A beginner's guide to costs management

A beginner's guide to costs management


District Judge Marshall Phillips advises on the best approach to costs budgeting, including cooperating with the other party and ensuring compliance with the CPR

Costs management has now been a feature of litigation for some time, and I am pleased to say that most large firms are now well familiar with what is required. However, I find that every now and again firms that are not familiar with the process attend a case and costs management conference (CCMC), and this article is aimed predominantly at them.

The first thing to say is

that a CCMC is not a detailed assessment, or indeed a mini detailed assessment. The court will not be interested in setting the hourly rate (and indeed should not do so, as the 83rd update of the Civil Procedure Rules makes clear). All the court is attempting to do is to set a budget which is both reasonable and proportionate, having regard to the factors set out

at CPR 44.3 (5).

The approach should, in my view, therefore be a light touch.With this in mind, it will be appreciated that the court has

a wide discretion as to what it assesses as a 'reasonable and proportionate budget'. There

is therefore much to be gained by the parties in attempting

to agree budgets, or at least

to agree phases of budgets,

before the hearing, and that is something I would encourage parties to do.

What has been agreed between the parties will not

be interfered with by the court, provided the court approves

the directions upon which

those budgets or phases of

the budgets were based. If,

for example, the parties have agreed that the trial should take three days but the court is of the opinion that two days should

be sufficient, the court is able

to reduce the amounts claimed in the trial phase to reflect the reduced time allowed.

Communication and cooperation between parties

is to be encouraged, and this should not be left to the last minute. Indeed, parties are

now required to file at court

a budget discussion report

(see CPR 3.13 (2)).

It is equally important that parties attempt to agree directions well before the hearing, and in that regard can

I make an appeal that parties use the template orders which can be found at www.justice.gov.uk/courts/procedure-rules/civil. They are expected to do so, as CPR 29.1 (2) makes clear.

Most courts throughout England and Wales will use a standard order listing these types of hearings. It is important that the order is fully complied with, and this includes the filing of

the case management bundle containing all the documents required to be filed in accordance with the order. Failure to do so will simply annoy the judge.

It is not uncommon for one party's budget (usually the defendant's) to be much less than the claimants. The reason for this is usually that the defendant's hourly rate is much less than that charged by the claimant. If the defendant's budget is much less, and provided the amount is both reasonable and proportionate, there should in my view be no reason why the claimant cannot agree that budget.

The fact the defendant is spending more hours in dealing with a particular item is not relevant; what is relevant is how much the defendant is charging for doing that work. Parties should not therefore feel that they have to challenge each amount that is being claimed. Instead, parties need to remember the purpose of

the hearing: to set a budget

that is both reasonable and proportionate.

Parties should also remember that the court can only budget costs that are to be incurred,

and not deal with those costs that have already been incurred. The court is able to comment upon such costs (for example,

if it considers them to be excessive), and as a result of

the Court of Appeal decision in SARPD Oil International Limited v Addax Energy SA and another [2016] EWCA Civ 120, I find that

I am frequently being asked to record in any costs management order a preamble that the court in no way approves the costs that have been incurred.

A word on contingencies: my view is that these should only be included if the event is probable '“ that is, more likely than not to occur. The case of Yeo v Times Newspapers Limited [2014] 5 Costs LO 823 makes this clear,

as do the guidance notes to

the 83rd CPR update.And finally, don't forget to apply to vary any approved budget or to agree a variation with the other party or parties

if this has become necessary. However, remember that before the court agrees to vary, it will have to be satisfied that there

is some good reason to depart from the approved budget.

District Judge Marshall Phillips sits at Cardiff Civil and Family Justice Centre, where he is the regional costs judge. He is also vice president of the Association of Her Majesty's District Judges