Abuse of the costs budgeting process

Any practical guide for legal professionals managing their costs budget cannot ignore the implications of Findcharm Limited v Churchill Group Limited [2017] EWHC 1108 (TCC). The case has been well reported and involves criticism of an unrealistic defendant Precedent R, a document that has, in my opinion, been one of the success stories of the costs budgeting regime.

Findcharm, if you will excuse the pun, is a charming but damning support for a realistic approach to the use of a Precedent R. It went so far as to infer that the defendant was using the document as a form of game or exploitation of the costs budgeting rules – ‘an abuse of the costs budgeting process’ – by reference to a pleading that was ‘an insurer’s defence straight out of the 1970s’. Despite this poor pleading, which must have been indicative of the defendant’s approach, and perhaps as a result of the solicitor’s physical attendance at court, it was the defendant costs department that shouldered the criticism.

Put in place as an afterthought to Precedent H, and in an effort to avoid lengthy costs submissions at any CCMC, it is the parties’ opportunity to distil any remaining criticisms of an opponent’s budget. It also allows for the costs sought and those offered, on a phase by phase basis, to be readily and easily identified by the court and decided on accordingly. One would have hoped that a decent amount of compromise will mean the issues are relatively narrow and limited to significant points of principle, e.g. is expert evidence required, how long is trial going to be, and is that brief fee reasonable or proportionate, etc?

I recently had the pleasure of a late instruction to attend a CCMC in Central London County Court. The defendant’s budget had been agreed and their Precedent R was littered with attacks on hourly rates and incurred costs. Short of that there was nothing much to decide and I reacted to my instruction by reasonably seeking that the defendant’s position be reserved to detailed assessment on these issues in an effort to avoid the time and expense of all attending court.

Such an approach is pretty much agreed in costs circles as resulting in the avoidance of a SARPD approach to incurred costs on assessment (i.e. they are approved/agreed if not objected to at the time of budgeting) and the need to address the same in any detail at any CCMC.

As this was not agreed we hastily prepared and served a statement of costs and sought to apply the decision of Findcharm in circumstances where all but tweaks were achieved by the defendant to the claimant’s budget (tweaks that were just but did not arise from submissions made in the Precedent R).

Findcharm’s approach was that the defendant’s Precedent R was ‘of no utility’ and I sought to adopt that position before the Master. Factually that was correct but, on developing the defendant’s position orally at the hearing, the reductions to two phases achieved on new grounds meant there was some merit in the hearing itself. It remains a crying shame these were not ironed out in advance.

I must add that had I been involved in the preparation of the budget, the earlier negotiations, or the claimant’s approach, I would like to think it would have been a full success. Defending a contingent for ‘strategic advice’ to the claimant was not easy but was allowed (and reduced to that of the defendant’s own similar contingent) on an equality of arms basis, as the same contingent was included in the defendant’s agreed budget. This is not a recommended approach to contingencies.

I think all at court that day will agree that we were only a hair’s breadth away from obtaining an interlocutory costs award. Regardless of that close failure the contingent for the second CCMC remained in the budget, untouched, and my fees were in line with the proposed counsel’s brief so, hopefully, those costs will be recovered in full should the claimant succeed in the action anyway.

Francis Kendall is vice chairman of the Association of Costs Lawyers and a costs lawyer at Masters Legal Costs Services

@CostsLawyers www.associationofcostslawyers.co.uk