Agreement, Assumption and Abulia
Lee Dixon – Senior Costs Draftsman
In the 75-page Judgment of Page v RGC Restaurants Ltd [2018] EWHC 2688 (QB) (15 October 2018), Mr Justice Walker, sitting in the High Court (QBD), took a hammer to any previous assumption that an inter-party agreement on Budget content carried any litigation value; it does not.
Inter-party cooperation and the application of common sense to try and limit costs that may never be incurred, has been dealt a blow by a rigid interpretation of the poorly drafted Budgeting rules.
So, CPR Rule 3.13 is clear, “Unless the court otherwise orders, all parties except litigants in person must file and exchange budgets”. We all knew this.
CPR Rule 3.14 is similarly clear, “Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees”. Again, this draconian rule is well known, and rightly despised.
The paragraphs share 5 distinct words, ‘unless the court otherwise orders’. These are warning shots that should have alerted all practitioners that costs management is not for the parties to control.
PD6(a) confirms that, “In substantial cases, the court may direct that budgets be limited initially to part only of the proceedings and subsequently extended to cover the whole proceedings.”
“…the court may direct…”
Following Page v RGC this sentence takes on a more portentous meaning.
Leaving aside the definition of ‘substantial’ to a later article, what is obvious is that any detour from the PD dealing with budget format, requires judicial sanction. What was not clear, until Page, was whether the parties could circumvent this by agreement. Previously it was accepted that even though the parties can agree Budgets (PD 7.3), any agreement still required judicial approval (Brown v BCA Trading Ltd & Ors [2016] EWHC 1464 (Ch) (17 May 2016)), but this dealt with the content of Phases, not the Budget scope itself.
There are obvious cases where budgeting to Trial is, arguably, pointless. We have all seen cases where the parties have agreed to budget forward to a specific procedural phase, say CMC, usually because there are far too many variables to allow a budget beyond this point to be anything more than a speculative mess. The most common situation flows from split Trials. It is not uncommon for Budgets to be prepared reflecting a liability only Trial, with quantum work left in abeyance.
Previously, some practitioners assumed that if the parties agreed to this part-prepared method, then a Judge would simply wave that through. Well that assumption was wrong, and Page v RGC confirms that you, the parties, have no such power to decide what a Budget can or cannot consist of. That power rests with the Court and the Court alone, and no matter how well intentioned or commercially wise, if you do not ratify any budget-format question with the Court before filing/serving a Budget, then you run the risk that a Judge will deem your decision one of ineptitude (as Mr Justice Walker did) and material non-compliance, and limit any un-budgeted phases to Court fees (this being the one saving grace from Page, the Court overturned the decision to restrict the Claimant entirely to Court fees).
If you feel that a full Budget at DQ or CCMC stage will include provision for Phases that are either impossible to anticipate, or it would be expensive and disproportionate to try and budget for, then the onus is on you to apply for the Court’s permission as soon as possible, and certainly long before a budget is due.
Commercially, and depending on your case, the cost of an early application (especially if by consent) will be significantly less than the costs you expose to disallowance and probably the costs of preparing a full Budget where it may be either completely inaccurate or outrageously speculative. Remember, there are also pitfalls in returning to amend your Budget at a later date, or to depart from a Budget at any point. Once it is fixed, no matter how wrong, you may be stuck with it. It is simply good practice to get this right as early as you possibly can.
If you run out of time (as is often the case with late arriving notices) or you are just not sure, then the only safe option is to prepare a full Budget and/or a selection of alternative Budgets, deal with them all until the Judge can decide on the day, and run the risk that the cost of these will be ultimately be disallowed in whole or part. An argument over departing or amending a budget will be significantly less stressful than one trying desperately to avoid the sanction for failing to lodge a compliant Budget. Interestingly, in Page, the parties agreed to not budget for Trial Preparation and Trial and the Claimant left those Phases blank; the Defendant, wisely, did not.
Five years on, and Budgeting remains a minefield ready to blow to smithereens an unwary Solicitor, an ineffective budget and, potentially, an entire case.
If in any doubt at all, Budget everything and speak to a costs expert as early as you can.
If you have any queries relating to this article or if you would like to arrange an in house training session at your firm, contact Lee by clicking here
Lee Dixon | Senior Costs Draftsman | Partners In Costs Ltd
Dated: 31.10.18