Costs Budget Hearing

I recently attended a Case Management Conference/Costs Management Hearing in relation to a personal injury case.

The hearing was in the County Court and the case was valued by the Claimant in the region of £27,000.  There were two Defendants.

The Claimant’s budget totalled £44,510.60.  The “spikes” were the trial, ADR/settlement discussions and contingent costs.  In relation to the “spikes” the budget was prepared on the anticipation that the trial would last two days.

ADR/settlement costs were potentially high because Counsel would have to fully prepare virtually to the extent of a brief to be in a position to negotiate a settlement.

The contingent costs related to the possibility of a third day and in relation to possible future expert evidence.

I understand that if a trial does not start on time and goes into an extra day, if this is not catered for in the budget the extra day is not covered by the budget.  There is a choice as to how a solicitor may wish to deal with this, either by ensuring that Counsel knows that they should apply to the Trial Judge at the end of the second day to adjust the budget or alternatively plan for this contingency to be heard during the Costs Management Hearing.

In relation to expert evidence, whilst the medical evidence itself was not complex, the Claimant did require surgery on two occasions and one of the Defendants stated that they wished to obtain their own expert evidence.

The estimated costs under the phase of Expert Reports catered for the expert answering questions raised by the Defendants and the solicitor liaising with the expert and considering up to date reports and answers to the questions etc.

In the contingency phase an allowance was made for the fact that if one Defendant was granted permission to get their own expert evidence, the other Defendant would ask for permission for their own. There would be two separate reports from the Defendants and the experts might have to have a joint discussion and prepare updated evidence or a new report.

In this case the Defendants agreed to jointly instruct one expert.

The total of the Claimant’s Precedent H was £44,510.60.  It should be noted however that this contained a significant amount for the pre-trial review, the trial, possible ADR/settlement discussions and contingent costs.

At the Costs Management Hearing the parties all acknowledged that the Court could not interfere with costs incurred to date but could comment on those costs and could take those costs into account when deciding on a future budget.  The Defendants submitted that the costs to date were disproportionate and the hourly rates were excessive.

The Defendants then went through each phase making comments and submissions about the costs that had been estimated by the Claimant and put forward their own views on amounts.

The Claimant was given an opportunity to respond to the Defendants’ submissions and my overall impression in relation to the budget was that it was very much like a summary assessment.

The Defendants’ budgets were then considered, but given the amounts sought (£17,000 by the 1st Defendant and £19,000 by the 2nd Defendant), their budgets consisted only of Page 1 of Precedent H and there was only a limited amount that could be constructively said about the two budgets.

Because the Court had dealt with directions it had expressed views on a pre-trial review, ADR and the amount of expert evidence required and therefore any adjustment on “common” costs to the Claimant’s budget would also have to apply to the Defendants’ budgets.

The Court asked the parties to retire whilst deliberations were undertaken.  After 30 minutes we returned before the Court and the decision was handed down.

The Court did not make any comment in relation to hourly rates and, as I understand it, nor should they.

The amounts sought for disclosure, witness statements and expert evidence were allowed as claimed.  Reductions were made to costs sought for the pre-trial review on the basis that the Directions did not allow for a pre-trial review hearing, a minor reduction was made in relation to trial preparation and the trial costs were significantly reduced.  This was primarily on the basis that the budget contained estimates for two full days but the Court was of the opinion that the hearing would not last for more than one and a half days.  Also, whilst the Court gave no express view, I believe the Court was not happy that the Claimant was seeking costs for a Grade B fee earner sitting with Counsel for two full days.

A reduction was made to the claim for ADR on the basis that there would not be a round table meeting in this case and adjustments were made to contingent costs on the basis that the Court did not believe that a third day would be necessary and because adjustments were made to potential future costs of expert evidence on the basis that the Defendants agreed to instruct an expert jointly.

The end result was that the Claimant’s budget of £44,510.60 was reduced to £28,527.60 which on the face of it seems harsh, but upon analysis was probably not too wide of the mark.

The Court then turned to the issue of proportionality under its duty to consider whether costs are proportionate, notwithstanding they may be reasonably and necessarily incurred.

The Court’s view was that the matter was relatively straightforward with slight complicated factors and whilst it was a Multi Track case, it was at the lower end of that track and the Court had to have regard to the order of the magnitude of the award.  An arbitrary reduction was then made reducing the budget to £25,000.

Each Defendant was allowed £15,000 on their budgets.

The Court ordered that budgets had to be re-filed with the Costs Management Order matching the figures allowed.  This raises an interesting dilemma in that if the Court is not allowed to touch pre-budget costs and has made specific allowances for future costs in the budget, where does the solicitor apply the arbitrary proportionality reduction?  There is no guidance on this and it is something that should be carefully considered by conducting fee earners.

In summary, it was an interesting experience to witness how the Court deals with budgets.  The overall impression was that parties present would make submissions in the same manner as a Summary Assessment where after the Court would form its own view.

The fact remains that in these early days parties are still somewhat in the dark in relation to Costs Management Hearings and the current school of thought is that with budgeting in its infancy, individual Courts will deal with budgets in a diverse manner.

James Scott, Partner and Costs Lawyer

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