Tag: sue fox

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

Negotiate, negotiate, negotiate

Andrew McAulayLeave a comment

The court has awarded costs against a party who has claimed unreasonable amounts in their budget.  In the case of King & Anor v Thipthorp & Ors [2016] EWHC 3859 (COP) the court reduced areas of the budget due to unreasonable claims and disproportionate amounts.  Although the budgets appeared overall not to be excessive, the budget was still reduced in relation to particular items.  This is contrary to the intended approach of the court, which is to adopt a global approach when considering reasonableness.  Furthermore the CPR is to be amended with regards to this global approach, confirming that hourly rates within budgets should not be set – here is a link to my previous blog regarding the yet to be implemented changes Least worse option.

The court ordered that the costs of the challenge could be recovered by the party objecting to those items.

Negotiations are key to successful costs management, avoiding the litigation risk associated with any hearing is certainly beneficial.  Furthermore, in view of the amendments to be made to the CPR regarding parties having to file “an agreed budget discussion report which sets out the agreed and disputed areas for each phase and a brief summary of the grounds of dispute schedules of agreed/disputed areas with the budgets”, negotiations have never been so important.

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