APPEAL AGAINST COSTS BUDGETING DECISION ALLOWED: JUDGE SHOULD HAVE CONSIDERED THE RELEVANCE OF THE OPPONENT’S BUDGET (EVEN IF THAT BUDGET WAS AGREED)

In Woolley v Ministry of Justice [2024] EWHC 304 (KB) Mr Justice Kerr allowed an appeal against a costs budget and remitted it to another judge for reconsideration.  The case shows the importance of a judge allowing a party to refer to their opponent’s budget, even when that budget is agreed.  The failure of the judge to allow the claimant’s advocate to refer to the figures in the defendant’s budget led to an unfair hearing and the claimant’s appeal against the budget was allowed.   I am grateful to solicitor Graeme Rothwell for bringing my attention to this decision.

The judge thereby disregarded a relevant consideration, as the claimant asserts in the first ground of appeal. The defendant’s budget was not intrinsically irrelevant; “some comparison between budgets may be informative”, as was said in Various Claimants v. Scott Fowler Solicitors. The defendant’s budget did not become irrelevant merely because it was agreed or because the judge may have disagreed with the reasonableness of the amounts in it”

 

THE CASE

The claimant brings an action against the defendant following assaults by fellow prisoners when the claimant was in prison. The matter was listed for remote CCMC before the Circuit Judge.  The defendant’s budget was agreed in advance of the hearing.  The Circuit Judge budgeted the case. The claimant appealed arguing that the claimant’s advocate had not been given sufficient opportunity to develop the submissions in relation to the budget, in particular by referring the court to the comparable figures in the defendant’s budget.

The appeal was allowed and the matter remitted to another judge for the claimant’s budget to be reconsidered.

THE ISSUES

The first ground of appeal: disregard of the defendant’s costs budget

 

    1. There are two parts to the first ground of appeal. The first part is whether the judge wrongly disregarded or refused to hear submissions on the content of the defendant’s budget, either as an obligation on the court under rule 3.17 of the CPR or because the defendant’s budget had potential relevance and the claimant was entitled to make submissions based on it. In the second part of this first ground of appeal the claimant asserts that the judge overlooked specific points about the complexity of the issues and the vulnerability of the claimant.

 

 

    1. Rule 3.17 is in Part 3 of the CPR, headed “the Court’s Case and Costs Management Powers”. It has three sections to it. The first, Section I, deals with “Case Management”; Section II deals with “Costs Management” and Section III with “Costs Capping”. Rule 3.17 is headed “Court to have regard to budgets and to take account of costs”. Rule 3.17(1) and (2) provide:

 

 

“3.17—(1) When making any case management decision, the court will have regard to any available budgets of the parties and will take into account the costs involved in each procedural step.

(2) Paragraph (1) applies whether or not the court has made a costs management order.”

 

    1. Mr Grütters submitted that a “case management decision” in rule 3.17 includes a costs management decision setting the approved amount of a party’s costs budget. He referred me to the notes in White Book (2023) volume 1, at 3.17.1, immediately beneath rule 3.17, which reads as follows:

 

 

Rule 3.17: Effect of rule

The CPR have the overriding objective of enabling the court to deal with cases justly and at proportionate cost (r.1.1(1)). The court must seek to give effect to the overriding objective when exercising any power given to it by the CPR, including any case management power (r.1.2). This rule reinforces the point that the court’s ‘costs management’ powers are ‘a feature of or adjunct to’ case management. The intention is that every case management decision should be made with full consideration of its cost implications. If the effect of making a particular case management direction is to render a particular phase of the proceedings or procedural step of the claim disproportionate (by reference to the definition of proportionality stated in r.44.3(5)) then that direction will not be given.”

 

    1. The words in quotation marks “a feature of or adjunct to” case management are not attributed. It is not clear from what source, if any beyond themselves, the learned editors of the White Book are quoting. Mr Grütters suggested that the emphasis should be on the word “feature” rather than “adjunct” and that a case management decision in rule 3.17 included a costs management decision; the latter was a species or subset of the former, rather than a separate creature.

