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Clarion Costs January 2016 Newsletter
Tag: Costs Management
“Remuneration on a time basis rewards inefficiency”- says LJ Jackson!
“Remuneration on a time basis rewards inefficiency”- says LJ Jackson!
At the IPA Annual Lecture on 28 January 2016, titled “Fixed Costs – The Time has Come”, LJ Jackson discussed the inevitability of fixed costs, the question that remains unanswered is – to what extent?Read More »
Boosting Cash Flow: Payments on Account in Budgeted Cases
Securing a Payment on Account for Solicitors at the conclusion of a claim can be crucial to cash flow. With many hours of work locked up in a matter, securing a timely payment on account is key.
CPR 44.2 (8) states that
“Where the Court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.”
However, what about in matters that settle by way of Part 36 Acceptance, and hence there is no Court Order? The receiving party is then required to make an application to the Court under CPR 47.15 (1).
The case of Mars UK Ltd v Teknowledge Ltd (No. 2) [1999] 2 Costs LR 44 is often referred to when considering the level of interim payment to be awarded. It provides guidance on how to approach quantifying the interim payment to be awarded. The Judge calculated a rough estimate as to the likely level of costs to be awarded on Detailed Assessment, and ordered a payment on account at two thirds this figure.
But what about in the post Jackson era where a case has been subject to Costs Budgeting?
Where a matter proceeds to Trial, there has been guidance given in the cases of Thomas Pink v Victoria Secrets UK Ltd [2014] EWHC 3258 (Ch) and Excelerate Technology Ltd v Lindsay Cumberbatch & Anor [2015] EWHX B1 Mercantile.
In Thomas Pink, the Judge awarded a Payment on Account at 90% of the Costs Budget that had previously been approved by the Court. In reaching this decision, the Court took into consideration that should the matter proceed to a Detailed Assessment, then that Judge should not depart from the approved Costs Budget without good reason [The 10% reduction accounted for the fact that the costs may face a reduction from the Budget on a Detailed Assessment].
From a Paying Party’s point of view, if the pre budget incurred costs are grossly excessive, is this 10% deduction sufficient?
If the Court makes a costs management order under rule 3.15, the Costs Practice Direction 3E 7.3 states:
…When reviewing budgets, the Court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs”
Therefore, whilst a Legal Representative may request that the Judge place a note in the Case Management Order as to the level of the incurred costs, what happens if the matter proceeds to Trial and the Case Management Order does not comment on the level of those incurred costs? The Receiving Party potentially has the ability to recover the full amount of the budgeted costs with the level of pre Budget incurred costs never being looked at.
It is for the proactive forward thinking Party to ensure that this marker is placed during the life of the claim or, alternatively, objections should be raised as to the level of the requested payment on account on the grounds that the incurred costs had never been approved or deemed reasonable.
In Excelerate Technology Ltd, following Judgment, the Court ordered a Payment on Account at 90% of the approved Budget (despite this Payment on Account exceeding the level of damages awarded) on the basis that they would be payable in any event on Detailed Assessment.
The question therefore remains as to how a Receiving Party, subject to a Costs Management Order in a case that has not proceeded to Trial (and hence the complete Budget not been used), can secure the maximum Payment on Account? An application under CPR 47.15 (1) would still be required, and the Receiving Party should rely on either Thomas Pink or Excelerate Technology Ltd. However, because the matter has not proceeded to trial, a 90% award is unlikely.
If you have any questions or queries in relation this blog please contact Joanne Chase (joanne.chase@clarionsolicitors.com and 0113 336 3327) or the Clarion Costs Team on 0113 2460622.
The expense of foreign witnesses attending trial
Kimathi -v- Foreign and Commonwealth Office
This is an interesting case which has an impact on both bills and budgets. There have been discussions in the past about whether witnesses could perhaps, in this technological era, attend court via video link rather than in person, thus avoiding the associated expenses of travel.
This case involved a dispute regarding whether certain Claimants were able to travel. It was held that those Claimants that were capable of travel to England should travel and attend at the trial. For those where there was a dispute regarding fitness levels and whether they could travel, it was held that they could give evidence by video link if they preferred. Finally those witnesses that simply didn’t want to travel and were medically fit to travel, they should travel to England.
This case has quashed the video link argument, it can assist with any counter arguments against any issues raised regarding the expenses associated with foreign witnesses travelling to attend court. Furthermore, foreign travel should ALWAYS be included in budgets and arguments should be raised to justify the same at any CMC, particularly reliance on the above case.
You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com
The CPRC least worst option! How to resolve the position regarding negotiating budgets
Negotiations
The Civil Procedure Rules Committee has amended the rules to include a new rule 3.13(2), in the event that a party files and exchanges a budget, all other parties will have to file an agreed budget discussion report which set out the agreed and disputed areas for each phase and a brief summary of the grounds of dispute – something many courts have been ordering for some time. The CPRC have described this as their “least worst option”!
The debate over hourly rates!
The Practice Direction is to be amended regarding hourly rates, it is confirmed that they will not be set and puts an end to this much debated area – “The making of a costs management order under part 3.15 concerns the totals allowed for each phase of the budget. It is not the role of the court in the cost management hearing to fix or approve the hourly rates claimed in the budget. The underlying detail in the budget for each phase used by the party to calculate the totals claimed is provided for reference purposes only to assist the court in fixing a budget.”
