“AGREED” COSTS BUDGETS NOT APPROVED BY THE COURT : THAT QC IS JUST TOO EXPENSIVE – THINK AGAIN

March 18, 2017 · by · in Assessment of Costs, Costs, Costs budgeting

In Brown -v- BCA Trading Limited [2016] EWHC 1464 (Ch) Mr Registrar Jones refused to approve “agreed” budgets. He held that the fees of leading counsel were too high and needed to be reconsidered. This shows that an agreement between the parties as to costs does not necessarily lead to the court endorsing such agreement as reasonable or proportionate. [I feel I should put a major caveat here in case anyone thinks that these type of fees are commonplace at the Bar – not in most areas of practice].

“…I cannot at the moment understand how, on a reasonable and proportionate basis, there can be a difference of £150,000-odd between the two sets of fees. It seems to me that I cannot possibly approve fees totalling £445,000 for a trial of ten days applying the test which I am required to apply.”

THE CASE

The Registrar was considering a costs budget in a section 994 petitions.  He had to consider the question of costs budgets.

THE JUDGMENT

 

Judgment on Costs Budget

 

    1. I now consider the costs budgets for the purposes of a costs management order. For the purposes of CPR 3.15 I am to record the extent to which the budgets are agreed between the parties and the respective budgets or parts of budgets which are not agreed record the court’s approval after making appropriate revisions.
    2. On the face of it, this would give me no jurisdiction to do anything else in respect of the parts that are agreed. However, at paragraph 3.15.1 of the notes in the White Book, there appears the following:

“Rule 3.15(2) provides that, if the costs management order (“CMO”) is made, the court will then record the extent to which each party’s budget is agreed or is approved by the court. Accordingly, the court should decline to make a CMO for the time being if it wishes to urge the parties to reconsider their budgets, whether or not those budgets are agreed.”

There is then reference to the decision of Coulson J in Willis v NRJ Rundell& Associates Ltd [2013] EWHC 2923 (TCC) in which he declined to approve the parties’ costs budgets in a professional negligence claim where the figures were disproportionate and unreasonable. Then there is an observation that:

“Circumstances may arise in which the court approves a budget in part only and neither approves nor comments upon the rest of it. See for example Hegglin v Persons Unknown (1) and Google Inc (2) [2014] EWHC 3793 (QB).”

  1. In this case, the majority of costs are agreed but I have found this a difficult case for the purposes of CPR 3.15 in the context of the reasonable and proportionate test to be applied. From my experience of section 994 petitions, this is not one of the most difficult cases either factually or in law. On the other hand, the sum involved, although these days perhaps not enormous, is significant. The Petitioner is seeking to recover a sum over £20 million. Whilst that is far in excess of the Respondents’ view of the value of the shares, this is the claim they have to face. In addition and importantly in this context, the allegations made by the Petitioner attack the reputation of the Respondents raising matters which will be damaging to them if proved, in particular to the professional reputation of the First Respondent. I can therefore understand why the Respondents consider it appropriate to instruct leading counsel; as has the Petitioner. This obviously increases the costs.
  2. In those circumstances whilst I am concerned about reasonableness and proportionality when looking at the overall figures, subject to one point, I have decided to adopt the approach that the parties’ agreement reflects the seriousness of the litigation and their acceptable analysis of the need for the expense anticipated.
  3. However, my accommodation to the agreement between the parties does not extend to the difference in fees for counsel for the purposes of trial. For the purposes of a ten day trial, and of course the brief fee includes preparation, the Respondents’ total costs for counsel in the budget are £287,000. That is high enough but the total costs for the Petitioner are £445,000. This is a substantial difference. I understand why both sides have decided to go to eminent leading counsel. I obviously recognise that the Petitioner has decided to instruct very experienced senior leading counsel. But I cannot at the moment understand how, on a reasonable and proportionate basis, there can be a difference of £150,000-odd between the two sets of fees. It seems to me that I cannot possibly approve fees totalling £445,000 for a trial of ten days applying the test which I am required to apply.
  4. In those circumstances, taking into account the guidance in the notes, I will decline to approve those fees, at least at this stage. I will urge the Petitioner to reconsider their budget in that regard.
  5. There are then two other items of fees that are not agreed. The first concerns the costs of £124,000 for disclosure on the part of the Petitioner, with particular reference being made by the Respondents to £54,000 attributed to paralegals. I have been taken by Mr Hossain QC on behalf of the Respondents to correspondence from the Petitioner, namely a letter from his solicitors dated 12 May 2016, which seeks to explain the amount of work required by reference to the amount of documentation that the Petitioner has to disclose, or at least to view in order to decide whether or not to disclose it. It includes some 30,000 emails which it is now accepted no longer have to be viewed because they will be part of the Respondents’ disclosure.
  6. In those circumstances, Mr Hossain submits that £124,000 can no longer be considered reasonable and proportionate. I have heard from Mr Wright in response but need not set out his detailed arguments because my conclusion is that the answer is obvious. That must be right.
  7. It is, of course, the position that there will be other work for the purposes of disclosure and the Petitioner’s solicitors will need to review what is disclosed. However this change must lead to the conclusion that the sum presented cannot be a reasonable and proportionate sum. I consider it right to direct the Petitioner to reconsider and reformulate this estimate.
  8. The second area concerns the paralegal costs for pre-trial work. These are presented for the Petitioner as 250 hours, producing £37,500 for the purposes of the budget. Mr Hossain QC refers in contrast to the Respondents’ budget in which 91 hours is proposed, producing a sum of some £16,000. There is a disproportionate difference in hours spent and therefore in the amounts to be incurred.
  9. Mr Hossain QC suggests a reduction of 150 hours would be reasonable and proportionate. He has also asked me to consider a background concern with reference to the pre-action costs. It is said that these are excessive but I am not going to consider that point further. This would take too long and is contrary to the background of the wide agreement otherwise reached. The position is that the solicitors acting for the Petitioner have identified these as costs which they have incurred and I am not going to go behind that here.
  10. Returning then to the arguments I will be considering, Mr Wright has submitted that I should take into account the fact that the original estimate has been reduced from some 300 hours and this shows the solicitors have carefully considered the figures finally presented. He has also emphasised that the figures have been influenced by the experience those solicitors have had in a recent, similar trial of a similar length. Finally he emphasises that his solicitors rely heavily on paralegals and their quality is high.
  11. It is always difficult to predict what is going to be required for the purposes of a trial. However, I think it is right for me to compare the two amounts. I consider it right for me to look at 250 hours and take the view that this is (putting it colloquially) a lot of hours. In reaching my decision I recognise that potentially the Petitioner has to spend more time in preparation for trial than the Respondents and, admirably in the context of hourly rates, asks paralegals to spend that time.
  12. Weighing those factors, I have decided I should find a figure in-between 250 hours and 91 hours, and not simply say the hours spent should be the same. I can only do rough justice and in that regard, rather than 250 hours proposed, I will accept 180 hours as the budget. I note there is, of course, always the ability for permission to come back with further details to vary it if appropriate.
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