 

 

    1. Mr Grütters submitted that the judge discourteously interrupted him on three separate occasions when he attempted to refer to the content of the defendant’s costs budget, on each occasion refusing to consider it. That, he said, was contrary to her duty under rule 3.17 because the amount to be allowed for the claimant’s budget was a “case management decision” and the court was therefore required “to have regard to any available budgets of the parties”.

 

 

    1. Even if rule 3.17 was not directly applicable, Mr Grütters submitted, the defendant’s budget was not immaterial to the proportionality of figures in the claimant’s proposed budget and he should have been allowed to make submissions based on the content of the defendant’s agreed budget for the various phases. The judge, however, refused to have regard to it and therefore misdirected herself by disregarding a relevant consideration. It was also procedurally unfair, he said, to refuse to allow the claimant to make relevant submissions in support of his case.

 

 

  1. He made clear that he was not arguing that there had to be anything like parity as between the parties’ respective budgets; but he pointed out that the judge had indicated that a figure in the range from about £60,000 to £80,000 overall would be about right for a case such as this one. The defendant’s total budget, at nearly £59,000 was just below the bottom end of that range, meaning the figures in it could in principle be of some help in arriving at proportionate equivalent figures for the various phases in the claimant’s budget.

THE JUDGE’S DECISION

The appeal was allowed.  The Circuit Judge had erred in failing to have regard to the defendant’s budget.

 

    1. I come to my reasoning and conclusions on the first ground. First, I accept entirely that decisions of this kind are likely to be made at speed, under time pressure and item by item as the hearing progresses, with summary reasoning at best. It will sometimes be sufficient to say that the submissions of X are preferred to the submissions of Y. The judge’s reasoning is then taken as that in X’s submissions. Nothing in this judgment should be taken to require more detailed reasons for cost management decisions than are currently given. The rules need not be referred to; the judges know them and, absent any contrary indication, are taken to apply them.

 

 

    1. Second, the value of comparisons between budget figures for particular phases is, as has been recognised in the authorities cited by Mr Carington, limited and may in some cases be nil or virtually nil. This is for the reasons given by Chief Master Marsh in the Various Claimants v. Scott Fowler Solicitors (a firm), cited above. I would add to them the point that budgets may be drawn and sometimes agreed at levels influenced by tactical considerations. The claimant’s solicitors suggested as much in this very case, commenting that although the defendant’s budget was “pitched tactically and unrealistically low”, it was agreed.

 

 

    1. A defendant may budget on the low side in a personal injury claim knowing that it is unlikely (because of qualified one way costs shifting) to recover its costs even if successful in defending the claim, in the hope of exerting a downward pull on the claimant’s budget. Conversely, a claimant may have little incentive to challenge the amount of the defendant’s budget, knowing that the claimant is unlikely to have to pay the defendant’s costs even if the claim fails and preferring to use the size of the defendant’s budget to make the claimant’s appear the more respectable. Thus there are good reasons for caution about the value of comparison between budgets.

 

 

    1. That is not the same as saying that the other side’s budget is intrinsically irrelevant and should a priori be disregarded as an irrelevant consideration. None of the authorities goes that far. Chief Master Marsh rightly recognised that “some comparison between budgets may be informative”. That obvious proposition flows from the equally obvious point that the parties are litigating the same case on the same issues; and, particularly in the latter stages of trial preparation and conduct of the trial, the tasks to be performed tend to be quite similar – though less so in the early stages of the claim where the claimant’s costs are front-loaded.

 

 

    1. Third, in the light of those observations the rival interpretations of CPR rule 3.17 are not critical and I need not express a concluded view on them. There is some force in both sides’ arguments. On the one hand, approving the amount of a budget phase is, as a matter of ordinary language, an act done as part of the court’s management of the case. On the other hand, Part 3 treats case management separately from costs management. Whichever interpretation is correct, rule 3.17 is clearly directed primarily at the expense of a procedural step such as disclosure or expert evidence, rather than at the making of a costs management order.

