Costs management: How to counter attempts by claimants to dispense with costs budgeting

Loved by some but hated by others, costs management has become a central feature of litigation in the post-Jackson world – and it is here to stay. The aim of costs management is, of course, to allow the court to manage both the steps to be taken and the costs to be incurred by the parties to any proceedings so as to further the overriding objective. In this article, Yvonne Booth says that proportionality is key.

Costs management applies to all Part 7 multi-track cases with the exception of:

• Claims commenced on or after 22nd April 2014 valued at £10 million or more;
• Claims brought by or on behalf of children which are commenced on or after 6th April 2016; or
• Proceedings that are the subject of fixed costs or scale costs

There is also general discretion afforded to the court to dispense with budgets under CPR 3.12 (e). It is not lost on compensators that claimants actively promote a costs budgeting regime to the detriment of the fixed costs regime and then seek to avoid it where possible.

We have seen a number of attempts to avoid it and despite none of the above exemption criteria being satisfied, an application is made inviting the court to exercise its discretion and dispense with costs budgeting entirely.

In a recent case, the Keoghs costs team attended the CCMC before DJ Hovington in Manchester District Registry. At birth, the claimant (now 14 years of age) suffered acute profound asphyxia resulting in cerebral palsy. Proceedings had been commenced before 6th April 2016 and so CPR 3.12 (c) did not apply, but since the claimant’s prognosis was uncertain, the claimant’s solicitors made an application to dispense pursuant to CPR 3.12(e).

It is important to point out that, when the application was made, the claimant had already filed and served her budget amounting to in excess of £800,000.

The further reasons cited by the claimant in support of the application were:

• It was impossible to know what costs would ultimately be incurred. The budget is wholly speculative. The medical evidence alone will be voluminous;
• Any budget would require substantial revision with applications required;
• Preparation of cost budgets would represent a waste of resources for both parties and the court;
• The case would not have been budgeted had it been issued after 6th April 2016; and
• It was probable that the value of this claim would exceed £10 million so proportionality is not an issue.

Keoghs submissions opposing the application were:

• Budgeting is not a precise exercise. Parties will never know for sure what costs are going to be incurred but that is why costs are termed “estimated” in Precedent H and the Rules;
• The claimant’s solicitors hold themselves out to be highly experienced and must have relied upon that experience in assessing costs to be incurred in this litigation;
• A precise budget had been filed in the sum of £801,579.87 certified by a partner as being a fair and accurate statement of costs and could not by any means be said to be a “wholly speculative” document;
• It is not unusual for there to be a significant amount of medical evidence in clinical negligence claims and, in any event, that factor does not justify abandoning costs management in its entirety;
• If budgets required revision during the course of the litigation, either party could do so if significant developments arose under Rule 7.6 of PD 3E;
• Budgets had already been filed and served and the parties were ready to deal with them. A significant amount of time had already been expended, including the judge’s preparation and reading time, in considering the costs budgets and preparing for the CCMC. It would not be in the interests of justice or the spirit of the overriding objective, having regard to court resources and proportionality, to simply throw those costs away;
• Hindsight should not be applied and there should be no attempt by the court to “second guess” the intention of the Rules Committee. If the Rules Committee had intended the transitional provision to have retrospective effect, it would have specified so;
• Whilst the true value of the claim was not yet known and there was no certainty that damages would exceed £10 million, it is wrong to say that proportionality is not an issue;
• Under 7.3 of PD 3E, proportionality is relevant to each step/phase taken in the litigation and value is not the only consideration. The court will also consider the factors under CPR 44.4; and
• The claimant’s budget is excessive and costs management is essential.

Outcome

District Judge Hovington said the matter was finely balanced and, had proceedings been issued after 6th April 2016, the parties would not be having a debate. A potential value in excess of £10 million did not preclude him from costs managing the case.

Budgets act as a guideline rather than a fixed sum being claimed and, if the claim succeeded, there would be a detailed assessment prior to which any costs management would set the scene. The judge said that if the claimant’s figure of £10 million for damages was correct then the current budget of £801,579.87 should not create much difficulty in determining proportionality but that is not to say the court would not interfere having regard to the tests referred to by the defendant.

The claimant’s best point in support of the application to dispense with budgeting was the current rule in place which excludes these types of cases.

However, DJ Hovington saw considerable force in the submission that substantial costs had already been incurred and that he had before him a detailed budget from which to work. Having taken all matters into account, this was a case which tipped in favour of costs management. The claimant’s application to dispense with costs budgeting was dismissed. District Judge Hovington reserved the matter to himself for costs management on the next available date.

Keoghs Comment

If done properly, costs management presents the court and paying parties with a powerful tool in ensuring that cases are conducted in a proportionate manner and costs kept in control. It is therefore reassuring that courts are still willing to reinforce the use of costs management in furthering the overriding objective - even in those cases which may seem to fall within the exemptions provided by the rules.