More than one warning for those failing to be reasonable when preparing and negotiating on costs budgets.
Nicholas Worcester v Dr Philip Hopley [2024] EWHC 2181 (KB)
The Defendant sought a specific costs order against the Claimant due to significant reductions made to their costs budget at a Costs Management Conference, the below deals with the outcome of said application, dealt with at a hearing on 16 July 2024 before Master Thornett.
Background
The proceedings related to a clinical negligence claim concerning the Defendant’s treatment of the Claimant’s mental health during October 2014. Proceedings were issued in April 2023, the Defence denied liability in full and the court subsequently listed a Case Management Conference for 11 April 2024. The parties were directed to file and serve their Precedent H and R forms and then seek to negotiate and agree their respective estimated costs. The direction stipulated that:
In default of agreement, by e-mail to the Assigned Master’s clerk, a party may either:
- Request that a Costs Management Hearing is listed. Such request shall provide a time estimate and preferred dates; or
- Request a direction from the court that further costs management is dispensed with and that costs shall be subject to Detailed Assessment.
It was therefore clear that budgeting would not be in consideration at the CMC hearing on 11 April 2024. This direction reflected a practice that has very typically been adopted by the Kings Bench Division Masters in recent years whereby case management is separated in time from costs management.
This approach reflects that in much higher value claims heard in the High Court, the range and number of disputed directions can often consume the entire initial Case Management Conference listing, leaving no time for budgeting to be addressed. It is considered to be a much more efficient use of time for all involved to defer costs management to its own separate hearing as opposed to looking at costs ‘on the hoof’ once directions have been dealt with. This allows the parties some time to adjust the budgets to reflect the directions and for negotiations and potential agreements to take place, negating the need for a Costs Management Conference at all.
In this particular matter, at the hearing on 11 April 2024 directions were given to the trial of defined preliminary issues and a Costs Management Conference was listed for 15 May 2024 to deal with the budgeting behind those directions. Prior to the Costs Management Conference, the Defendant’s budget was agreed. At the hearing the Claimant’s budget was reduced considerably from a total estimated figure sought of £342,263 to £159,675, a reduction of £53%.
At the 15 May 2024 hearing the Defendant indicated they would be seeking a specific costs order in their favour due to the significant reductions made to the Claimant’s budget. Costs were therefore expressly reserved and a further hearing listed for 16 July 2024.
16 July 2024 Hearing
Defendant’s Position
The Defendant considered that due to the Claimant’s unrealistically high budget, the compelling arguments raised in the Defendant’s Precedent R, the negotiations which ensued and the significant reductions made by the Court that the typical ‘costs in the case’ orders should not apply.
They therefore requested that the Court exercise its discretion under CPR 44 by directing that:
- there be no order for costs in respect of the hearing on 15 May 2024;
- the Claimant pays the costs of the hearing on 16 July 2024; and
- should the Claimant recover costs upon success, there should be a 50% reduction of such assessed costs of and occasioned by Costs Management.
Claimant’s Position
The Claimant submitted that the events described were no different to any other Costs Management hearing, that the final reductions were not proof that the Claimant had taken an unreasonable approach and that the usual ‘costs in the case’ order should follow.
Counsel for the Claimant submitted that there should be no reason to depart from the usual order unless the reason is very obvious and unusual. Perhaps something as serious as misstatement, misconduct or abuse of process for example. Penalising a party in costs in relation to a hearing dealing with those costs could lead to satellite litigation, ultimately increasing the time and costs expended and potentially could encourage Defendants to not make realistic offers on budgeting. As, albeit the reductions were significant, the Claimant had achieved more than the figures offered by the Defendant in their Precedent R. They argued that some of the reasons for the reductions were not known to the Claimant at the time the budget was prepared, directions were amended at the first CMC and that ultimately the Claimant was still the ‘successful’ party, therefore costs should be in the case.
Court’s Decision
The Court highlighted that in accordance with CPR 44.2, it has wide discretion when making orders as to costs and that the Claimant was correct in principle that it would not be appropriate for the court to regularly depart from an ‘in the case’ costs order following ‘ordinary’ costs management just because a party has seen their budget reduced.
However, this matter was slightly out of the ordinary in that, the Court had listed a separate hearing for the exclusive purpose of costs management, with an expectation that the intervening period provided would prompt the parties to reconsider their respective positions. Moreover, the Claimant’s stance did overlook the wide discretion the Court had in relation to Costs, Master Thronettt provided:
‘In short, a party that resolutely proceeds to a separately listed costs management hearing with an overly ambitious budget should not readily assume that the court will be willing to see both its time and resources and those of opposing parties’ engaged without any potential consequence in costs.
At the Costs Management Conference, the Court had found that the Claimant’s Precedent H was unreasonable and unrealistic in terms of proportionality. This had therefore prevented settlement against the Claimant’s budget, necessitating a separate hearing, which was not conventional but rather a fundamental deconstruction of the Claimant’s proposals leading to sizeable reductions.
Conclusion
Master Thornett concluded that there be no order for the Costs Management Hearing of 15 May 2024, they went further to say that the Claimant should consider it positive that the Defendant only sought no order as opposed to an order in their favour. The Defendant was awarded their costs of the 16 July 2024 hearing.
Jenkins v Thurrock Council [2024] EWHC 2248 (KB)
A similar, more recent matter revisited the principles considered above. A CMC took place at which directions were given through to a five-day trial. A separate Costs Management Hearing was listed for the purpose of the parties revising their Precedent H and R forms in light of both the directions made at the CMC and also to reflect any preliminary comments made about budgeting at that hearing. Further and importantly, to facilitate further discussion and negotiation about each party's budget.
At the CMC the court had indeed made preliminary observations about apparent disproportionality of the Claimant's budget. The Claimant had served a full budget to a trial that totalled £1,195,754.26 and a second budget through to a 2nd CCMC that totalled £730,396.28. The Defendant's budget to trial, featured two additional expert medical disciplines yet was a considerably lower sum of £383,417.20. By comparison, the Claimant's incurred costs were £355,640.61, being only £27,765.59 less than the Defendant's entire budget.
At the Costs Management Hearing the Court was entirely satisfied that the Claimant was maintaining an unrealistic and inappropriately ambitious budget. Despite the Claimant having attempted to offer slightly reduced figures, the Court found that the Defendant's submissions as to proportionality remained far closer to what, on any objective terms, could be submitted as within a reasonable range.
The Court also concluded that the trial preparation, trial and ADR phases were not to be approved but deferred to a date closer to the Trial Window, so as to be in a more informed position in order to gauge whether the estimated costs claimed were in fact reasonable.
When considering the costs of the hearing itself the Court provided that the Claimant had ample opportunity to amend its approach and undertake appropriate negotiations so as to try and agree budgets with a view to vacating the hearing. As this approach was not taken the Claimant was directed to pay the Defendant's costs of and occasioned by the Costs Management Hearing.
Analysis
Both cases should act as a stark reminder that Claimants approaching budgeting as an exercise in overestimating in order to achieve the highest possible level of costs, should ensure that their budgets in fact accurately reflect the reasonable costs required to conduct the litigation and adhere to the directions given by the Court. Moreover, all parties’ best efforts must be utilised when given the opportunity to re-consider budgets and enter negotiations in any intervening period between hearings. It is not correct that all of the potential costs should be claimed and the Courts relied upon to reduce them to a level that they consider proportionate. This is not a cost-effective use of anybody’s time and it is clear that the Courts will penalise those with such an approach.
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