 

 

    1. Fourth, agreed budget phases are outside the scope of the court’s approval function, but are subject to the court’s right to comment if it has reservations about the agreed amount. In the words of Chief Master Marsh, “the agreement of a budget phase removes the court’s ability to set a budget for that phase”; but the other party’s unagreed figure for the same phase may be approved at a lower or higher level; the agreed figure may be “only of passing interest to the court”.

 

 

    1. Against that background, I come back to the hearing in this case. The judge said, as noted above, that the claimant’s budget appeared disproportionate and invited submissions from the claimant on proportionality. Mr Grütters began by conceding that the claimant’s budget must be reduced because the trial was to be for two not five days. He then said that in relation to trial preparation, “the defendant’s budgeting outstrips that of the defendant [sic – claimant]”.

 

 

    1. He started to say that the “only real issue of dispute I would imagine would be in relation to”. The judge then interrupted: “I am asking you, I am not asking for what you imagine, I am asking you to address me on proportionality.” That was unfortunate because Mr Grütters had used the verb “imagine” in the sense of “believe”, while the judge turned the same verb back on him using it in the pejorative sense – when addressed to a barrister in court – of “envisaging something unreal” or “indulging in fantasy”.

 

 

    1. The judge turned the discussion away from the topic Mr Grütters wanted to mention, the defendant’s budget, continuing: “I am asking you to address me on proportionality. If there is nothing further you want to say in relation to the fact that is under CPR 48 [sic – 44] that I need to address then that is fine, we will just go straight to it.” She steered away from the defendant’s budget to whether the claimant was a remand prisoner released since the incident, a relevant point because it is more difficult and expensive to take instructions from someone in prison.

 

 

    1. The judge then said she was satisfied it was not a complicated matter, it was a two day trial, relatively straightforward and of limited value. It was then that she indicated that she would expect an overall budget in the region of £60,000 to £80,000. The claimant’s, she observed, was “double what I expected to see in reality”. She then addressed the claimant’s budget item by item, ascertaining in some but not all cases what figures were agreed or not agreed.

 

 

    1. The first item was “[s]tatement of case”, corresponding to item (1) in the subsequent order: “issue / statements of case”. The judge asked if the amount for that item was agreed. It was not, said Mr Carington. She asked Mr Carington what was offered in the Precedent R and he replied £1,500. She asked Mr Grütters “[w]hat are you saying?” and he replied that the claimant can accept that. The judge responded “[t]hank you. So that element is agreed”. That was, indeed, the amount recorded as item (1) in the subsequent order.

 

 

    1. The judge briefly mentioned the cost of the CCMC, but the next item she addressed was disclosure. That was not agreed. In the Precedent R, the defendant had offered £3,500. The judge did not ask what was offered but commented that £12,500 had been spent on disclosure already. She allowed £1,000 for disclosure, the figure appearing as item (2) in the subsequent order.

 

 

    1. The judge then turned to the next phase, witness statements. Mr Grütters accepted that there would have to be a significant downward adjustment from the £6,500 in the claimant’s budget. The judge asked Mr Carington what was offered. He said £2,800. The judge said she considered that proportionate and that was the figure appearing as item (3) in the subsequent order.

 

 

    1. The next budget phase considered was experts’ reports. The judge asked Mr Carington what was offered; he replied £3,500. The judge said she considered that figure to be proportionate and would adopt it. Thus, that was the figure that appeared as item (4) in the court’s subsequent order.

 

 

    1. The judge then turned to the cost of the pre-trial review (PTR). The judge asked what was offered and Mr Carington replied “£2,000 for solicitors’ costs”. Mr Grütters said the claimant could accept that, but the judge commented that “you cannot accept individual bits of phases”; as she had said a little earlier, “it has to be for the whole phase”. She took a figure of £3,175 for the whole PTR phase and that was the figure that appeared as item (5) in the court’s subsequent order.

