Kerry Underwood

AMENDING, AND DEPARTING FROM, COSTS BUDGETS: FOUR RECENT CASES

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The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

 

Change on Causation Justified Claimant Amending Costs Budget

In

Zeromska-Smith v United Lincolnshire Hospitals NHS Trust [2019] EWHC 630 (QB) (22 February 2019)

the Queen’s Bench Division of the High Court overturned a Master’s refusal to permit a claimant to amend her costs budget to allow for the instruction of leading counsel.

This decision illustrates a “significant development” under Practice Direction 3E.7.6.

Here, the defendant’s change of position on whether the claimant had suffered psychiatric injury as a result of the defendant’s admitted negligence constituted a significant development, as it had potentially significant consequences for the quantification of the claimant’s claim.

The claimant had brought a clinical negligence claim against the defendant after the claimant’s daughter was stillborn.

The claimant alleged that she had suffered psychiatric injury due to the defendant’s negligence and served a supportive expert’s report.

The parties discussed the extent to which the defendant admitted the claim and the basis on which judgment could be entered.

The claimant’s solicitor informed the defendant’s solicitor that the claimant could only agree to quantum-only directions if the defendant admitted liability, including both breach of duty and causation.

The defendant’s solicitor confirmed that judgment could be entered for the claimant “with extent of injury and loss to be assessed.”

The claimant understood the defendant to be admitting that the claimant had suffered a psychiatric injury due to the defendant’s admitted negligence.

The defendant had obtained its own expert evidence by the time of the case and costs management hearing, but did not serve it until eight months later.

It then emerged that the defendant was denying that the claimant had suffered any psychiatric injury at all.

The claimant considered that the defendant had resiled from the basis on which judgment had been entered and applied, unsuccessfully, to amend her costs budget to allow for the instruction of leading counsel.

On appeal, the High Court Judge held that, in deciding that there was no significant change justifying an amendment to the claimant’s costs budget, the Master had erred in law: he had failed to appreciate that the defendant was not simply disputing the extent of the psychiatric injury, but asserting that there was none.

The defendant’s change of position was significant because there was a qualitative difference between the defendant conceding damages only for the failure to successfully conclude the pregnancy.

 

Costs Offer Not A Benchmark Below Which Costs Cannot Be Budgeted

In

Gray v Commissioner of Police for the Metropolis [2019] EWHC 1780 (QB) (24 May 2019)

the Queen’s Bench Division of the High Court, on appeal, refused to revise the claimant’s costs budget upwards.

In reaching this decision, the key questions were whether the lower court judge had:

  • placed too much emphasis on the low value of the claim;
  • failed to take into account or place sufficient weight on other aspects of the case including the complexity of civil actions against the police; and
  • the difficulties which the claimant’s solicitors would have in taking the claimant’s instructions given his mental health issues.

The High Court held that the lower court  was not only entitled, but obliged, to take into account the relatively low value of the claim under CPR 44.3(5)and was entitled to conclude that the matter was relatively straightforward: the case centred around a series of factual disputes, which did not raise novel or particularly difficult legal issues.

As  to the specific items of the costs budget, the High Court Judge held that the court was not required to give reasons for allowing a sum for witness statement preparation which was lower than that which the defendant had offered; the figure offered by the defendant was not proportionate.

An offer for costs was not a benchmark below which costs could not be budgeted (paragraph 27).

A substantial amount of preparatory work had already been carried out in analysing the defendant’s disclosure, and large numbers of the documents disclosed were common to both parties, so they would have already been considered by the claimant’s solicitors.

Although the claimant’s mental health problems had to be borne in mind, they did not justify a significant increase in costs for witness statement preparation.

Although the lower court judge mistakenly thought the trial was three days instead of five days, this was not a factor which would have decreased the budgeted costs for trial preparation.

While the case was not “run of the mill”, the amounts allowed were not manifestly too low.

The budget as decided did not mean that the litigation was no longer economic.

 

No Significant Developments Justifying Revision Of Costs Budget

In

Seekings and another v Moores and others [2019] EWHC 1476 (Comm) (7 June 2019)

a High Court Judge refused a defendant’s application to increase its costs budget by £130,000.

There were two issues:

(i) whether there was any jurisdiction to make such an order when the vast majority of the costs had already been incurred, something considered in Sharp v Blank [2017] EWHC 3390 (Ch); and

(ii) whether there had been “significant developments” justifying revision of the budget, as per Practice Direction 3E, Paragraph 7.6.

