COSTS, BUDGETS AND “STRATEGY”: THE CASES TO READ

May 17, 2017 · by · in Costs, Costs budgeting

Is it appropriate to talk about “strategy” in relation to costs budgeting? It probably says a lot that I am at the APIL annual conference and this is one of the things being talked about in the reception at the evening (to be fair this may be by a minority of those here). The issue being discussed was the practice of defendants putting in low budgets and using these as the basis of attacking the claimant’s budget.  There are two cases that are essential reading for those involved in the budget process.

 

(Not everyone will be talking about costs budgeting)

 

“It is hard to imagine anything more sterile than arguing about a grossly excessive costs estimate. It does not go to the issues, it is wasteful of Court and the parties’ time, and it offends against the obligation to keep costs to the reasonable minimum (both in the fact of the estimate and the need to whittle it down).”

“…some parties seem to treat cost budgeting as a form of game, in which they can seek to exploit the cost budgeting rules in the hope of obtaining a tactical advantage over the other side. In extreme cases, this can lead one side to offer very low figures in their Precedent R, in the hope that the court may be tempted to calculate its own amount, somewhere between the wildly different sets of figures put forward by the parties. Unhappily, this case is, in my view, an example of that approach.”

THE CASE THAT CLAIMANTS SHOULD READ

The judgment of Mr Justice Stuart-Smith in GSK Project Management Ltd -v- QPR Holdings Ltd [2015] EWHC 2274 (TCC) is one that needs to read by anyone involved in preparing a costs budget,

KEY POINTS

  • Whilst costs budgeting is normally a broad brush process there are some cases in which a more detailed examination of the costs budget is necessary.
  • The claimant’s  costs budget in the current case was wholly disproportional and was halved.
  • The claimant was ordered to pay the additional costs caused by the costs budget dispute and the claimant’s solicitor ordered to notify their clients of the terms of the judgment.

THE JUDGMENT

The judgment has been looked at in detail in a previous post.  Here we look at the postcript in a case where the judge felt that the costs budget had been considerably overblown.

  1. At one point in the attempt to justify its exorbitant costs estimate, the Claimant submitted that this litigation has been and is “combative”. That is plain and obvious from the length, approach and tone of both the Statements of Case and the correspondence included in the materials for this CMC. It does not begin to justify the level of incurred and prospective costs set out in the Claimant’s Precedent H.
  2. I respectfully repeat and adopt the recent observations of Edwards-Stuart J in Gotch v Enelco Ltd [2015] EWHC 1802 (TCC), where he said:
“44. It is therefore time to say, in the clearest terms, that parties and their solicitors can no longer conduct litigation in a manner which does not keep the proportionality of the costs being incurred at the forefront of their minds at all times.
45. It is no longer acceptable – if it ever was – for the parties to pursue issues or applications that have no real impact on the issues that are central to the dispute. Further, it is no longer acceptable for solicitors to carry on a war of attrition by correspondence, whether instructed to do so or not; it is the parties who are the subject of the duty in CPR 1.3, not merely their solicitors.
46. […]
47. Whilst English law is an adversarial process, that goes to the issues in the case: not to every aspect of the procedure. Parties to litigation, in the TCC at least, are expected to conduct that litigation in the manner that is most expedition and economical. Bringing the right issues to trial in the most economical fashion, and taking steps to ensure that the costs are kept at a level that is proportionate to what is at stake, is to be at the heart of the process.
48. Unreasonableness, intransigence and the taking of every point must in my view now be regarded as unacceptable, because conducting litigation in that way flies in the face of the overriding objective as it is now formulated. These habits must disappear from the landscape of litigation in the TCC. If they do not, offending litigants must expect to bear the costs.
49. If access to justice is to have any real meaning, then the aim of keeping costs to the reasonable minimum must become paramount. Procedural squabbles must be banished and a culture of co-operative conduct introduced in their place. This will not prevent contentious issues from being tried fairly: on the contrary it should promote it.”
  1. It is hard to imagine anything more sterile than arguing about a grossly excessive costs estimate. It does not go to the issues, it is wasteful of Court and the parties’ time, and it offends against the obligation to keep costs to the reasonable minimum (both in the fact of the estimate and the need to whittle it down).
  2. This costs estimate was grossly excessive, being overstated by almost 100% in relative terms and nearly £400,000 in absolute terms. It justified the effort and expense of the detailed attack made on it by the Defendant. There is no reason why the Defendant should be out of pocket because of the need to deal with such an exorbitant estimate. On a most broad-brush approach I estimate that it must have taken counsel at least 3 hours to prepare for the issue; and about 1 ½ hours of Court time was spent on it, during which time the Defendant’s solicitor was necessarily engaged. The Claimant will pay the Defendant’s costs of this issue, which I summarily assess in the sum of £1,000. That sum will be paid to the Defendant by 4pm on the date 14 days after delivery of this judgement. I direct that, within 14 days, the Claimant’s solicitors shall bring the terms of this judgment to the attention of any paying client who has retained them in this action and that they shall notify the Court when that has been done,

ESSENTIAL READING FOR THE DEFENDANT

The case looked earlier this  week is essential reading for defendants.  The judgment of Mr Justice Coulson in Findcharm Ltd -v- Churchill Group Ltd [2017] EWHC 1109 (TCC). It is a clear warning of the dangers of the use of tactics in the use of  Precedent R.

The judge felt that the defendant had put in a low budget deliberately.  The defendant also made ridiculously low offers in Precedent R in relation to the claimant’s  budget.
“…some parties seem to treat cost budgeting as a form of game, in which they can seek to exploit the cost budgeting rules in the hope of obtaining a tactical advantage over the other side. In extreme cases, this can lead one side to offer very low figures in their Precedent R, in the hope that the court may be tempted to calculate its own amount, somewhere between the wildly different sets of figures put forward by the parties. Unhappily, this case is, in my view, an example of that approach.”
“In my view, Churchill’s Precedent R is of no utility. It is completely unrealistic. It is designed to put as low a figure as possible on every stage of the process, without justification, in the hope that the court’s subsequent assessment will also be low. In my view, therefore, it is an abuse of the cost budgeting process”

SO BE REALISTIC IN TERMS OF BOTH SUMS BEING CLAIMED AND SUMS BEING CONCEDED

Reasonableness in approach is, probably, one of the hardest tasks going.  Claim what can only can be reasonably claimed. Make reasonable concessions and focus on the issues that are unreasonable.  A scattergun approach is likely to find little favour with the court.

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