The latest Precedent H guidance notes

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

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.

 

 

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

 

 

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.