Update your budgets before you lose out!
Alex Taylor considers the Judgement in Sony Communications International AB v SSH Communications Security Corporation.
This matter concerned the revocation of a patent in which the Claimant won the majority of action and as such was entitled to costs, save for those matters wherein it was unsuccessful. The costs aspect to this matter is very interesting, due to the Judge’s decision to use the Costs budget when assessing costs at the end of the case. In making his decision, Mr Wyand QC, gives us a fascinating example of the use of a Costs Budget in a summary assessment scenario in lieu of Detailed Assessment.
The parties agreed that on the basis that the Costs Budget reflected reasonable and proportionate costs, Detailed Assessment could be dispensed with in favour of a Summary Assessment based on the Costs Budget. The Parties further agreed that the Claimant was the overall winner, subject to a deduction in respect of the issues on which they lost. This was to be dealt with on a ‘macro’ scale, rather than a more detailed manner, which would negate the purpose of a Summary Assessment.
The Claimant sought permission to increase their Budget in three phases, namely Experts, Trial Preparation and Trial. These phases had been exceeded by wide margins. It was the Defendant’s argument that the Claimant was seeking to increase their costs budget without advancing good reasons as to why the budget should be exceeded, as though there were no CMO in place.
In making his decision, the Judge considered the matter of Henry v News Group Newspapers, and as per paragraph 14 of the instant case, found the following:
- i) The budget is not a cap but a guideline which the court has the power to depart from;
- ii) Each phase of the budget is to be considered separately and it is not legitimate to combine two phases where one is overspent and the other is underspent;
iii) The court will only depart from the budget where it is satisfied that there is a good reason to do so;
- iv) The parties have a duty to revise their budgets if significant developments in the litigation warrant such revisions;
- v) The court can depart from the budget even if the parties have not revised their budgets as the litigation proceeds. The passage in the judgment of Moore-Bick LJ set out above could be read as suggesting that it would be more difficult to establish ‘good reasons’ for departing from the budget if the parties have been assiduous in updating their budgets, however, that would be encouraging parties to ignore their duty to update;
- vi) In considering whether there are good reasons for departing from the budget the court should take into account all the circumstances of the case;
vii) A particular consideration is the function of the budget in ensuring that the costs incurred are proportionate and reasonable. If the budget is being considered before the result of the trial is known, both parties have an interest in trying to ensure that both their own and the other side’s costs are reasonable and proportionate. Once the result is known, the two parties have conflicting interests in that the winning party will seek to recover as much of their costs as possible and the paying party will seek to reduce the costs it has to pay. This makes it much more difficult for the court to assess what costs are reasonable and proportionate;
viii) A further function of the budget to be considered is the value to the opposing party to understand what is being done and what it is going to cost. Accordingly, a factor in the assessment is whether any requested increase in the budget, post-trial, will be whether the increase would take the paying party by surprise.
In relation to the Claimant’s arguments regarding the increase of the budget, the Judge held:
- Each phase should be considered in isolation; a combination of phases in order to bring the overall costs under budget was not appropriate. In this matter the Claimant attempted to combine the trial preparation and trial phases to reduce the overspend on the trial preparation phase.
- Despite the above, the post-trial costs were greater than expected and this was good reason to depart from the budget in the trial phase.
- It was reasonable to have exceeded on the Experts phase due to a greater volume of documentary evidence than might have been expected.
- Although the Claimant had not sought to increase their budget before settlement, as is their duty, the Defendant could not have been surprised by the overspend given the above fact of which all parties were well aware.
This matter gives solicitors further understanding of the Court’s powers and the options available to litigants in dealing with Costs Budgets. The guidance provided is comprehensive. With reference to the paragraph as highlighted above, this is one of the key principles in the case, our recommendation is always to be mindful of your budget, and seek to update the same before it becomes necessary to do so.
Contact us at email@example.com to see how we can help.