PI Brief Update

Post-Jackson Costs Cases - Sue Nash, Litigation Costs Services

21/10/13. We are now 6 months+ into the post-Jackson era and while the Court of Appeal has yet to get involved (although see Mitchell below), there have been a few cases that may indicate how the new regime will affect us all in the future. Most of these have been to do with compliance with the new Rules and I urge everyone to read the 18^th lecture in the Jackson implementation series of lectures which was delivered by the Master of the Rolls on 22nd March this year. http://www.judiciary.gov.uk/Resources/JCO/Documents/Speeches/mr-speech-judicial-college-lecture-2013.pdf

This article concentrates on and summarises the few cases that impact directly on costs management. A future article will deal with what solicitors (and barristers) need to be doing to comply with the new regime and to ensure that they do not fall foul of it.

Proportionality

Willis v MRJ Rundell & Associates Ltd & Anor [2013] EWHC 2923 (TCC) – Coulson J. The case concerned a £1.6m professional negligence claim against a firm of construction professionals that was subsequently reduced to £1.1m. Both sides submitted budgets at the original case management conference (CMC) in December 2012 – £821,000 for the claimant and £616,000 for the defendant. An unsuccessful mediation was subsequently held and the judge then ordered a costs management hearing which was held the last week in September. By this time the respective budgets were £897,000 and £703,000.

The costs in both budgets were found to be “disproportionate and unreasonable” on the basis “it will cost significantly more to fight this case than the claimant will ever recover”. This was so even allowing for the extra costs that a professional negligence claim can generate in expert evidence and “for the non-quantifiable, but potentially serious, damage to the defendant’s professional reputation that may be caused by a claim of this kind”.

He declined to approve either budget

Note: He went on to say that “it must be likely that [at the conclusion of the case] even the successful party will recover only some of its costs” before adding “although I am aware that some have taken the view that the absence of an approved costs budget means that that party will recover no costs at all, I do not believe that such a draconian approach is in accordance with the letter or the spirit of the new costs rules or 51G PD. Just because an estimate of costs of £900,000 at this stage of the case appears disproportionate and unreasonable does not mean that a final recovery of, say, £450,000, by agreement or on assessment, would not be appropriate.”

Comment: This is the first reported case dealing with proportionality – expect many more over the next year as the Court of Appeal’s guidance on the interpretation of the new rule will be essential.

Compliance

The headline case is Andrew Mitchell MP v News Group Newspapers Ltd [2013] EWHC 2355 (QB). Master McCloud allowed Mr Mitchell only his court fees after his solicitors failed to comply with the Court’s direction that budgets be filed at least 7 days before the CCMC (actually the day before it!). She specifically referred to the guidance given by Lord Justice Dyson (MR) in the 18^th lecture in the Jackson implementation series before concluding:

“Budgeting is something which all solicitors by now ought to know is intended to be integral to the process from the start, and it ought not to be especially onerous to prepare a final budget for a CMC even at relatively short notice if proper planning has been done. The very fact that the defendants, using cost lawyers, were well able to deal with this in the time allotted highlights that there is no question of the time being plainly too short or unfairly so.”

Comment: This case has been leapfrogged to the Court of Appeal and is due to be heard on 7^th November (Dyson LJ is to sit on it). Most costs commentators expect the Court of Appeal to uphold the judgment even though Master McCloud herself accepted that her ruling was draconian.

In Elvanite v Full Circle Ltd v AMEC Earth and Environment (UK) Ltd [2013] EWHC 1643 the Defendant had failed to make a formal application to vary its budget prior to the final hearing (although it had served the revised budget on the Claimant). Coulson J held that the Court’s approval should have been sought and that such an application should be made, “immediately it becomes apparent that the original budget costs have been exceeded by more than a minimal amount”. He dealt with the matter as an application to retrospectively amend a budget (NB it had almost doubled) and went on to say that, “The certainty provided by the new rules would be lost entirely if the parties thought that, after trial, the successful party could seek retrospective approval for costs incurred far beyond the level approved in the costs management order”.

Finally, there is the case of The Board of Trustees of National Galleries and Museums on Merseyside v AEW Architects and Designers Ltd & Ors [2013] EWHC 3025 (TCC) delivered on 11^th October by Mr Justice Akenhead. Both parties had files revised costs budgets for the PTR but they had not been dealt with at that hearing (through an oversight by both parties and by the court). The paying party argued that the costs judge could not depart from the last formally approved budget and referred to Coulson J’s ruling in Elvanite. Mr Justice Akenhead saw “no reason to disagree with the principles set down by Mr Justice Coulson” but pointed out that the Court could agree revised budgets without a formal application and referred to the oversight adding that this was “a very obvious case, based on my knowledge of the case and the case management, for a substantial upward departure from the approved budget”. He left it to the costs judge for assessment noting that he/she would no doubt “take into account what I have said.”

Comment: The latter case in no way diminishes the importance of Elvanite which is line with several other judgments on compliance with the rules.

Other

Murray and another v Neil Dowlman Architecture Ltd [2013] EWHC 872 (TCC). This case involved revision or rectification of a costs budget after it had been approved by the Court. Although Coulson J allowed the Claimants to revise their costs budget on the basis that there were special circumstances in the case (there was a technical error in the Precedent H rather than a procedural default) he held that it will normally be extremely difficult to persuade a court that inadequacies or mistakes in the preparation of a budget, which is then approved by the court, should be subsequently rectified.

Comment: It is vital that parties get their initial budgets right. They are required in all cases where mandatory costs management applies even if a Costs Management Order (CMO) is subsequently not made. Also note that the mandatory regime may well soon be extended to commercial cases over £2M.

In Slick Seating Systems and Ors v Adams and Ors [2013] EWHC B8 (Mercantile) HHJ Brown QC followed his earlier judgment in Safetynet and summarily assessed the winning party’s costs immediately following the trial of the issues and ordered payment within 14 days. He said as follows:

1. The claimants also ask for their costs and this particular case, as I say, has been case managed throughout by me and therefore the activities of the claimants have been controlled to a certain extent by the active case management of the court. The claimants have co-operated in that process, as indeed they are obliged to do. By running this case with a costs budget, I approved a budget of a grand total of £359,710.35 pence for doing this case through to trial. In my judgment, that budget was proportionate to what was at stake: the £4.4 million sum that I have just awarded. The claimants have laudably kept within that budget and exercised due control over their activities and expenditure in an exemplary fashion. The statement of costs on 13th May 2013 (which is today) is favourably compared with the costs estimate of 22nd May 2012. The form is signed by the partner of the solicitors and a member of the client company as well, Mr Beasley; the grand total is £351,267.35 pence. In my judgment that is a sum which is, looking at each of the phases is within the budget that was set and the claimants are to be commended with controlling their budget throughout this particular period.

2. That will be the sum that I would award to be paid within 14 days without the need for detailed assessment, detailed assessment becoming otiose. ……………. . Here, I am in a position - bearing in mind this is a one-day trial although a lot of activity has taken place - to summarily assess these costs because I have been actively involved in managing this case throughout. I would know more about the costings of this case than any detailed costs judge would have. Therefore, it seems to me quite right that I should assess these costs today with all that knowledge.

Comment: The upside for receiving parties of this approach is obvious. Paying parties however will want to be sure that the court has as much ongoing oversight of the costs as HHJ Brown did in this case and that the receiving party’s budget does not include non-recoverable costs.

Sue Nash
Litigation Costs Services 
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