Court of Appeal finds approved costs budget irrelevant when indemnity basis awarded

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.

Lord Justice Coulson acknowledged The figure produced by an approved cost budget mechanism (CPR r.3.12-r.3.18) is a different thing to the final assessment of costs following the trial. The former is prospective; the latter is retrospective. True it is that, in many cases, the approved costs budget will be the appropriate starting point for the final costs assessment. But that does not detract from the underlying proposition that they are different figures produced by different considerations with different purposes” and in any event “If there is an order for indemnity costs, then prima facie any approved budget becomes irrelevant.

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 Fate of the ‘Court Fee only Budget’ post April 2015

Lawyers live in fear of having their costs budget reduced to court fees.  If a budget is reduced to court fees, the only solution to minimise the impact of this is to obtain an indemnity basis costs order – approved costs budgets should not be relied upon at any indemnity basis assessment.  Costs Management only applies to standard basis assessments, therefore this is the only way that a somewhat hopeless situation could potentially be rectified.  At the moment, the Claimant has the advantage. The Claimant can secure an indemnity basis award by making a well-pitched Part 36 offer, the Defendant cannot. Either party can secure indemnity awards raising arguments such as conduct, however awards made on this basis are much more difficult to achieve.

The Rule Committee have identified this and have amended the rules, which will be implemented in April 2015, to address this disparity. Cases in which the offeror’s costs have been limited to court fees is now governed by CPR Part 36.23.

(1) This rule applies in any case where the offeror is treated as having filed a costs budget limited to applicable court fees, or is otherwise limited in their recovery of costs to such fees.

(Rule 3.14 provides that a litigant may be treated as having filed a budget limited to court fees for failure to file a budget.)

(2) “Costs” in rules 36.13(5)(b), 36.17(3)(a) and 36.17(4)(b) shall mean—

(a) in respect of those costs subject to any such limitation, 50% of the costs assessed without reference to the limitation; together with

(b) any other recoverable costs.

The intention of the Rule Committee is to ensure that Part 36 still works in such cases and continues to provide an incentive to make a Part 36 offer.  Equally it is important that the innocent party should not regard itself as having a blank cheque to litigate the case.  Sanctions must therefore be imposed for turning down a reasonable Part 36 offer.

If you have any questions or queries in relation to this blog please contact Sue Fox (sue.fox@clarionsolicitors.com and 0113 3363389) or the Clarion Costs Team on 0113 2460622.

Failure to Word Tomlin Order Correctly Can Result in Adverse Costs

We have often encountered difficulties when costs orders have not been termed correctly.  One example is where a party failed to include the provision for costs to be assessed in the final Tomlin Order, and simply provided for the losing party to pay the winning costs ‘subject to agreement’. There was no reference to detailed assessment.

In order to commence detailed assessment proceedings, it is necessary to have a ‘right to detailed assessment’ (CPR 47.7). Such a right can arise only as a result either of a court order which states that costs are to be assessed, or a deemed order (for example as a result of acceptance of a CPR 36 offer, or upon notice of discontinuance under CPR 38). Importantly, where an order does not mention costs the general rule is that no party is entitled to its costs (CPR 44.10(1)).

Therefore, in the absence of the inclusion of the terms ‘subject to detailed assessment’ the court held that there was no authority for the costs to be assessed and adjourned the Detailed Assessment hearing.

The costs implications couldn’t be clearer.  When concluding any claim it is vital that any Tomlin or Consent Order specifically makes reference to costs to be assessed.  Costs Lawyers can assist with the terms of costs orders ensuring that these are completely watertight, and therefore avoiding the possibility of adverse costs or expensive satellite litigation.

You can contact the Clarion Costs Team on 0113 2460622, or by emailing Andrew.McAulay@clarionsolicitors.com.

What if your Precedent H Costs Budget has been reduced to court fees?

Will a budget which has been reduced to court fees apply if indemnity basis costs have been awarded?

  • Where a budget is limited to court fees, it is advisable to attempt to secure an indemnity basis costs order – costs budgets only apply to standard basis assessments. The CPR is clear regarding this (CPR Part 3.18) and there is now supporting caselaw Kellie v Wheatley & Lloyd Architects Ltd [2014] EWHC 2866 (TCC).

If your budget has been reduced to court fees, can the budget be revised?

  • If your budget has been reduced to court fees, this does not exclude you from seeking the further costs which may be necessary as a result of any significant developments in the litigation.

If you have any questions or queries in relation to this blog please contact Sue Fox (sue.fox@clarionsolicitors.com and 0113 3363389) or the Clarion Costs Team on 0113 2460622.