Tag: precedent h

“Costs budgets are now working better.”

Andrew McAulayLeave a comment

At this years’ APIL conference it was said that “Costs budgets are now working better”.

Thanks to Gordon Exall and Rachel Rothwell for tweeting interesting and salient comments and quotes made at this years’ APIL conference. Those tweets included – “Harrison is coming any day”, “Merrix may largely be upheld with clarification of incurred costs”, “costs budgets are now working better”………  To read a few of those comments please click here.

Thanks again to Rachel and Gordon for their continued devotion to provide updates
on costs law.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com

Calling trumps: how the court has laid its cards on the table over costs management.The interaction between costs budgeting and costs assessment – Merrix v Heart of England NHS, the appeal of the first instance ruling.

Anna LockyerLeave a comment

The interaction between costs budgeting and costs assessment has been considered again in Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB) – the appeal of a first Merrix v Heart of England NHS instance ruling.

Mrs Justice Carr found that the court will have ‘regard to the receiving party’s last approved or agreed budget by respecting it or finding that there is a good reason to depart from it. So, the question to be answered is – will a receiving party’s costs
be allowed in full if they are less than the budget? Yes – for now! The Merrix decision confirms that any departure from the budget applies to both downward and upward revisions, hence parties have to show a good reason to depart from the budget.

Does Mrs Justice Carr’s finding in Merrix deny the paying parties an opportunity to challenge potentially unreasonable costs, despite it being their responsibility for the costs of challenging those costs? At the moment – yes.

Is it ‘just’ for the receiving party to request their costs in full simply because they have been incurred and fall within the parameters of the budget? What safety mechanism is in place to ensure that any receiving party does not include unreasonable and disproportionate costs in their claim for costs, simply justified on the basis that they ‘fall within budget’?

Mrs Justice Carr felt that the indemnity principle was sufficient, though perhaps it is not – unreasonable costs can be claimed from the client, hence the need for Solicitors Act assessments. Or alternatively, the client may have little regard to the constraints of the budget and request that ‘out of scope’ or disproportionate and unreasonable costs are incurred in any event.

How can restraints be imposed on a spendthrift client with deep pockets, and at the same time discourage a paying party from being overzealous in their requests for detailed assessment? Perhaps the introduction of the ‘one-fifth rule’ to costs budgeted cases could be the answer. This shares the burden of the costs consequences, rather than the traditional costs shifting rule. If the bill is reduced by more than 20%, then the receiving party is responsible for those costs rather than the paying party, but if the paying party secures less than a 20% reduction to the bill, then they become responsible for those costs.

This should encourage all parties to think seriously about committing to detailed assessment, rather than the onus being on the paying party. Not only does this tie in nicely with the rules for Solicitors Act assessments, but it is also in line with the rules surrounding provisional assessment relating to the recoverability of costs for an oral
hearing (see article, page 10). Further, it embraces Jackson’s intention to reduce the number of detailed assessments, and at the same time does not deprive parties the opportunity to challenge the costs. Just a thought.

Is this the end? Perhaps only for now. Mrs Justice Carr requested that if this decision were to be appealed, then it should be heard together with any existing listings covering the same point of principle.

In her decision, she referred to Harrison, which was soon to be heard in the Court of Appeal. The Harrison decision is listed for May, and so the paying party in Merrix may be running out of time to get this listed together with Harrison – but we await with interest.

Please click here to read the full article which was published in the April edition of the Litigation Funding magazine.

Anna Lockyer is an Associate at Clarion. You can contact her at anna.lockyer@clarionsolicitors.com or on 0113 288 5619.

Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB) – On appeal, Mrs Justice Carr confirms that the good reason test to depart from a budget relates to both downward and upward departures.

Andrew McAulayLeave a comment

Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB) – On appeal, Mrs Justice Carr confirms that the good reason test to depart from a budget relates to both downward and upward departures.

