Costs Budgeting is no game – Latest Judgment – Fincharm Ltd v Churchill Group Ltd [2017] EWHC 1108 (TCC)

May 24, 2017

 

Ever since the inception of costs budgeting, both within the pilot scheme at the Technology & Construction Court and thereafter within the wider CPR reforms brought in in April 2013, rumours have abounded, suspicion even, that tactics would play a part. Defendant’s insurers often spoke of claimants inflating budgets in the hope of maximising the eventual sums allowed, and claimants that the defendants were presenting unrealistically low budgets, either due to their already capped hourly rates or otherwise, in an effort to demonstrate by way of comparison that the claimant’s budget was unreasonably high.

 

These accusations have always existed on the periphery of the budgeting regime, and even when any party has endeavoured to raise their head above the parapet and suggest that any such practice was actually going on, the courts have been slow to uphold such criticism in any reported cases…until now.

 

It was always going to take a robust judicial character to do so, and therefore it is perhaps with little surprise that the writer can report no less than Coulson J has now turned the tide, by severely reprimanding a defendant for presenting a costs estimate which was “…completely unrealistic…“.

 

The matter of Fincharm Ltd v Churchill Group Ltd [2017] EWHC 1108 (TCC) was a matter which involved a claim being brought for some £820,000 plus interest by a restaurant following a gas explosion in 2014 which had closed the restaurant for 4 months. Despite the claimant’s pleaded claim being extremely detailed, Coulson J found that

 

“…Churchill’s defence could not be more basic.  It is a combination of bare denials and non-admissions of the kind that the Civil Procedure Rules was designed to sweep away.  It is, bluntly, an insurer’s defence straight out of the 1970’s.  For example, despite the fact that the explosion happened in its hotel, Churchill does not even formally admit the cause of that explosion.”

 

and thus was not impressed by their conduct even at the outset of the costs management process.

 

The claimant had revised their cost budget downwards, to £244,676.30, based upon the assumption that there would be no need for expert evidence as to the cause of the explosion, Coulson J having given the defendant (due to the inadequacy of their defence) 21 days to properly plead a positive defence as to the cause of the explosion in default of which it would be taken that they admitted the claimant’s pleaded case. Against this background, the defendant served their Budget Discussion Report (Precedent R), commenting on the claimant’s budget and asserting that such costs should not exceed £90,000.

 

The defendant’s budget was put forward in the sum of £79,371.23, which Coulson J commented “…seems erroneous on its face…“, observing that it allowed nothing at all in respect of any fire experts, notwithstanding that the defendant argued at the CMC that causation was in issue and an expert was necessary; and further estimated less than £7,000 for the preparation of a High Court trial.

 

In his view, Coulson J noted the same to be “…an unrealistically low budget…“, but quite properly approved the defendant’s budget in the amount claimed as that was the amount for which the defendant contended.

 

He then turned his attention back to the defendant’s Precedent R, finding the same to be “…of no utility…completely unrealistic…[and]…designed to put as low a figure is possible on every single stage of the process, without justification, in the hope that the court’s subsequent assessment will also be low.”

 

By way of example “…of the lack of reality…” in the defendant’s Precedent R, Coulson J noted in his judgement unjustifiably low proposals in respect of the phases relating to disclosure, witness statements, experts reports and trial preparation.

 

Whilst clarifying that he made no criticism of the conducting solicitor who appeared before him on behalf of the defendants solicitors, Kennedys, he was entirely critical of their Costs Department, branding both the defendant’s solicitors budget and their Precedent R “…an abuse of the cost budgeting process.” and found it entirely proper, and indeed his obligation “…to disregard Churchill’s Precedent R, ” further noting the imperative that the “…Precedent R process is carefully and properly adhered to by the parties to civil litigation…“.

 

The claimant’s budget was allowed at £244,676.30.

 

This matter should, therefore, serve as a salutary reminder that the cost budgeting regime is not one which should be utilised for perceived tactical advantage, but rather one which is intended to properly regulate costs by way of checks and balances in civil litigation.

 

It is further anticipated that this judgement may now lend itself to a more proactive approach to costs management, with previous reservations as to criticism of either party being reduced.

 

For assistance with your costs budgets and throughout the budgeting process, and beyond, please do not hesitate to contact us on (01772) 435550, or by e-mail at costs@sphcostingservices.com.

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