Costs Management/Budgeting. Andrew Mitchell's Appeal Dismissed

The Court of Appeal handed down Judgment, dismissing Andrew Mitchell's appeal against two earlier decisions of Master McCloud relating to the recently introduced rules for costs budgeting in Civil Litigation. The first decision was to allow Court fees only in light of the failure to file a costs budget and the second was a refusal to allow an application for relief from sanctions.

The Court of Appeal could not have been clearer in their determination not to undermine the thrust of much of the Jackson Reforms and in particular, the need to comply with rules and practice directions even if the consequences are very serious.

Please click here to see the full Judgment.

In relation to costs budgets generally, it should be noted that the Court cannot budget costs that have already been incurred before the preparation of the budget became necessary. However, it is open to the Court to register its comments on a particular aspect where they might feel costs are too high. This can of course affect any future summary or detailed assessment of those costs and can impact on what the Court might allow in terms of costs for a particular aspect of the case going forward. An example of this would be if they felt time spent on witness evidence pre action was excessive they could limit the amount of costs budgeted for this aspect going forward. 

Another important point is that pre action costs should not simply be placed under the pre action heading, they should be correctly claimed under the various headings and if this is done meticulously it lessens the prospect of the Court registering its concern. Sadly, the guidance provided by the CPR is wholly inadequate which which increases the importance of being able to explain to the Judge why particular work is claimed or split between particular headings.

Vitol Bahrain EC v. Nasdec General Trading LLC (RCJ5/11/13). An important indicator on the judiciary's view on proportionality post Jackson

The Judgment of Mr Justice Males in this Commercial Court case appears to give a clear indication of the Judiciary's determination to ensure proportionality of costs is paramount and to avoid the failings that followed the Woolf Reforms and the introduction of this concept. The case related to an application by the Claimant to continue an anti-suit injunction to restrain the 2nd and 3rd Defendants from pursuing any application to join the Claimant as a party to proceedings in the UAE and sought the continuation of an injunction previously granted.

The Claimant’s and Defendants’ statements of costs produced at the hearing and which the Judge described as "eye watering" totalled £242,760.48 and £165,421.80 respectively. The Defendants’ costs were reduced to £75,000 with the Judge reiterating that recoverable costs must be proportionate.

Guideline Hourly Rates Survey 2013

Time for Solicitors’ firms to make submissions to the Civil Justice Council (“CJC”) Costs Committee closes on Friday 6 December 2013. The guideline hourly rates were last updated in 2010. The Civil Justice Council Costs Committee are inviting Solicitors from across England and Wales to tender their written submissions before the deadline and in advance of evidence- based recommendations being made to the Master of the Rolls on or before 31March 2014.

This is a crucial review in light of the rates having been static for 3 years and it generally being agreed that the earlier rates were based on outdated evidence. The effect of the Jackson Reforms in terms of the abolition of the recoverability of success fees, after the event insurance premiums, referral fees and the introduction of the alternative business structures and damage based agreements are all likely to have an effect on the way in which the guideline hourly rates are calculated. 

Please click here for more information.

Exposure to Costs on Provisional Assessment under CPR47.15 Clarified

The recent update to the Civil Procedure Rules has clarified what a successful party can recover in terms of costs of the provisional assessment process. The maximum exposure to costs is £1,500 plus VAT in addition to any relevant Court fee which depends on the value of the bill but would not exceed £980.

I have found from personal experience in dealing with cases for paying parties that being aware of their maximum exposure to costs provides certainty to their paying clients and in many cases is avoiding what they might have previously done by effectively “buying off the risk” of significant adverse costs where there is a considerable dispute between the parties which could have a substantial effect on the costs recoverable but which could go either way. Many are taking the decision to proceed on the basis it is a risk worth taking in view of the limited exposure.

Also of significance is CPR 47.15(10) (a) and (b). This provides that any party that makes a written request for an oral hearing following a provisional assessment must achieve an adjustment in its own favour by 20% or more of the sum provisionally assessed in order to be entitled to the costs of and incidental to that Hearing unless the Court orders otherwise. It should also be borne in mind that proportionality is likely to be strictly enforced in relation to any appeal and if properly enforced should ensure that the parties again are not exposed to unreasonable costs.

Qualified One-Way Costs Shifting (CPR 44.16)

This is a new rule devised for personal injury cases as an alternative to “After the Event” insurance. The general rule is that a losing Claimant will not pay any costs to the Defendant and a successful Claimant, against whom a Costs Order has been made (where a Claimant does not accept and then fails to beat a Part 36 Offer to settle) will not have to pay those costs, except to the extent that they could be set-off against any damages received. No protection will exist if a claim is struck out or is found to be fundamentally dishonest.

There are other exceptions, set out at the new CPR 44.16. This rule will not apply where a Claimant has entered into a CFA (Funding Agreement) before 1st April 2013.

Damages-Based Agreements ("DBAs")

These have been introduced as an alternative to CFAs. It appears they are only available to Claimants or Counter-Claimants. Where a DBA exists and a Claimant is successful, costs are assessed in the normal way. If the contingency fee agreed with the Claimant is higher than the figure arrived at through assessment, the Claimant will have to pay the shortfall out of the damages. If the recovery at assessment is greater, there will be no further liability. There are limits on what is recoverable from the Claimant in terms of the contingency.

The DBA Regulations are not dissimilar to the now revoked CFA Regulations 2000. This would leave such agreements open to technical challenges in the same way that CFAs were, leaving the risk of no costs being recoverable from the Defendant. 

It seems that a costs war on these agreements is inevitable.

For details of the Regulations, please click here.