The inter-action between costs budgeting and costs assessment has been considered again in the appeal of the case of Merrix v Heart of England NHS Foundation Trust [2016]. DJ Lumb found that:

“It is not helpful in the context of this debate to consider “departure” within the meaning of CPR 3.18 as being upwards or downwards. It is important to understand that the departure refers to a departure from the budget not from a fixed sum. Just because a party has incurred costs that come in at under the total for a phase is not a departure from the budget. Applying the ordinary meaning of the words the party is still within the budget unless or until the Court revises the budget. It is not the replacement of one fixed sum with another fixed sum. The purpose of the form Precedent Q is to set out the differences between the actual expenditure and the budgeted figures for each phase. It is not intended to be some advanced assessment of the recoverable costs. If having completed a line by line assessment of the reasonable costs the Court considers that the costs are still disproportionate, the Precedent Q could be a useful breakdown for the Court to use to make adjustments to ensure the resulting figure is proportionate”. 

DJ Lumb concluded that the budget and the bill of costs were different tools for Courts to manage costs, which were applied at different times. Consequently, despite the cost claimed being less than the budget, DJ Lumb (Regional Costs Judge) ordered that detailed assessment was appropriate.

This decision has been appealed to the High Court and the appeal has been allowed, with Mrs Justice Carr finding:

“In my judgment, the answer to the preliminary issue is as follows: where a costs management order has been made, when assessing costs on the standard basis, the costs judge will not depart from the receiving party’s last approved or agreed budget unless satisfied that there is good reason to do so. This applies as much where the receiving party claims a sum equal to or less than the sums budgeted as where the receiving party seeks to recover more than the sums budgeted”.

This decision now falls in line with LJ Jackson’s report and the cases of Slick Seating and Safetynet. In 2012, in the case of Safetynet Security LTD v Coppage [2012] EWHC B11, HHJ Simon Brown QC stated that “since the Claimant’s costs were within the budget approved by the court, a detailed assessment would be an unnecessary and expensive course of action to take”. Costs were awarded in the Claimant’s favour, in the amount of the budget. Later in the case of Slick Seating Systems & Ors v Adams & Ors [2013] EWHC B8 (Mercantile), HHJ Simon Brown QC observed that the Claimant had “laudably kept within the budget and exercised due control over their activities and expenditure in an exemplary fashion” and that their budget was proportionate to what was at stake, he awarded the claimant their costs as claimed.

LJ Jackson’s view of how cost budgeting would work was explained at Chapter 40 1.4 (iv) of his report:

“At the end of the litigation, the recoverable costs of the winning party are assessed in accordance with the approved budget”

And at Chapter 40 1.5 of his report:

“Issues for consideration. If costs management becomes a feature of civil litigation in the future, many issues will have to be considered before any set of costs management rules is drawn up. In particular: (iv) In so far as the last approved budget is binding, should it operate as an upper limit upon recoverable costs or should it operate as a form of assessment in advance? “

At Chapter 45 of his final report the Law Society noted that:

”If the costs management proposals set out in the Preliminary Report are accepted, it would seem that detailed assessment will have a place only in the context of cases where RP’s costs significantly exceed the budget”. The Commercial Litigation Association (“CLAN”) believed that “detailed assessment will become less common if costs management is adopted”.

That said, the case of Troy Foods v Manton [2013] EWCA Civ 615, Lord Justice Moore-Bick warned that an approved budget is not a licence to conduct litigation in ‘an unnecessarily expensive way’. He added that: “I do not accept that costs judges should, or will, treat the court’s approval of a budget as demonstrating, without further consideration, that the costs incurred by the receiving party are reasonable or proportionate simply because they fall within the scope of the approved budget.”

So, the question to be answered is – will your costs be allowed in full if they are less than the budget? Yes, unless parties can show a good reason to depart from the budget – Merrix  now confirms that this applies to both downward and upward revisions to the budget.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com

Costs Budgeting is essential”, hails LJ Jackson.

Andrew McAulayLeave a comment

“Costs Budgeting is essential”, hails LJ Jackson.