 

 

    1. Next, the judge turned to the trial preparation phase and asked if the claimant’s budget for that phase was agreed. Mr Carington replied: “No, Your Honour. There is an offer of £9,000 for that phase to allow for preparation also counsel’s brief fee for the two day trial.” Mr Grütters asked to address the court on that and the judge replied “[y]es.” Mr Grütters wanted to make a point about the defendant’s budget for this phase combined with the trial phase. He began:

 

 

“… if we take the trial preparation and trial together as, it is really up to the parties as to how they divide the work between preparation, the trial itself, counsel and which grade earner does which sort of work.”

 

    1. At that point, he sought to allude to the defendant’s budget, saying:

 

 

“If we are looking at the budget from the defendant they, not having the burden, have a cost associated roughly at £19,000. If we take the, so it appears strange for any offer made to the defendant [sic – claimant] not to at least match those fees.”

 

    1. The judge again repeated Mr Grütters’ word back to him, this time the adjective “strange”, twice:

 

 

“Well, strange or not the Court is not interested in strange, I am afraid. It is interested in proportionality and I remind myself of the limited value of this claim. I am going to budget it for this phase, £8,000, how you spend it is a matter for you.”

 

    1. The judge did not respond to the claimant’s invitation to consider the figure of £19,000 in the defendant’s budget for trial preparation and trial combined. The defendant had offered £9,000 for the trial preparation phase, not including the trial itself, in its Precedent R document. The judge did not ask Mr Carington what figure was offered for this phase, but Mr Carington volunteered that it was £9,000. The judge’s figure of £8,000 was item (6) in the court’s subsequent order.

 

 

    1. The judge then turned to the budget phase for the trial itself. She asked Mr Carington what amount was offered. He said “[t]he offer advanced is £11,000 for the trial which it also seemed high to me, I have to say.” The judge did not ask Mr Grütters if he wanted to say anything further. She said:

 

 

“Yes, well in terms of the figures that are put forward obviously this is advanced for a five day case, so if we are looking at now a one [sic – two] day case and solicitors having to attend then all we have got is, it is going to be what one refresher fee, £3,250 for this phase. How it is spent is a matter for the parties.”

 

    1. Mr Grütters attempted to return to the subject of the defendant’s budget, interjecting (with some “cross talk” and the judge saying “I am sorry, Mr Grutters”):

 

 

“Your Honour, the budget of the defendant, which presumably must equally be proportionate and reasonable has a budget of nearly £14,000 … for a two day trial.”

 

    1. The judge responded:

 

 

“Mr Grutters, you need to be familiar with the rules. You have agreed that budget. That is the defendant’s costs. That is a matter for you. The whole idea of the budgeting process with these [Precedent Rs] and each party putting forward their respective positions is designed to try and get the parties to reach agreement. If they do not, the Court budgets and the Court’s primary regard is proportionality in relation to the whole overall of the claim, which is why I said what I said at the start about £60,000-£80,000 and also in terms of the individual phases. So, that is what it is going to be £3,250.”

 

    1. The judge’s suggestion there was, first, that Mr Grütters was not familiar with the rules; presumably, the costs budgeting rules. I find that remark surprising. There is nothing in the evidence I have seen to support any lack of familiarity on Mr Grütters’ part with the rules relating to costs budgeting. He seemed to me well versed in them. I do not know why the judge thought otherwise, but she should not have said so in court without good reason. If made without good reason, such remarks may make the receiving party feel it is not getting a fair hearing.

 

 

    1. Second, the judge noted that the defendant’s budget was agreed, which it was. In the rest of the passage I have just quoted, the judge appears to be indicating that agreement to the other side’s budget does not mean it is reasonable; and that where agreement is not reached, the court looks primarily at proportionality overall (£60,000 to £80,000 being the approximate reasonable amount for this claim); and also proportionality in relation to each budget phase. There is nothing to indicate a willingness on the judge’s part to consider any argument Mr Grütters wanted to make that relied on the amount of the defendant’s budget and phases within it.

