England and Wales High Court (Senior Courts Costs Office) Decisions

IN THE SENIOR COURTS COSTS OFFICE

		11 August 2017

Keywords

Costs budgeting – detailed assessment – costs guidance – Practice Direction 3E – practice and procedure – drafting of bills – Precedent H Guidance Note – costs lawyers

Introduction

1. This is a brief judgment on a point which arose in the course of detailed assessment before me sitting as a deputy Costs Judge. It deals with the interplay between the provisions of PD3E paras. D7.2-D7.3 and the provisions of the 'Precedent H Guidance Note' which is annexed to PD 3E, how that impacted on management of the detailed assessment in this case, and the approach taken.
2. In view of the relative shortage of decisions of courts which relate to the practicalities of detailed assessment in cases which have been subject to the new costs budgeting regime of CPR Part 3 and PD 3E, (as opposed to its predecessor in Defamation, or previous versions of the rules) it is perhaps unsurprising that the point arising here required attention. I do not of course purport to suggest that the approach is the only, or the ideal approach to take but only that it is the approach which was taken here. It may nonetheless be of use.

Practice Direction 3E B(6)(b)

3. PD 3E B(6)(d) states: "Parties must follow the Precedent H Guidance Note in all respects". That Guidance is annexed to the PD.
4. Leaving aside the uncomfortable tension between the notion of "Guidance" per the title of the document, on the one hand and the requirement in the PD that it must be followed in all respects, which at face value elevates it beyond guidance and into the realm of that which must be obeyed in all respects, the meaning is nonetheless clear enough. In drafting the Precedent H the costs lawyer should follow the Guidance. An unspecified sanction could presumably result from breach if the Costs Judge disapproved of a departure from the Guidance.

The Precedent H Guidance Note

5. The Guidance Note states at para. 4 (with bold text which appears in the original) that "This table identifies where within the budget form the various items of work, in so far as they are required by the circumstances of your case, should be included."
6. The above might be read as allowing some room for manoeuvre if the costs lawyer drafting the Precedent H decided that the circumstances of the case meant that it would assist the court to depart from the guidance as to where an item of work was placed in the form H, though a narrow reading would interpret the above as being limited to omitting from the Precedent H any items of work which were not required in that case (and therefore that where such items were required to be included in a given phase the Guidance must be followed as to where to include them). I need not decide that question but incline to the narrow view.

The Table annexed to the Precedent H Guidance Note (2017 White Book)

7. There are two parts of the Table which is annexed to the Guidance Note which are relevant to this judgment. One (ie (a) below) was in play at the hearing and the other (ie (b)) should be mentioned because the same reasoning would probably apply.

a. In the row of guidance relating to the CMC phase it is stated that (among other matters) the following must be included within the costs budget for the CMC phase:

Reviewing opponent's budget

Correspondence with opponent to agree … budgets, where possible

Specifically the following must (among other matters) be excluded from the CMC phase:

Preparation of costs budget for first CMC (this will be inserted in the approved budget)

b. In the row of guidance relating to the PTR phase it is stated that (among other matters) the following must be included within the costs budget for the PTR phase:

Preparation of updated costs budgets and reviewing opponent's budget

Correspondence with opponent to agree … costs budgets, if possible

(there are no relevant exclusions from the budget for the purposes of this judgment).

8. It is clear from the above that the costs lawyer who follows the 'Guidance' note will include in the CMC (or PTR) phases some items which are identified above and which relate to the costs budgeting process and the content and agreement of costs budgets. Those parts of the budgeting costs will themselves therefore be budgeted as part of that phase.

Practice Direction 3E 7.2 and 7.3

9. PD 3E para. 7.2 states that "Save in exceptional circumstances –

(a) The recoverable costs of initially completing Precedent H shall not exceed the higher of £1000 or 1% of the approved or agreed budget; and

(b) All other recoverable costs of the budgeting and costs management process shall not exceed 2% of the approved or agreed budget."

Steps in this case

10. In this case the very brief procedural history is as follows:

a. Costs were budgeted by DJ Avent by an order dated 18 May 2016 at Central London County Court.

b. 'Assumptions' in the budget for the CMC phase were set out as follows insofar as relevant in a table attached to the Claimant's budget as approved:

Work to date: Instructing Costs Draftsmen to prepare Costs Budget.

