• GL
Choose your location?
  • Global Global
  • Australian flag Australia
  • French flag France
  • German flag Germany
  • Irish flag Ireland
  • Italian flag Italy
  • Polish flag Poland
  • Qatar flag Qatar
  • Spanish flag Spain
  • UAE flag UAE
  • UK flag UK

The increasing role of costs budgeting and management

23 July 2020
At our recent webinar, Lionel Marcus and William Mackenzie explored some of the hot topics that practitioners are coming across, as costs management evolves.  They looked at solutions to these issues and answered questions from the audience. The key discussion points are outlined below.

Are Courts Costs managing cases which are subject to the exclusions listed in CPR 3.12 with a particular focus on Claims over £10m?

CPR 3.12 sets out the guidance on when a costs management order is appropriate. Cases over £10 million and infant cases are both listed as notable exclusions. 

When the costs management regime was introduced in 2013, there would not have been appetite from the Court to actively manage costs for these types of cases. However, over the years, the Courts have become more willing to make costs management orders on high value cases in particular. 

In the case of CIP Properties v Galliford Try [2014] 1037 - it was held that the Court has unfettered discretion when considering whether a case over the monetary threshold should be subject to costs management. In Sharp v Blank [2015] EWHC 2685, a costs management order was made in a case where damages were valued in excess of £200 million. Napp Pharmaceutical Holdings Ltd v Dr Reddy's Laboratories (UK) Ltd [2017] EWHC 1433 is another case where damages are likely to be in the region of £100 million and the Court made a costs management order.

This is further proof that parties should look to actively pursue a costs management order, notwithstanding the provision within CPR 3.12.  

Another exclusion are infant claims. Again, the Court will now budget these cases if they think they cannot be dealt with justly and proportionate cost. 

When a case falls in the CPR 3.12 exclusions, often the Defendant will take the lead to seek the costs management order, where it is often the case that Claimant's budgets are greater than Defendant's budgets.

In the event that a party seeks to disapply costs management, the parties need to be prompt with an application and it is likely the Court won't hear the application until the CCMC. Parties should include a request for an extension of time, or there may be an instance where an application for relief may be required due to missing the relevant deadline. 

Would you costs budget if your case is over £10 million?

The audience were asked to take part in two polls:

1. If you are a Claimant, would you budget if your case is over £10 million?

45% said yes and 55% said no.

The outcome of this poll is to be expected as Defendants are more likely to be in favour of budgeting in these cases as it gives certainty following the principles that were derived following Harrison.  

2. If you are a Defendant, would you budget if your case is over £10 million? 

77% said yes and 23% said no.

Again this was not considered to be surprising, William made the point that no budgeting would leave all costs open to assessment so this could benefit Claimants. 

Should Solicitors be actively managing a costs budget and when might revisions be required?

It goes without saying budgets should be monitored. The aim here is to ensure recovery of costs is maximised. There has been a rise in legal project management and this is something that Costs Lawyers do well as they are able to see the bigger picture. 

Having an element of budget tracking in place will allow parties to consider whether time is being properly spent by the right fee earner, if not then this can be quickly addressed before the phase is exceeded.

Defendants often consider budgeting as a tick box exercise and do not monitor the budget once it has been set. However, they may win on a Part 36 offer but they always need to have an eye to revising downwards where appropriate as a tactical point. 

Parties should look to review approved costs budgets immediately once a significant development has been identified. 

What constitutes a significant development that would require budgets to be revised?

There is no formal definition of a significant development, however there must be a change in the trajectory of the claim. Examples of this may be based on disclosure being more than anticipated. 

A downward revision of budget could be required due to a significant development such as an admission of liability or Death where medical evidence is no longer necessary.

An upward revision of budget would be where the trajectory of the case changes such that there is a departure from the original assumptions that the first costs management order was made on. 

Where parties do not look to actively manage an approved budget, it could lead to the receiving party having a larger buffer which is not properly capped.  The assumptions within the approved budget would be the marker.

The Courts will consider significant development against overspend, as often it is the latter. The key here is whether there is a reasonable anticipation - see the case of Seekings &Ors v Moores & Ors [2019]EWHC 1476 (Comm) which gives guidance. 

In order for there to be a significant development, there must be a move away from the assumptions - see Al-Najar & Ors v The Cumberland Hotel (London) Ltd [2018] EWHC 3532 (QB).

A poll was asked on whether people have had to revise a budget downwards post costs management order.

84% said yes and 16% said no

This was expected and it is very rarely seen. As cases are always changing this should be something parties are actively doing. 

To discuss any of these issues in more detail, please contact Lionel Marcus or William Mackenzie.

Author: Sukhjhit Dhadwal

Further Reading