 

 

    1. The figure of £3,250 for the trial phase was, as the judge had stated, the figure appearing at item (7) of the court’s subsequent order. For completeness, at item (8), which was not controversial, the figure was £3,000, thus producing the total approved estimated costs in the sum of £26,225.

 

 

    1. In my judgment, it is inescapable that that judge closed her mind to any argument based on a comparison with items in the defendant’s costs budget. It is no answer to that proposition that the judge said she had read the bundles. She had not had sufficient time, through no fault of her own because of her overloaded list, to look at the documents in detail. She did not claim or demonstrate familiarity with the defendant’s budget or the figures in the defendant’s Precedent R. Her responses to Mr Grütters’ attempts to refer to the defendant’s budget show that she was not prepared to entertain arguments based on its content.

 

 

    1. The judge thereby disregarded a relevant consideration, as the claimant asserts in the first ground of appeal. The defendant’s budget was not intrinsically irrelevant; “some comparison between budgets may be informative”, as was said in Various Claimants v. Scott Fowler Solicitors. The defendant’s budget did not become irrelevant merely because it was agreed or because the judge may have disagreed with the reasonableness of the amounts in it. Mr Grütters was entitled to make submissions about it, for what they were worth, and was prevented from doing so.

 

 

    1. There was accordingly, in my judgment, a procedural or other irregularity within CPR rule 52.21(3). The irregularity was the judge closing her mind to a relevant consideration and not entertaining argument on it. It was, in my judgment, a serious irregularity because of the language used by the judge when addressing Mr Grütters on three occasions: when she used his word “imagine”; when she used his word “strange”, twice; and when she suggested he was not familiar with the rules.

 

 

    1. I have some sympathy with the judge because of the difficult, pressurised conditions in which she had to do her job. Most judges have experienced similar stresses in their court work and it may be difficult to maintain the utmost courtesy at all times, but when treatment of a party or his counsel falls short as in this case, the appellate court’s duty is to say so. The language used was indefensible.

 

 

    1. It may be thought that Mr Grütters’ points based on a comparison with the defendant’s budget were likely to be weak forensic jury points which may not have impressed the court. That is of potential relevance to the question of remedy, to which I will come shortly. It does not excuse the refusal to hear the arguments. The first ground of appeal succeeds on that basis.

 

 

    1. I do not uphold the arguments of the claimant supporting the second part of the first ground of appeal. The claimant asserts that the judge overlooked specific points about the complexity of the issues and the vulnerability of the claimant. I reject that. I agree with Mr Carington that the judge understood and considered the arguments about those matters.

 

 

    1. She was aware the claimant would contend that the defendant tolerated his assailant’s reprehensible and illegal activities at the prison. The claimant agreed that the trial would be listed for two days and, therefore, whatever complexities lay in the issues and any vulnerability of the claimant could not take more than two days in all to air in court. I find no merit in this part of the appeal.

 

 

The second ground of appeal: failure to consider and ensure that the parties were on an equal footing

 

    1. The claimant submits that the judge failed to deal with the costs budgets in a manner that kept the parties on an equal footing. While Mr Grütters made clear he was not arguing for any principle of parity or anything close to it, the costs management order, he submitted, restricted the claimant to estimated costs of £26,225 even though the claimant bears the burden of proving liability, while the defendant’s estimated costs, albeit agreed by the claimant, were £37,727, i.e. about 42 per cent more than the allowed estimated costs of the claimant.

 

 

    1. In my judgment, this point adds nothing to the first ground and has no merit independently of it. In so far as the complaint is that the judge failed to weigh in the scales the amount the defendant would be able to spend on the case compared with what the claimant would be able to spend, I have already addressed the complaint when upholding the first ground of appeal. The judge should have been willing to consider arguments based on a comparison with items in the defendant’s budget, even if the comparison might be of only passing interest to the court.