Jackson told a London Common Law and Commercial Bar Association event last night that:

“Costs budgeting is an essential element of any programme to make the costs of litigation proportionate”, and that:

‘Litigation is a commercial enterprise.’  He added ‘there are no other commercial projects which people enter without a budget” and that “some form of costs management or costs budgeting is essential.’ This echoes comments he made in his 2009 final report.

In Jackson’s final report in 2009 he said “Any measures to control the costs of a project are themselves a source of some expense. Quantity surveyors have to be paid professional fees for their services in monitoring the costs of a construction project and determining what amounts are payable at each stage or what sums are due in respect of variations. But no-one suggests that quantity surveyors should be dispensed with, in order to “save” the costs of employing them. The costs of any multi-track case can be substantial, ranging from tens of thousands of pounds to tens of millions of pounds. In other words, the costs of every multi-track case, unless it settles early, are comparable to at least the costs of a small building project and sometimes they are comparable to the costs of a major building project. There is precisely the same need to control the costs of litigation as there is need to control the costs of any other project”.

After 7 years since his report was written, 1 pilot scheme and the 3 year practical application of the amended Civil Procedure Rules, Jackson’s opinion on both the effect of costs management and the costs of the same, remains constant.  Costs Management works and the costs of the same are a sensible part of the ‘project’.

Please follow this link to the Law Society Gazette’s article.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com

Costs Budgeting – claims over £10m

Andrew McAulayLeave a comment

In Signia Wealth Limited -v- Marlborough Trust Company Limited [2016] EWHC 2141 the court considered whether costs budgeting was appropriate.

Practical points

  • If there is no value on the claim form, then despite the amount of the claim – costs management applies.
  • The combined value of the claim for costs was considered when deciding whether the proportionality test was engaged.
  • Will an inequality of arms be a determining fact when deciding if costs management applies?  If making submissions regarding the same, then evidence to support the financial circumstances should be provided.

This was a high value claim and the court was asked to consider whether the claim should be taken out of the costs management regime.

The claimant identified that because neither the claim nor the additional claim had specified a monetary value in excess of the £10m limit, the claim was not automatically taken out of the costs management regime by virtue of CPR 3.12 (1)(b).

Costs budgets were filed and both parties’ claims for costs totalled £4.14m, the value of the claim was in the region of £13m. Consequently, the court found that the proportionality argument was engaged.

The court considered whether CPR 3.15(2) applied -“Where costs budgets have been filed and exchanged the court will make a costs management order unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made.

The court commented:

“13. It is not in doubt now that this claim is within the costs management regime. That is so because neither the claim form nor the additional claim mentioned the value of £13 million, which is said to be the value of the shares which were held by the first defendant. Had the figure been mentioned in the additional claim form, then the costs management regime would not have applied.

14. It seems to me that, given that this claim is within the regime, the proper approach for the court to adopt is to apply the test set out at CPR 3.15(2), namely the court must be satisfied, if this case is to be taken outside the regime, that the claim can be conducted justly and at proportionate cost in accordance with the overriding objective without a costs management order being made. If the court is not so satisfied, then the claim must stay within the costs management regime.”

The court  further commented that the incurred costs as against the future costs needed to be considered.   “If a point had been reached at which point future costs were to be de minimus, there was little point it requesting parties to undertake the expense of costs management. Although costs management was occurring later than desirable, there were significant future costs to be incurred and therefore this was a case to make observations about costs which have been incurred”..

The defendant argued that there was an inequality of arms, the second defendant was an individual.  However, no evidence was provided to support her financial circumstances and therefore the court found that it would not be right to make a decision in relation to the costs management.

The court considered that the claim fell within the costs management regime and therefore the proper approach for the court to adopt was to apply the test set out in CPR3.15(2).

Because there were issues of proportionality which needed to be considered  and there were real benefits for the parties if there was a costs management order, the court ordered that there be a costs management hearing.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com

Should the additional liabilities be included in the budget to allow the proportionality test to be applied correctly?