Assumptions (sic):

Reviewing Budget and liaising with Costs Draftsmen

Attempting to agree budget

Reviewing Defendant's Budget […]

Preparing for further CMC … and updating and revising Costs Budget.

c. 'Assumptions' for the PTR phase (no work was done on this phase but I include for illustration):

Liaising with Costs Draftsmen in order to update Budget

Reviewing opponents Budget and correspondence with opponents to agree … Budgets.

d. I need not go into detail, but a further CMC was listed on 6 December 2016 before DJ Avent (there was an issue between the parties as to whether this was a CMC or, properly, a CCMC) but Central London County Court lost (or did not provide the judge with) the file and the hearing was aborted on the day with no substantive progress or revised or agreed budget.

e. In the period between the budget of May 2016 and the abortive hearing of December 2016 some costs (principally of an expert) were incurred by the Claimant which exceeded the budget. (I declined to find that there was a good reason for allowing them outwith the budget on detailed assessment).

f. The matter settled soon after the abortive hearing before DJ Avent.

g. The case went to detailed assessment before me.

11. The Assumptions in the Precedent H are, it will be noted, consistent with the Precedent H Guidance document but arguably go a little further in terms of the extent of what might be called the 'costs budgeting related costs' which is included in the CMC phase of the Precedent H.

The Bill of Costs in this case

12. The costs lawyer who drafted the Bill of Costs for the Claimant took the following approach in drafting the bill. It is a bill which is in the 'new' form namely specifying the costs claimed on a phase by phase basis with the phases matching those on the Precedent H.

The costs lawyer set out in the CMC Phase of the Bill all the CMC costs which did not relate to costs budgeting.

The costs lawyer provided a separate 'non phase' part of the Bill in which all the costs relating to costs budgeting and costs management were set out. This comprised:

(i) Costs under PD 3E 7.2(a), ie the costs for drafting the first Precedent H (ie those capped at the higher of £1000 or 1% of the approved or agreed budget).

(ii) Costs of budgeting which did not fall within the scope of (i), and therefore arguably fell within the 2% cap in PD 3E 7.2(b).

13. It followed that the Bill's 'CMC' phase excluded some items of costs which related to budgeting, but which (by the PD and Guidance) were required to be included (and had been included) in the Precedent H for budgeting purposes, and were therefore themselves part of the budgeted costs for that phase. Instead the costs of budgeting and costs management were all grouped together into the separate 'non phase' part of the Bill and effectively attributed either to the '1%' category or the '2%' category in PD 3E 7.2 as the case may be.
14. The motivation behind this approach was the understandable position expressed in replies to the Points of Dispute that: "On a detailed assessment it will be necessary to identify (a) the costs of initially completing Precedent H and (b) all other costs of the budgeting and costs management process. Where a costs management order has been made and the receiving party's budget has been agreed by the paying party or approved by the court it will be both necessary and convenient that the bill be divided so as to identify the costs of initially completing Precedent H and the other costs of the budgeting and costs management process, unless those costs can be clearly identified in some other way."
15. The above is a quote from the decision of the Senior Costs Judge, Master Gordon-Saker in BP v Cardiff & Vale University Local Health Board [2015] EWHC B13 (Costs).

The objection on detailed assessment, and my decision.

16. The objection raised by the paying party was (here I paraphrase) that the 'non phase' costs which were included in the 'costs budgeting' part of the Bill were, to a large but imperfect degree, costs which had actually been budgeted in the CMC phase of the Precedent H (as the Notes for Guidance required and as was consistent with the Claimant's Assumptions in the Precedent H) and should therefore have appeared in that part of the Bill rather than moved out of that part.
17. This was material since the costs claimed in the CMC phase of the Bill had been budgeted and were, even leaving out of account the costs now appearing in the 'non phase' section, already somewhat in excess of the budgeted sum allowed for the CMC phase. Including the relevant parts of the budgeting costs in the CMC phase consistent with the Precedent H and Guidance would mean the total in that phase of the bill exceeded the budgeted total for that phase by a still wider margin.
18. The Receiving party's position was that it was correct to have separated out the 'costs of costs budgeting', in line with the quotation from BP v Cardiff & Vale University Local Health Board above. The costs for every item appeared once and once only in the Bill and were not duplicated.