 

 

    1. In so far as any separate or independent complaint is made that the judge did not allow the claimant a high enough budget for estimated costs, the short answer is that the figures she allowed did not fall short of what was needed for him to bring his case to court and instruct competent counsel. As Mr Carington pointed out, the overall claimant’s budget including incurred costs was £76,930, towards the upper end of the range from £60,000 to £80,000 envisaged by the judge for a claim of this magnitude and complexity.

 

 

Remedy

 

    1. By CPR rule 52.21(3), the court will allow an appeal where the decision of the lower court was (a) wrong or (b) unjust because of a serious procedural or other irregularity in the proceedings in the lower court. It is in one sense difficult to say that the decision was “wrong”. The claimant’s allowed budget for estimated costs was within the range open to the judge and not so low that the claimant is unable to bring his claim to court and secure justice. Had the judge been willing to hear the claimant’s arguments about the defendant’s budget, the outcome might have been no different. But the real problem with the decision below is that it was marred by a serious procedural and other irregularity, as I have explained.

 

 

    1. Mr Carington made submissions to the effect that nothing Mr Grütters could have said about the defendant’s budget would be likely to have persuaded the judge to allow a greater amount than she in fact allowed. The outcome was fair and the appellate court should not disturb it. However the question here is whether the decision of the lower court was unjust because of the serious procedural or other irregularity. That is not the same test as whether, on the balance of probabilities (or applying some other perhaps higher standard), the outcome would have been the same if the irregularity had not occurred.

 

 

    1. In the cases cited in the White Book notes to rule 52.21 (see in the 2023 edition at 52.21.5), I find none where a remedy has been refused because a serious procedural or other irregularity occurred but the decision was nonetheless just. Normally, if the irregularity is serious, the decision will be unjust. Conversely, if the decision is just, the irregularity will not be serious. A rare case where a remedy was refused despite a serious procedural irregularity is, as it happens, my own decision in Samuels (t/a Samuels & Co Solicitors) v. Laycock [2023] EWHC 1390 (KB).

 

 

    1. In this case, I have concluded that the decision was unjust and cannot stand for a number of reasons. First, the irregularity occurred. Second, it was unusually serious because it occurred in court and violated the fundamental principle of equal treatment of the parties before the court. Third, it is an unattractive proposition to say that a person whose mind was closed to a particular line of argument would have made the same decision if her mind had been open to it.

 

 

    1. Fourth, I am far from sure that the outcome would have been the same if the judge had heard Mr Grütters’ submissions in full. The judge might have adopted the offered amount of £9,000 for trial preparation, instead of £8,000. She might have adopted the offered amount of £11,000 for the trial, or a figure closer to that amount, than the £3,250 she chose. She had previously shown interest in some, though not all, the amounts “offered” by the defendant in its Precedent R document and had adopted some, though not all, the defendant’s offered amounts.

 

 

    1. That is normal practice and in the spirit of CPR rule 3.15(2)(a), requiring the court to indicate to what extent the budgeted costs are agreed. If the agreement is reached before the costs management hearing, the court and the parties are bound by it. Figures may also be informally “agreed” at the hearing in the manner that happened in this case, by the claimant accepting a figure offered in a Precedent R document and the judge adopting that figure. While that is not normally treated as agreement within rule 3.15(2)(a), the defendant’s offer can exert an influence on the court.

 

 

    1. Fifth, the parties have faced uncertainty about the claimant’s budget since this appeal has been pending. They have known since the appeal was brought that the judge’s decision is challenged and, since Sir Stephen Stewart’s order of 20 October 2023 granting permission to appeal, that the challenge would be allowed to proceed. The trial is fixed for this summer, in July 2024. I do not know what sums may have been expended by the claimant during the period of uncertainty but if any have, the balance between incurred and estimated costs will have changed.

 

 

  1. The just solution is, in my judgment, to remit the whole of the claimant’s costs budget back to the county court for reconsideration by another judge, unless the amount of that budget is agreed. If it is not agreed within 14 days of the court’s order in this appeal, the matter should be relisted in the county court.