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Costs budgeting guidance – Precedent H

We have remarked previously upon what is, in our view, the rather strange approach expected by the hierarchy to both proportionality and budgeting.

In both fields, there seems to be some idea that the judiciary are equipped to pluck figures from the air in order either to determine what is or is not proportionate in terms of recoverable costs or what should be allowed for each phase of a budget.The focus of this article is in relation to budgeting and in particular what we consider to be the helpful comments of Mr Justice Warby in Yeo v Times Newspapers Limited [2015] EWHC 209 (QB).

From our experience, budgeting works best where the parties are on an equal footing. Thus, where there is some commercial dispute or perhaps a boundary dispute, both parties may well be asserting their factual position in order to demonstrate their rights and it might be anticipated that very similar amounts of work would be required by both.Where matters become far more complex is in the common situation in a personal injury claim where a Claimant may well have to do far more work in order to prove or substantiate their claim and where a Defendant may take a view on the prospects of success and tailor their budget accordingly. The case of Yeo is a claim for libel pursued by Tim Yeo MP and thus is perhaps not one of the most common types of claim undertaken by all our readers. Nevertheless, Warby J does enumerate some points of principle which are of general application.

He considers CPR 3.16 (2) which suggests that where practicable a CCMC should be conducted by telephone or in writing. Noting that the recoverable costs of budgeting are capped at 1% for the initial preparation of the budget and 2% for all other costs relating to budgets, he hopes that such a method might be more widely adopted in the future. As we have said, in appropriate cases it may be possible but in so many cases the parties are so far apart that an oral hearing is going to be required.

He also notes the crucial point that incurred costs are not the subject of the approval process. Whilst they can be taken into account when considering the amount allowed for each phase, the Court cannot interfere with them. He considers that “it is likely to help the parties reach agreement without Detailed Assessment later on if the Court records reasons for its decisions at the budgeting stage” particularly where incurred costs have been taken into account.

However, by far the most important aspect of this Judgment in our view is his analysis of PDE 3E 7.3 where “the Court’s approval will relate only to the total figures for each phase of the proceedings”. It was put to him that the Senior Costs Judge, Master Gordon-Saker, made a speech to the Commercial Litigation Association on the 1st October 2014 stressing that budgeting is not a prospective Detailed Assessment and that the training given to Judges suggested that they should not look at hourly rates or hours but rather at overall reasonableness and proportionality. This is the very heart of the point that we were making at the beginning of this article. How on earth is anyone to be expected to approve a budget apparently just on the basis of proportionality? Unless it is ever going to be said that proportionate costs must bear some direct relationship to the financial value (by which we mean in specific percentage terms) then we simply cannot see how this proposed approach is workable. Surely, some regard must be had as to the steps required to take the matter to trial and the necessary work involved by particular fee earners in that regard.

It is absolutely right that there should not be long and detailed argument over these issues and that the Judge should take a broad brush approach. What is being set is a budget not the final recoverable figure. Warby J fully endorses this approach and prays in aid PD3E 7.3 which says “in the course of its review the Court may have regard to the constituent elements of each total figure”. It seems that the Senior Costs Judge has focused on the first part of that paragraph almost to the exclusion of the later part. The Judge then points out that Precedent H explicitly requires hourly rates and hours to be included on the form and whilst he does not explicitly say so, it is clear from his comments that he sees little point in requiring all of that detail if the approach is simply to be lump sum figures plucked from the air.

Finally for the purposes of this article, he also makes again what is in our view a very common sense comment in relation to the contingencies. There is no point in a contingency being claimed for some unspecified potential future step (e.g. a run of the mill application). The Practice Direction is clear that if an application is subsequently required which was not reasonably anticipated at the CCMC, then the costs can be added to the budget. Only if there is a need for an application on the balance of probabilities should that be included within the budget. The parties do not have to anticipate each and every potential turn of the litigation but only those which are more likely than not.

As we have said, we consider that these comments are helpful indeed and it is to be hoped that they inform the process to be adopted in budgeting in future as opposed to, what appears to have been, the initial training to Judges on their role.

SPH Costing Services – Law Costs Draftsmen & Costs Lawyers

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