REDUCTION IN VALUE OF CLAIM AND REDUCTION IN HOURLY RATES DID NOT REPRESENT A GOOD REASON TO DEPART FROM THE BUDGET
In Jallow v Ministry of Defence  EWHC B7 (Costs) Master Rowley rejected an argument that the settlement of a claim for a sum less than that claimed and a reduction in hourly rates for incurred costs represented “good reasons” to depart from the costs budget. (I am grateful to Sean Linley from Partners in Costs Ltd for sending me a cop of this judgment).
“The fact that the hourly rates allowed at the detailed assessment are different from those originally used in the budget does not, in my view, found a good reason.”
The claimant settled an action against the defendant for £90,000. The case had been budgeted. The defendant argued:
- The claim had been claimed at £300,000. This reduction in damages was a good reason to depart from the budget.
- The reduction in hourly rates for incurred costs represented a good reason to depart from the budget.
THE DIFFERENCE IN VALUE ARGUMENT
The Master rejected the defendant’s argument that settlement at £90,000 was a “good reason” to depart from the budget.
14…., it seems to me that from time to time the paying party, where it is the defendant, will inevitably seek to argue that the budget set by a judge at the CCMC was determined based upon a false understanding of the value of the
15. In the previous regime regarding proportionality i.e. as described in Lownds v Home Office  EWCA Civ 365, the Court of Appeal was alive to the issue of the sums claimed being found to be rather higher than the sums actually achieved. The then Master of the Rolls set out the test as being what it was reasonable for the claimant to consider that he could recover in the proceedings. He went on to say, at paragraph 40:
“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.”
16. I would respectfully suggest that the Court of Appeal’s dicta will apply equally to arguments raised on this point under the new regime. 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 he 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.
17. That is not the case here. The claimant was “employed” by the defendant for a period of 14 months before he left. That is a very limited period on which to base a substantial loss of earnings claim. The situation in respect of being in the Army is further complicated by the various points (in this case 4 years, 7 years and 12 years) at which the claimant might have left the Army. As I indicated in respect of other decisions that I gave in this case, the claimant’s claim in quantum was inevitably going to be based on a certain amount of conjecture. It is in fact for that reason that both sides relied upon employment expert’s evidence. It seems to me that this is just the sort of case where a wide variety of potential sums might be achieved at an assessment of damages hearing, depending upon how the evidence pans out. Consequently, it was likely to be settled somewhere in the middle given the risks involved to both sides of adverse findings by the judge. That is what happened in this case.
18. In my judgment, the claimant did not exaggerate his claim. He put forward alternative cases as to quantum which demonstrates that he was alive to the issues surrounding the potential level of damages to be recovered. Therefore, the ultimate settlement of this claim did not falsify in any way the premise of Master Leslie’s setting of a budget in a case where the sums in issue were £300,000. Consequently, I reject the Defendant’s argument that the valuation of the case is a good reason to depart from the budget.
THE HOURLY RATES ARGUMENT
The Master also rejected an argument that the reduction in hourly rates on the incurred parts of the bill was a good reason for challenging the budgeted costs.