My decision.

19. There is a tension between the requirement in the PD to follow the Precedent H Guidance (which means that some costs of costs budgeting and costs management are placed in the CMC and PTR phases of the Precedent H and therefore budgeted) on the one hand and the very sensible guidance of the Senior Costs Judge in relation to the need to spell out in the eventual Bill the costs which are claimed as being within the 1% or 2% caps on budgeting costs. In this instance the costs lawyer drafting the Bill proceeded on the footing that the Senior Costs Judge's guidance should be followed and the costs of budgeting and costs management should be separated out.
20. The difficulty which this caused was that it was difficult for the parties and the court initially to get to the bottom of what the correct approach to assessing the relevant parts should be, and for what items in the Bill, and whether to treat some or all of the 'non phase' costs as being subject to the 2% cap or (alternatively or perhaps in addition) also subject to the budget limit for the CMC phase itself.
21. My decision on how to approach this, in this case is as follows:

The Assumptions in the Precedent H are the starting point. Those evidence the basis on which the judge has made his or her budgeting decision or on which the parties agreed the budget. Here the Assumptions included in the CMC phase (and PTR phase) included some costs referable to budgeting and costs management, which is as the Guidance requires^[1].

The costs lawyer drafting the Precedent H must, unless the Guidance changes, follow the Guidance as to which costs of costs budgeting he or she includes in the CMC (and PTR) phases and which he or she includes in the non-phase elements as being the 'other' costs of costs budgeting.

In my judgment (whether or not the Guidance has been followed, albeit it was in this case), where a budget is approved or agreed then the assumptions on which it was approved or agreed are the best guide as to how the relevant budgeting costs should be treated in the Bill, so as to avoid the difficulty of argument over the extent to which those budgeting costs may be subject to the CMC phase's budget limit (thereby requiring 'good reason' if in excess of budget) as opposed to or as well as the "2%" cap imposed by PD 3E 7.2(b).

Ensuring that the Bill phases include (wholly and exclusively) the costs which were budgeted in the corresponding identical Precedent H phases could avoid the confusion as to 'what goes where and how to treat it' which was encountered here and took some time in court to resolve item by item in the 'non phase' part of the Bill.

I therefore directed that the items in the 'non phase' part of the Bill which fell within the CMC phase assumptions of the approved Precedent H (and Guidance) should be treated as if they had been pleaded in the CMC phase of the Bill, and that all other costs of costs budgeting and costs management should remain in the non-phase part of the Bill and be subject to the 2% (and 1%, as appropriate) caps.

In the result, the costs claimed in the CMC phase exceeded the budget for that phase by a somewhat greater amount than they already did in any event.

22. The parties settled the remaining issues in the Bill.

Conclusions

23. The above approach is not ideal. Whilst it ensures that the CMC budget phase matches exactly the Bill CMC phase, it has the undesirable effect of dividing the costs budgeting costs into two parts (those subsumed into the CMC budgeted phase and those in the 'non phase', non-budgeted part of the Bill). Separating those in that way then arguably causes difficulties in application of the 2% cap on budgeting costs, and in this judgment I was not asked to rule on the question as to whether the costs budgeting costs in the CMC phase were subject to the budget for that phase only, or whether they were subject to both the phase budget and the 2% cap.
24. It may be helpful for the Rules Committee to consider whether the Guidance for Precedent H should stipulate a simple solution, namely that any costs referable to costs budgeting and costs management are not to be included in the Precedent H other than for the purposes of the 1% and 2% caps on budgeting costs. Taking that approach would mean that CMC budgets would be as their name suggests, budgets for case management conferences and case management, and not the costs management aspects of the case, which (consistently with the Senior Costs Judge's guidance in BP v Cardiff & Vale University Local Health Board) could helpfully be spelled out in one clear part of the Bill to which the relevant percentage cap can easily be applied.

MASTER VICTORIA MCCLOUD sitting as a Deputy Costs Judge.

11 August 2017.

Note 1   Arguably he or she also included in the CMC phase some budgeting costs which were not required by the Guidance to be in that phase (but were not expressly excluded from that phase by the Guidance either).    [Back]