Costs budgeting latest – further “tension”
The world of costs rarely stands still, not least most recently in the areas of interplay between budgets and detailed assessment, with the writer addressing the same only a matter of days ago within this blog, with Deputy Master Campbell providing guidance in the matter of RNB v London Borough of Newsham, SCCO ref CCD 1702513, judgment 4 August 2017, as to how the approach in Harrison ought to be adopted.
Hot on the heels of this further guidance, Master McCloud, sitting as a Deputy Costs Judge in the matter of Woodburn v Thomas  EWHC B16 (Costs), identified what she has referred to as a “tension” between Practice Direction 3E B(6)(d) (requiring the parties to “…follow the Precedent H Guidance Note in all respects” and the obvious tension which that phrase within the Practice Direction created within itself; the very nature of “Guidance” implying advisory, rather than the wording of the Practice Direction which appears mandatory), and the approach adopted by Master Gordon-Saker in BP v Cardiff & Vale University Local Health Board  EWHC B13 (Costs) who stated
“On a detailed assessment it will be necessary to identify (a) the costs of initially completing Precedent H and (b) all other costs of the budgeting and costs management process. Where a costs management order has been made and the receiving party’s budget has been agreed by the paying party or approved by the court it will be both necessary and convenient that the bill be divided so as to identify the costs of initially completing Precedent H and the other costs of the budgeting and costs management process, unless those costs can be clearly identified in some other way.”
with the Master finding (at ) that
“There is a tension between the requirement in the PD to follow the Precedent H Guidance (which means that some costs of costs budgeting and costs management are placed in the CMC and PTR phases of the Precedent H and therefore budgeted) on the one hand and the very sensible guidance of the Senior Costs Judge in relation to the need to spell out in the eventual Bill the costs which are claimed as being within the 1% or 2% caps on budgeting costs. In this instance the costs lawyer drafting the Bill proceeded on the footing that the Senior Costs Judge’s guidance should be followed and the costs of budgeting and costs management should be separated out.”
This presented the problem that
“It was [therefore] difficult for the parties and the court initially to get to the bottom of what the correct approach to assessing the relevant parts should be, and for what items in the bill, and whether to treat some or all of the “non phase” costs as being subject to the 2% cap or (alternatively or perhaps in addition) also subject to the budget limit for the CMC phase itself.”
Given this tension, the Master opined that the appropriate way, in her view, to address this tension was thus, namely that (at )
The Assumptions in the Precedent H are the starting point. Those evidence the basis on which the judge has made his or her budgeting decision or on which the parties agreed the budget. Here the Assumptions included in the CMC phase (and PTR phase) included some costs referable to budgeting and costs management, which is as the Guidance requires.
The costs lawyer drafting the Precedent H must, unless the Guidance changes, follow the Guidance as to which costs of costs budgeting he or she includes in the CMC (and PTR) phases and which he or she includes in the non-phase elements as being the ‘other’ costs of costs budgeting.
In my judgment (whether or not the Guidance has been followed, albeit it was in this case), where a budget is approved or agreed then the assumptions on which it was approved or agreed are the best guide as to how the relevant budgeting costs should be treated in the Bill, so as to avoid the difficulty of argument over the extent to which those budgeting costs may be subject to the CMC phase’s budget limit (thereby requiring ‘good reason’ if in excess of budget) as opposed to or as well as the “2%” cap imposed by PD 3E 7.2(b).
Ensuring that the Bill phases include (wholly and exclusively) the costs which were budgeted in the corresponding identical Precedent H phases could avoid the confusion as to ‘what goes where and how to treat it’ which was encountered here and took some time in court to resolve item by item in the ‘non phase’ part of the Bill.
I therefore directed that the items in the ‘non phase’ part of the Bill which fell within the CMC phase assumptions of the approved Precedent H (and Guidance) should be treated as if they had been pleaded in the CMC phase of the Bill, and that all other costs of costs budgeting and costs management should remain in the non-phase part of the Bill and be subject to the 2% (and 1%, as appropriate) caps.
In the result, the costs claimed in the CMC phase exceeded the budget for that phase by a somewhat greater amount than they already did in any event.
Thus, the Master (acknowledging that the guidance had, in any event, been followed in the instant matter) concluded that
“The above approach is not ideal. Whilst it ensures that the CMC budget phase matches exactly the bill CMC phase, it has the undesirable effect of dividing the costs budgeting costs into two parts (those subsumed into the CMC budgeted phase and those in the ‘non phase’, non-budgeted part of the bill). Separating those in that way then arguably causes difficulties in application of the 2% cap on budgeting costs, and in this judgment I was not asked to rule on the question as to whether the costs budgeting costs in the CMC phase were subject to the budget for that phase only, or whether they were subject to both the phase budget and the 2% cap.”
and further suggested that
“It may be helpful for the Rule Committee to consider whether the guidance for Precedent H should stipulate a simple solution, namely that any costs referable to costs budgeting and costs management are not to be included in the Precedent H other than for the purposes of the 1% and 2% caps on budgeting costs. Taking that approach would mean that CMC budgets would be as their name suggests, budgets for case management conferences and case management, and not the costs management aspects of the case, which (consistently with the senior costs judge’s guidance in BP v Cardiff & Vale University Local Health Board) could helpfully be spelled out in one clear part of the Bill to which the relevant percentage cap can easily be applied.”
This judgement, once again, highlights the difficulties which can be encountered both in the preparation and assessment of costs budgets, and the detailed assessment of matters in which costs management orders have been made. Whilst each judgement seeks to give further clarity to rules in which tensions are being identified (and on occasions exploited) almost on a weekly basis, it is clear that very considerable care is required throughout the entire process.
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