The judge held that there had not been “significant developments” justifying revision and so did not need to consider the “difficult question of jurisdiction”.

In Sharp v Blank the court had interpreted “future costs” in Paragraph 7.6 of Practice Direction 3E as meaning costs after the last approved or agreed budget, rather than – well – future costs.

Virtually every commentator thinks that the decision in Sharp is wrong.

Here the court just considers the issue of significant developments and the judgment contains a useful summary of the existing case law, although generally the matter will be fact sensitive to each matter.

It is not consistent with the overriding objective to allow parties to amend budgets because they have overlooked something or made a careless mistake, or when the case develops in a way that should have been foreseen – see

Al-Najar and others v The Cumberland Hotel [2018] EWHC 3532 (QB)

which gives useful guidance.

Here, the judge concluded that continuing electronic platform costs should have been anticipated and were relatively minor and so did not warrant revision.

Requests for information pre-dated the budget and so the defendant should reasonably have anticipated the work required.

An increase in the documents for review did not warrant an increase either: they were the defendant’s documents and the defendant should reasonably have anticipated the extent of the review.

In relation to expert evidence reasons for the increases appeared to be “an amalgam of matters which should have reasonably been anticipated, and matters which did not warrant an increase”.

As to pleadings and lists of issues, these are common in this sort of litigation.

The work relied upon should reasonably have been anticipated and did not warrant revising the budget.

£85,000 had been agreed for this phase.

It was not proportionate to spend more.

As to Requests for further information the costs of hearings resulted from the defendant’s decision to resist the claimant’s applications, which were successful, and resulted in adverse costs orders against the defendant.

Even if they were a significant development, their outcome was such that no revision to the defendant’s budget was warranted.

The judge noted that the defendant should have followed the proper procedure for revision including identifying the changes and giving reasons for them.

7. The relevant parts of Practice Direction 3E are:

7.3 If the budgeted costs or incurred costs are agreed between all parties, the court will record the extent of such agreement. In so far as the budgeted costs are not agreed, the court will review them and, after making any appropriate revisions, record its approval of those budgeted costs. The court’s approval will relate only to the total figures for budgeted costs of each phase of the proceedings, although in the course of its review the court may have regard to the constituent elements of each total figure. When reviewing budgeted costs, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.

7.4 As part of the costs management process the court may not approve costs incurred before the date of any costs management hearing. The court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all budgeted costs.

7.5 The court may set a timetable or give other directions for future reviews of budgets.

7.6 Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions. Such amended budgets shall be submitted to the other parties for agreement. In default of agreement, the amended budgets shall be submitted to the court, together with a note of (a) the changes made and the reasons for those changes and (b) the objections of any other party. The court may approve, vary or disapprove the revisions, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed.

 

Effect Of Settlement Of Claim On Good Reason To Depart From Budget Under CPR 3.18(B) When Costs Are Assessed

In

Barts Health NHS Trust v Salmon (unreported) (17 January 2019)

a County Court Judge allowed an appeal against a  decision taken by a master when assessing costs of a claim which had settled.

The receiving party claimed less than the budget sum for certain phases and the master assessed the bill as claimed.

The judge held that the master had been wrong in not explaining his reasons for assessing the bill as claimed and in not allowing the paying party to make submissions as to the appropriate sums in respect of those phases before assessing.

The County Court Judge said that where a party claimed less than the budget sum, because they spent less and because of the indemnity principle, that was a good reason for departing from the budget under CPR 3.18(b) –

see Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792

and there was no need to establish a “further” good reason in order to reduce the costs to a greater extent.

In any event, here, there were good reasons to justify a further downward departure from the budget figures; the phases were substantially incomplete and there was no alternative dispute resolution other than the making and acceptance of a Part 36 offer.

Once the court has found a good reason to depart downwards from the budgeted figure, the court should hear submissions from both parties on what the final figure should be.

The judge did not criticise the master for his approach to proportionality.

He considered that he went through the relevant factors, in a structured and analytical way, and carried out the balancing exercise.

However, the consequences of the conclusions reached on good reason in the appeal meant that the starting-point for the exercise of applying the proportionality test might have shifted.

In the absence of agreement, there would have to be a re-assessment of the reasonable costs and the court would have to re-assess proportionality if the starting figure was different to the figure that the master had as his starting point.

It suggests that whenever budgeted cases have settled before trial, costs are going to be open to challenge on assessment.

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Written by kerryunderwood

July 31, 2019 at 8:14 am

Posted in Uncategorized

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