ADDITIONAL LIABILITIES AND COSTS BUDGETING AND PROPORTIONALITY: SOME PROBLEMS
the Chancery Division of the High Court stated that figures for additional liabilities in cases where they are still recoverable should not appear in cost budgets.
Additional liabilities remain recoverable in defamation and privacy proceedings, mesothelioma proceedings and, to a limited extent, in clinical negligence proceedings.
Here the defendant had submitted that the court should consider the extent of additional liabilities when looking at proportionality during the costs management exercise.
However the judge agreed with the claimants that Precedent H, the form for the costs budget, stated clearly that it related only to base costs and the summary page contained wording stating that the budget excluded success fees and After-the-Event insurance premiums.
This form is compulsory by virtue of Practice Direction 3E and therefore the form itself had the force of a Practice Direction.
Furthermore the claimants were under no obligation to disclose the terms of the Conditional Fee Agreement or After-the-Event insurance before the end of the trial and that itself meant that it could not be proper for that information to be given during the costs budgeting stage.
It has always been the case that details of the level of success fee do not have to be disclosed until the end of the case as that would indicate the solicitor’s assessment of risk and would prejudice the party being represented under that Conditional Fee Agreement.
This did mean that there might be some inconsistency between the budgeting process and the assessment process.
In BNM v MGN Ltd  EWHC B13 (Costs)
the Senior Costs Judge had said that the court need not consider the amount of any additional liability separately from the base costs when looking at the whole test of proportionality, that is the new test post-1 April 2013.
Here the judge commented that on actual assessment the judge would know what the additional liabilities were and would be dealing with actual figures and the inconsistency was an inevitable effect of the different things required of the parties at different stages of litigation.
There is an inherent logical problem here. Suppose a court sets a budget taking into account proportionality and limits the total to say £100,000.00 base costs and disbursements as the maximum proportionate figure.
If that is then applied on assessment it is obvious that nothing further can be allowed for the success fee or ATE premium as any additional costs would tip the bill over into disproportionality.
To not allow any such additional liabilities defeats the will of Parliament in retaining recoverability in these limited fields and indeed in relation to mesothelioma the Administrative Court quashed Government attempts to remove recoverability.
Under the pre-1 April 2013 law proportionality did not come into play in relation to additional liabilities.
In my view the new Civil Procedure Rules, insofar as they allow proportionality to be considered in relation to additional liabilities, are ultra vires, or to put it more bluntly, illegal.