“THE DEVELOPING BODY OF LAW AS TO THE RELATIONSHIP BETWEEN COSTS MANAGEMENT AND DETAILED ASSESSMENT”: INTERIM ORDER FOR COSTS AFTER A TRIAL: 90% OF BUDGETED COSTS 70% OF INCURRED COSTS

February 26, 2021 · by · in Costs, Costs budgeting, Interim Payments

The courts have been supportive of applications for interim costs for a successful party after a trial.  The interim payment at this stage is not nominal and is normally firmly based on the budgeted costs. A working example can be seen in the judgment of Gavin Mansfield QC (sitting as a Deputy High Court Judge) in  Puharic v Silverbond Enterprises Ltd [2021] EWHC 389 (QB).

 

“In my judgment, the Claimant’s proposal fails to have regard to the developing body of law as to the relationship between costs management and detailed assessment.”

THE CASE

The judge had found for the Defendant after a trial and was considering the issue of costs.  He did not accept that indemnity costs should be awarded and went on to consider the appropriate award to be made for interim costs.

THE JUDGMENT

    1. CPR 44.2(8) provides that where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.
    1. The Claimant accepts that there should be an order pursuant to CPR 44.2(8). The question is what amounts to a reasonable sum.
    1. The Claimant offers 50% of the Defendant’s budgeted costs, and argues that this is a reasonable amount.
    1. In my judgment, the Claimant’s proposal fails to have regard to the developing body of law as to the relationship between costs management and detailed assessment. I accept the Defendant’s submissions on this point. The court should have regard to the fact that on detailed assessment the costs judge, pursuant to CPR 3.18, will not depart from the approved or agreed budget unless satisfied that there is good reason to do so (MacInnes v Gross [2017] 4 WLR 49 at paragraphs 25-28). In MacInnes, Coulson J (as he then was) regarded 10% as the maximum deduction appropriate in a case where there is an approved costs budget. The same point is made in the notes to the 2020 White Book at 44.2.12 p.1384, where reference is made to Thomas Pink Ltd. v Victoria’s Secret UK Ltd. [2014] EWHC 3258 (Ch), another case where 90% of the approved budgeted costs was awarded.
    1. No submissions have been made to suggest that there will be good reason to depart from the approved budget on detailed assessment. Accordingly, I adopt the approach referred to in the authorities I mention above, and will include in a payment on account 90% of the approved budgeted costs.
    1. The same point does not apply to costs incurred by the time of the CCMC, which were not subject to the court’s approval. In respect of those costs, I will award a reasonable sum in accordance with the guidance in Excalibur Ventures LLC v Texas Keystone Inc [2015] EWHC 566 (Comm) per Christopher Clarke LJ at paras 22-24, referred to in the 2020 White Book at 44.2.12 p.1384. The incurred costs relate to the pre-action, issue/statement of case and CCMC phases. I have reviewed the Defendant’s Precedent H in respect of those phases. In the Costs Management Order Master McCloud recorded the comment that the court would expect costs of £10,000 for each party for the CCMC phase. The Defendant’s incurred costs for the CCMC phase were £11,010, suggesting the Defendant’s costs were a little high for that phase, but not significantly so. No comments were recorded in respect of the pre-action or issues/statements of case phases. No specific submission is made by the Claimant as to the level of the incurred costs. In the circumstances 70% of the incurred costs, as sought by the Defendant, is a reasonable sum for the purposes of an interim payment, even where costs are being assessed on a standard basis, and I will make an order on that basis.
    1. The Defendant seeks 50% of its budgeted costs of the PTR phase, on the basis that work was done, but the hearing was vacated. That is reasonable. The Defendant also seeks payment on account in respect of its budgeting costs, which is reasonable.
    1. Accordingly, I will order a payment on account in the sum sought by the Claimant, [I think there is an error in the transcript here and this should read “Defendant”]
  1. I am told, and have no reason to doubt, that the Defendant is unable to reclaim VAT on its legal costs. VAT falls to be added at 20%, bringing the total payment on account, inclusive of VAT to £187,121.13.
Tags: , ,