Defendants Warned To Quit Playing Tactical Games During The Costs Budgeting Process
On the 12 May 2017, the Hon. Mr Justice Coulson bandied around the following statements that Claimant solicitors have argued since the introduction of Costs Budgets in 2013:
“..An unrealistically low budget.” “..it is completely unrealistic.” “..designed to put as low a figure as possible on every stage of the process, without justification, in the hope that the court’s subsequent assessment will also be low.” “..an abuse of the cost budgeting process.” “..unjustifiably low.” “..simply incredible..” “..reflects their own unrealistically low figure for this stage and is again unjustifiable.”
To ensure these comments were in the forefront of litigant’s minds, the Hon. Mr Justice Coulson arranged for the short Judgment of Findcharm Ltd v Churchill Group Ltd  EWHC 1108 (TCC) to be published on BAILLI. Victoria Stewart, Costs Lawyer, reports.
This move proved the importance to ensure that the process for the preparation and negotiation of cost budgets was carefully and properly adhered to by all the parties to civil litigation. The claim is for £820,000.00 plus interest. The Defendant’s Costs Budget totalled £79,371.23 and their assumptions did not appear to match the case they were arguing, such as allowing nothing for experts, even though at the CMC they were arguing that causation was in issue and an expert necessary.
Their Budget even estimated a sum of £10,000.00 for the preparation of a High Court trial (in contrast, the Claimant sought almost £70,000.00 for Trial Preparation). In the Precedent R, the Claimant agreed the Defendant’s unrealistically low Budget. In response, the Defendant offered approximately £90,000.00 against the Claimant’s already reduced Budget of £244,676.30.
The court later approved the Claimant’s costs budget at £244,676.30. The Precedent R document (where parties comment on each other’s Costs Budget during budget negotiation) was introduced to make the Costs Budgeting process more user-friendly and more efficient for the court. The document focuses parties on adopting a realistic attitude to the Costs Budget of the other party which would identify real disputes between the parties on costs.
As a costs firm, it is not unusual for us to see a very low costs budget from a Defendant that does not expect to recover their costs. Not only do they underestimate on time spent, but their hourly rates and counsel’s hourly rates are at a much lower commercial rate, making it unfair to make a like for like comparison of budget totals.
Our experience is echoed by the Hon. Mr Justice Coulson when he was of the opinion that:
“..Some parties seem to treat cost budgeting as a form of game, in which they can seek to exploit the cost budgeting rules in the hope of obtaining a tactical advantage over the other side.”
Although, the Hon. Mr Justice Coulson made it clear he was criticising the costs department of the international firm Kennedys as opposed to the fee earner, PIC is of the view that fee earners and costs lawyers should work together on the preparation of a costs budget to ensure they are prepared with a very high degree of accuracy.
The fee earner is of course responsible for the future conduct of the case and provides signature to the Costs Budget to confirm its accuracy. In this case the Defendant conceded that their figure for expert forensic accountant fees was not based on any estimate from a proposed expert.
In the court’s experience, the sums included were wholly out of step with what an expert accountant would charge for this type of work. The budget in this case was also prepared without any reference to the issues brought up at the CMC (or vice versa).
Here at PIC, Budgets are prepared on accurate estimates (if not from the experts instructed then we have experience and documentation from a range of experts from around the country) and reference to the directions to be sought.
If there is anything that can be learned from the decision in this case is that all parties must prepare realistic, reasonable and justifiable Precedent H costs budgets and carry on this approach when preparing Precedent R budget negotiation reports.