That said, consideration will have to be given to the hourly rate, how can the claim be quantified without an hourly rate? I agree with not setting the hourly rate and when I negotiate I don’t agree to the setting of the hourly rate, however, I may agree to the hourly rate for quantification purposes. My aim is not to have the rate set for the purposes of detailed assessment, unless of course there is no reason for the hourly rate to be disputed.
You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com
Five Gold Rings!
I have been preparing budgets for over 5 years, during the pilot scheme and onwards. I have prepared budgets in all areas of law and I have drafted well in excess of 1,000 budgets, so I would like to share with you my 5 Gold Rings!
- File your budget well in advance of the hearing, this allows parties to negotiate properly.
- Mutual exchange. Agreeing to mutually exchange the budgets may be beneficial, it may assist your case if neither party is aware of the opponent’s budget. This may help strategically and stop parties adapting their budget, following consideration of the opponent’s budget.
- Only include foreseeable contingent costs, the rules are clear regarding this. Do not include every eventuality, consider how you think your case will proceed and only include the relevant contingencies.
- Filing v service. This is a cute point. The court sanction only relates to failing to file rather than failing to serve. If you are experiencing a tight deadline then file your budget first rather than serve. Obviously I am not condoning a lackadaisical approach to service, however it is something to bear in mind if time is of the essence.
- The rules provide for downward revisions of budgets. This is a good point to remember. Defendants often consider budgeting to be a waste of time, simply a box ticking exercise, this is usually defendant insurers or defendants that will be subject to QOCS. However, if there are material changes to the case, then it may be appropriate to seek a revision downwards. This is a good tactic for the defendant because it may reduce their costs liability – so defendants, please do not ignore the budgets.
Incurred Costs – Shifting Change
LJ Jackson has recognised there are problems surrounding incurred costs. As predicted by many, he is concerned that some parties will undertake as much work as possible before the case management conference, thereby putting large swathes of costs outside of the reach of costs budgeting. This tactic of “front loading” goes against the very essence of what costs budgeting stands for. LJ Jackson in his lecture earlier this year referred to incurred costs, stating that “a residual power to set a global figure for both incurred and future costs for any phase is to be introduced”.
His suggested solutions are sensible ones – (1) the court should have the power to comment on the incurred costs and to summarily assess those costs at the case management conference, if necessary; or alternatively (2) the court should be able to set a global figure for any phase, to include both incurred and future costs. This would be a welcome development in the task of controlling costs via the costs budgeting regime. The clear benefit to parties is that at the conclusion of the case where costs have fallen within limits of the budget, then parties may start to experience their costs being allowed in full, including the incurred costs. At present, when a party has actively managed their case effectively and efficiently, the incurred costs continue to be subject to either detailed assessment or summary assessment. LJ Jackson’s proposal would avoid this expensive and costly assessment process.
If this proposal was to be encompassed into any future revisions to the rules, then the parties to the litigation would begin to encounter some additional benefits. LJ Jackson has also suggested an introduction of pre-action costs management principally for clinical negligence costs. It appears there is a shift towards applying more focus to the issue of incurred costs in the future.
LJ Jackson’s proposal to change the position regarding incurred costs is one of the many steps needed to make costs management work.
You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com
New deadlines for filing Costs Budgets
The CPRC’s committee has agreed to amend the timeframe for the filing and service of budgets. Claims that are worth less than £50,000, budgets will need to be filed with the directions questionnaire. Claims worth more than £50,000, budgets will need to be filed 21 days before the case management conference. They have not released a date yet for the implementation of these changes.
You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com
Pre-budget costs are highly relevant – Redfern –v- Corby Borough Council (QBD 03.12.14)
It is quite clear within the CPR that any costs which have been incurred should be considered when assessing future costs, however as we are all aware, these costs can neither be approved or disapproved, only comments can be recorded (CPR Part 3, para 7.4 of PD 3E). As part of the costs management process the court may not approve costs incurred before the date of any budget. The court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all subsequent costs.
In the case of Redfern –v- Corby Borough Council (QBD 03.12.14), the Judge applied this principle and relied upon the incurred costs in accordance with PD 3E when assessing the future costs.
You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com
When a Costs Budget is appealed – Havenga –v- Gateshead NHS Foundation Trust
We now have some guidance regarding the approach which the Court may adopt regarding appealing the amount of an approved Costs Budget.
In Havenga –v- Gateshead NHS Foundation Trust [2014] EWHC B25 (QB), the Court found that it was ‘not the role of the appellate Court to tinker with Costs Budgets’ and ‘the role of the appellate Court, in these circumstances, is to decide whether the Budget as revised by the District Judge was reasonable and proportionate. Only if I conclude that the revised Budget was outwith what can be described as reasonable and proportionate and that, therefore, the District Judge had exceeded his wide ambit of discretion can I interfere with the overall Budget’.
Although the Judge did feel that he may have been more generous in some areas of the Budget, he considered that as a whole, the Budget was both reasonable and proportionate and the appeal was dismissed.
Perhaps this approach will avoid unnecessary and unreasonable requests for appeals and will ensure a cost effective and pragmatic approach to Costs Budgeting, or will it result in increased costs? This may encourage more Lawyers to have both Counsel and the Costs Lawyer at the costs management hearing, so that any risk of comprehensive arguments not being made is avoided.
You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com