • At the CMC, the judge will suggest Alternative Dispute Resolution (ADR), including Early Neutral Evaluation (ENE).
  • The CMC will be the only interim hearing, this will include setting the trial timetable.
  • Consideration is being given to limiting the number of witnesses, the thoughts are that there will be one factual witness on each side.
  • Costs budgeting will not be required and there will be no pre-trial review.
  • The trial length will be up to two days (excluding judicial reading)
  • Cross-examination will be “very strictly controlled”.
  • An early hearing date will be guaranteed.
  • Judgments will be produced within a short period of time.
  • Pilot participants can expect “active and proactive” case management.
  • Costs will be summarily assessed at the end of trial.

The above proposals were made in March 2017, however since then there have been further proposals, as follows:

  • The pilot will only relate to claims that are less than £250,000.
  • The pilot will only relate to claims where the trial is no more than 2 days.
  • The pilot will only relate to non-complex matters.
  • The maximum costs that will be allowed will be £80,000. The pilot scheme will be similar to the IPEC costs regime. There will be caps for phases of litigation and those phases will be the same as the phases used in costs budgets.
  • Parties can only leave the scheme under exceptional circumstances, examples of those circumstances are; allegations of fraud, if the matter subsequently is listed for a 3 day trial.
  • Judgment will be handed down within 6 weeks.
  • The proposed ‘grid’ is not yet available and it is likely that this will not be available until the practice directions are published, so it may make its way into any July update to the rules. The main benefits of the pilot scheme are that claims will be resolved speedily and parties will be more aware of their potential costs exposure.
  • We will continue to provide updates regarding fixed costs, as well as all costs related law.

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.