Costs News

05 April 2019
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Article for Litigation Funding by Claire Green, Council member of the Association of Costs Lawyers

On 17 February 2019, the 104th CPR update – including a new Precedent R – was signed off. The update stated that the new Precedent R opened in Excel format in a new window. Unfortunately, to date, there seems to be only the PDF version which was annexed to the practice-making document, while the Precedent R on the Ministry of Justice website remains as it was.

No doubt this will be corrected in the coming weeks, given that the new Precedent R is to be implemented on 25 April 2019.

The new version is radically different to the original, with expansion of the detail over 12 columns in comparison with five in the original. Incurred costs are now referenced separately, but with rows 13 to 15 seemingly un-editable, being marked as not applicable. As these are incurred costs and relate to pre-trial review, trial preparation and trial, a practitioner could be forgiven for taking the form at face value, but what happens if budgeting only takes place two weeks before trial (as happened in the recent Arcadia case)?

In those circumstances, some work will have been incurred, particularly in relation to trial preparation. This would lead to the need to unprotect these cells, and finding and inserting formulae, which for those of us who are not Excel gurus, could lead to disastrous mathematical errors.

Conversely, at row 7, pre-action costs are identified as not applicable across the discussion report, with no allowance for the judge's comments (notwithstanding the court's right to record any comments in respect of the incurred costs as enshrined in 3.15(4)). At the very least this is in direct contrast to the original Precedent R.

Budgeted costs (columns C-E) now have to be shown as a whole and then broken down between the time cost and disbursement elements for each of the phases.

Similarly, the proposed offers of the paying party are also more detailed, as the whole offer is also broken down between time costs and disbursements, with the paying party’s comments following on before the judge’s comments in the final columns in similar format.

However, paragraph 7.3 of PD3E says the “court’s approval will relate only to the total figures for budgeted costs of each phase of the proceedings, although in the course of its review the court may have regard to the constituent elements of each total figure”. Furthermore, “when reviewing budgeted costs, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs”.

The format of the new Precedent R, on the face of it, seems to be at odds with this approach, as it sets out time costs by monetary value. Surely that represents an analysis by way of constituent parts?

This was an approach held by Mr Justice Jacobs, ruling in Yirenki v Ministry of Defence [2018] EWHC 3102 (QB), to be wrong. In that case, the master was found to have erred in ordering that the party’s positions be reserved as to incurred costs and hourly rates, with the knock-on effect that the parties have a lack of certainty in any approved budget. Somewhat unusually, the submissions of both parties before the appeal court were in accord and it was found that the master’s decisions on the elements could not stand.

Jacobs J warned against the costs budgeting process becoming a “micromanaged” operation, and said hourly rates should be left “open” to be debated by the costs judge at detailed assessment:

He said: “Paragraph 7.3 of the Practice Direction indicates that the ultimate aim is to arrive at budgeted costs which fall within the range of reasonable and proportionate costs. None of that means, of course, that it is not appropriate for the master, when setting the budget and approving the figures, to look at the constituent parts. Indeed, it is impossible to see how a master can sensibly come to figures without looking to see how they have been calculated by the party putting them forward…

“However, all of those matters feed in to the identification of all of a reasonable and proportionate figure. They do not feed in to a finding as to the specific number of hours which are to be spent in the future, or a finding as to specific figure for disbursements to be incurred in the future.”

Compare that decision with the more recent Arcadia Group Ltd & Ors v Telegraph Media Group Ltd (Rev 1) [2019] EWHC 96 (QB) (23 January 2019) – concerning the costs of Sir Philip Green’s case against the Daily Telegraph – where Mr Justice Warby capped the hourly rates, and then approved the claimant’s budget.

What are the emerging trends here? One of the most glaring has to be the inconsistency we continue to see in judicial decisions.

In February 2019, the Ministry of Justice’s post-implementation review of part 2 of the Legal Aid Sentencing and Punishment of Offenders Act 2012 noted: “One of the main recurring concerns is that costs budgeting is inconsistent… between different courts and that different members of the judiciary has quite different approaches to costs budgeting.”

Somewhat unsurprisingly, the Civil Justice Council and the Judicial College have recently issued an invitation to interested stakeholders to receive general comments or specific examples of issues of concern.

This article first appeared in Litigation Funding April 2019 issue.


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