Costs budgeting is not inevitable – Charlie Cory-Wright QC

26 August 2019 by

Assuming that from now on you will always have to budget your costs? Maybe, but not necessarily…

Introduction

Generally speaking, we lawyers dislike procedural change. While we may well understand that a particular change is necessary and we will certainly recognise that we need to adapt to it when it comes, such changes nonetheless tend to make us feel ignorant and highly uncomfortable. We have to treat any new procedural regime as a known unknown, which presents pitfalls for the unwary, at least until we become familiar with it. And in the meantime, a culture of half-knowledge develops, an uncertain and dangerous combination of a little learning, anecdote, and false assumptions. This very often leads to negative over-simplification. 

The typical common lawyer’s attitude to costs budgeting is a good example of this. There will be many litigators who are fully familiar with the new regime, who, maybe on a weekly basis, have to provide their own draft budgets (and to try to agree those set by their opponents), and therefore know their way around and navigate it quite happily. However, for many of the rest of us, the budgeting regime still, even now, feels like an inflexible and inscrutable monolith for which we have to relearn all we know every time we approach it.

This piece is intended for them. It is not remotely an attempt to set out or analyse the law relating to budgeting. Its purpose is rather to draw one simple but, I consider, important general conclusion from a particular case in which I have recently been involved and, in doing so, to explode what seems to me a common assumption: that we have no choice but to budget our cases because there is quite simply no alternative to budgeting. (This assumption is made in the face of anecdotal evidence of comments to the contrary made by those who know, such as Queens Bench masters and costs judges.) But, as I say, recent experience has taught me that that is simply not so.

The procedural starting point

The relevant provisions here are of course CPR 3.13-15. CPR 3.13 provides that, in general, all represented parties must exchange budgets; in a claim for more than £50,000, not later than 21 days before the first case management conference (CMC)CPR 3.14provides that failure to do so will (unless otherwise ordered) result in a the budget being treated as confined to the applicable (court) fees.

CPR 3.15 is the one that is important for present purposes. It is the rule that gives the court its costs management powers. It provides, in particular, at CPR 3.15(2):

… Where costs budgets have been filed and exchanged the court will make a costs management order unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made

The upshot of this, put very shortly, is that the court has a discretion not to order costs budgeting at all if it is satisfied that the litigation can be conducted appropriately without such an order being made.

The case in point

The case with which I was concerned is a high value injury case, with quantum only in dispute. It is ongoing, and therefore I do not want to say anything about the case itself beyond setting out the bare bones of the issues and summarising the position (ultimately common as between both parties) on costs budgeting.

The claimant, for whom I was acting, suffered catastrophic injuries including severe brain damage as a result of a road accident abroad. Most of the familiar issues arising in any serious brain damage case arise here (care and case management regimes, accommodation, Court of Protection costs, lost earnings). These are all complicated from a procedural point of view by the fact that the case has to be tried in England but in accordance with the law of the country where the accident occurred. But that complication aside, it is not a case which is inherently more unpredictable than many of its sort.

By the time we got to the costs budgeting hearing in front of a Queen’s Bench master earlier this summer, there was already a fair bit of procedural history. At an earlier hearing, the court had already ordered that the parties prepare alternative budgets for the purposes of costs budgeting: one to trial two years further down the line; and one simply to a further CMC 15 months down the line, at which further directions could be given. (This was the result of both sides agreeing at that earlier hearing that there were real questions as to the stage at which it was going to be possible to identify with precision the further expert evidence needed).

Thus both parties attended the costs budgeting hearing last month with their budgets prepared and anticipating that costs budgets would be ordered that day, with the only real question being whether the master:

  • Budgeted to trial.
  • Budgeted only as far as the proposed further costs and case management conference (CCMC) next year.

However, there were in truth two further possible alternatives for him, neither of which had been explicitly raised by either side with him, or with each other, before the hearing:

  • That all budgeting be put off until the further CCMC next year.
  • More radically, that the case not be budgeted at all.

As the hearing progressed, two things became clear. The first was that, the master having assiduously read all the papers, his appetite for budgeting at all at that stage (whether to trial or to a further CCMC) was not great. This was essentially due to a recognition that there was genuine continued uncertainty as to a number of expert disciplines required; and that it was much more likely that certainty as to how that would be achieved by the time of a further CCMC.

The second was essentially the consequence of the first. It gradually also became clear that, for similar reasons, there was an argument for not budgeting this case at all. By the time of this hearing, there had already been a large amount of profit costs and disbursements incurred which (whatever happened about budgeting) will have to be assessed to assessment, if not agreed, in any event. If the case was not going to be budgeted for another nine months or so, then an even greater proportion (probably a majority) of the costs would by then be past/incurred costs, and would have to be assessed in any event.

Ultimately, the master agreed that costs budgeting should be deferred to the further CCMC, where substantive directions could be given and budgets could be ordered if necessary, and left it to the parties to draft the precise form of order dealing with possible draft budgets and so on. However, by the that time, the parties had raised with the master the possibility that this might be a case where budgeting was not to be ordered. The hearing ended on the basis that that too would be something that could be considered at the further CCMC.

After the hearing, both parties realised that preparation for a further CCMC with draft budgets was a potentially very expensive and fruitless exercise. They agreed to make a joint submission to the master that this was a case where budgeting should be dispensed with, on the grounds that:

  • It was not possible sensibly to budget at this stage.
  • By the time the budgeting could be done, most of the costs would already have been incurred.

The master agreed.

Conclusion

If it was appropriate (as it clearly was) for costs budgeting to be dispensed with in this case, there must be many other cases of which they same could be said, that is, where the parties can satisfy the requirement of CPR 3.15(2) “… that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without [budgeting being ordered]”.

High value, complex, catastrophic injury cases, particularly those involving capacity issues and therefore the Court of Protection, those where a large amount of the expert evidence has already been obtained by the time the case comes to the CCMC, and those where there remains significant uncertainty as to the extent of the further evidence necessary, may very well be more sensibly and proportionately dealt with by the old assessment regime rather than by budgeting. It seems more likely (albeit not certain) that the court will adopt this line if the parties are agreed as to it, although technically there is no need for such agreement.

Dispensing with costs budgeting will not necessarily mean more costs will be allowed. Indeed, it may sometimes mean the opposite. However, it does seem likely to make the case concerned easier to litigate properly.

Charles Cory-Wright QC is a barrister at 39 Essex Street. This post first appeared on the Practical Law Dispute Resolution Blog on 19 August 2019.

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