Andrew McAulayLeave a comment

Following the case of BNM v MGN Ltd (3rd June 2016) where it was found that the after the event insurance should be taken into account when assessing whether the costs were reasonable and proportionate, should the additional liabilities now be included in the budget to ensure that the proportionality test is applied properly at the budget stage?

According to the recent decision in  Various Claimants v MGN Ltd (21st July 2016) the Defendant accepted that under CPR, the Claimants are not obliged to disclose the amount of the success fee or ATE insurance as this could reveal the prospects of success. However, they referred to the case of  BNM v MGN Ltd (3rd June 2016) and argued that to enable the court to assess the reasonableness of the budget and apply the proportionality test then the additional liabilities now needed to be included in the budget.

Despite the court recognising that by taking into account the additional liabilities this allows a prospective view of proportionality, rather than a retrospective view, thus fulfilling the courts costs management duties, the court disagreed with the Defendant, referring to the provisions within the CPR, specifically the precedent H form and the precedent H guidance notes, concluding as follows:

  • I do not consider that the apparent change in the approach to proportionality on assessments (if there is one) means that there should be a change to the approach on the occasion of budgeting. The reasons for this are based on both the provisions of the rules and the Practice Direction and on the practicalities.
  • The provisions for costs budgeting are to be found in Part II of CPR 3. The procedures are dealt with in Practice Direction 3E. Paragraph 2(a) requires the court to have regard to the overriding objective and paragraph 6(a) provides:

“Unless the court otherwise orders, a budget must be in the form of Precedent H annexed to this Practice Direction.”

  • The first page of that precedent contains a summary which is amplified in the following pages. Below the summaries of costs under various headings there is included the following wording:

“This estimate excludes VAT (if applicable), success fees and ATE insurance premiums (if applicable), costs of detailed assessment, costs of any appeals, costs of enforcing any judgment and [complete as appropriate]”

Therefore, in light of the emerging case law on proportionality, the approach to the inclusion of additional liabilities remain the same and should be excluded from the precedent H.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com

How can the precedent H budget assist with any submissions for a split trial?

Joanne ChaseLeave a comment

The budget can be used in certain instances to assist with the litigation.  A request for a split trial is one of those instances.   The fundamental argument surrounding whether there should be a split trial is predominantly the additional costs associated with this extra trial.

Whether you are requesting the split trial or opposing it, the budget can help.

How can the budget assist with any submissions in support of the application? The budget can demonstrate that the costs remain proportionate and reasonable and those costs are not excessive, despite the additional costs that will be incurred.

How can the budget assist with any submissions in opposition to the application? The budget may be able to highlight that the additional costs will result in the costs being wholly disproportionate and unreasonable.

The budget can be a useful tool for litigators.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com

Revising your budget – what is a ‘significant development in the litigation’?

Joanne ChaseLeave a comment

Budgets can only be revised if there has been a ‘significant development in the litigation’.  Unfortunately the CPR is devoid of any comment or explanation regarding what a ‘significant development in the litigation’ is.  In the recent case of Churchill -v- Boot (22/04/16) the court determined that the budget could not be revised because no such development had occurred.

The value of the claim had doubled since the original budget had been approved, the trial had been delayed and there had been additional disclosure.  The Judge found that there had not been any significant developments since the date that the previous budget was approved and refused to vary the budget.  The Claimant appealed to the judge who held that:

  • He was not satisfied that there had been significant developments
  • The increased value of the claim did not mean that there would be higher costs. The parties already had permission to call the relevant experts.
  • The additional disclosure was clearly foreseeable when the costs budget was set.
  • An adjournment could potentially be a significant development. However on the facts of this case it was not.
  • The master had exercised his discretion appropriately there were no grounds to interfere with the exercise of that discretion.

This demonstrates the need to interpret the case and accurately formulate the case plan prior to preparing the budget.  The judge gave consideration to what the parties should have known when the budget was prepared, rather than simply relying on the assumptions to support the revision of the budget.  Accurate assumptions are essential despite the recent amendment to the rules which encourage condensed assumptions.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com