Kerry Underwood

REASONS TO DEPART FROM BUDGET: A HIGH THRESHOLD

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In Jallow v Ministry of Defence [2018] EWHC B7 (Costs)

Master Rowley, sitting in the Senior Courts Costs Office held that neither the reduction of the hourly rates for incurred costs, nor the fact that the matter settled for a significantly lower sum than claimed, and on which the budgets were based, were good reasons to depart from the claimant’s costs budget.

Here Mr Jallow brought a personal injury claim against the Ministry of Defence claiming £185,000, or in the alternative £312,000.

Shortly before the quantum hearing to assess damages, the claimant accepted the defendant’s Part 36 Offer of £90,000.

At detailed assessment Master Rowley reduced some of the hourly rates of Mr Jallow’s solicitors for incurred costs, but these reductions would only apply to the budgeted costs if the Master found that the reduction in those hourly rates was a good reason to depart from the budget.

The Master held that the parties would need to raise something specific to the case to succeed in an argument that the costs budget should be departed from and there was nothing specific to this particular case in the hourly rates challenge, and if the budget was departed from for that reason, then the same point would apply in other, many cases.

The Master considered that a similar test to “good reason” was whether a “genuine issue” existed as in

Hazlett v Sefton Metropolitan Borough Council [2001] 1 Costs LR 89

and rejected Mr Jallow’s argument that there needed to be a “significant development” in the litigation.

The Master also pointed out the recent authorities that warned against costs judges adopting too low a threshold in relation to the question of what is a good reason – see for example

Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB)

The Master expressed concern that the lack of court scrutiny at the detailed assessment stage of the hourly rates or budgeted costs may encourage parties to incur costs up to the budget set for each phase, in the knowledge that these figures were unlikely to be successfully challenged on detailed assessment.

However, it acknowledged that the aim of costs management was to make detailed assessments shorter, and that that was a price that might have to be paid.

The Master also rejected the Ministry of Defence’s argument that the fact that the case settled for a much lower sum than the sum claimed was a good reason to depart from the budget.

The claimant had put forward alternative cases as to quantum, and that showed that he was alive to the issues surrounding the potential level of damages.

This case was one where a wide range of damages might be achieved, and it was reasonable for Mr Jallow to have believed that his case was worth the sum claimed.

 

This finding followed the case law on the old proportionality test, and in particular the decision of the Court of Appeal in

Lownds v Home Office [2002] EWCA Civ 365

where the Court of Appeal was alive to the issue of the sums claimed being higher than the sums achieved and said that the test was what it was reasonable for the claimant to consider that he could recover in the proceedings.

The Court of Appeal said:

“The rationale for this approach is that a claimant should be allowed to incur the cost necessary to pursue a reasonable claim but not allowed to recover costs increased or incurred by putting forward an exaggerated claim and a defendant should not be prejudiced if he assumes the claim which was made was one which was reasonable and incurs costs in contesting the claim on this assumption.”

Here the Master said that the essence of the point is whether it was reasonable for the claimant to believe that his case was worth the sum that he claimed.

It is only if the claimant could not reasonably have had that belief, because his claim was exaggerated in some way, that the budget might be considered to have been set on a false premise and as such should be departed from on assessment, and that was not the case here.

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Written by kerryunderwood

May 15, 2018 at 8:26 am

Posted in Uncategorized

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