Claimant Succeeds in Costs Management Appeal over a Budget without a final figure
In the case of Yirenki v Ministry of Defence  EWHC 3102 (QB) the Claimant was successful in his appeal against a Master’s Costs Management Order.
The initial Costs and Case Management Hearing
At a Costs and Case Management Hearing Master Davison approved the Claimant’s Costs Budget in the sum of £206,669.72 and the Defendant’s Costs Budget in the sum of £100,639.00. An Order was made which states that
“Save that the parties reserve their positions as to incurred costs and as to hourly rates… it remains open to them to dispute those matters (and to that extent the figure for each phase) at a detailed assessment”.
During the Hearing, the Master advised he had a standard approach to cost budgeting. In accordance with his usual approach, he approved fee-earner hours, individual disbursements and counsel’s fees, but reserved the issue of hourly rates on estimated costs to the detailed assessment. During the course of the Hearing the Claimant’s representative raised issue with the Master’s approach, on the basis that it did not provide the parties with certainty, however the Master advised he was not going to depart from his usual practice.
The Claimant appealed the decision. The appeal took a slightly unusual course as at the start of the appeal Jacobs J was advised that it was agreed by the Respondent that the appeal should be allowed as he had no reasonable argument to advance to support the approach taken by the Master.
The Claimant submitted that the Master’s approach was incorrect as a matter of principle and that it was inconsistent with CPR PD 3E paragraph 7.3 which states “The court’s approval will relate only to the total figures for budgeted costs of each phase of the proceedings” and paragraph 7.10 which states that “It is not the role of the court in the Cost Management Hearing to fix or approve the hourly rates claimed in the Budget”.
Following submissions, Jacobs J, held that Master Davison had erred in stipulating and approving specific constituent elements of the Budget rather than simply approving total figures for each phase of the Budget and to do so was contrary to paragraph 7.3. When considering the budgeted costs, it was not for the Court to undertake a detailed assessment in advance or to set or agree the hourly rates claimed in the Budget but rather to evaluate whether the budgeted costs were within the range of reasonable and proportionate costs, this was clearly set out in paragraph 7.10. Jacobs J did not consider it inappropriate for the Master to utilise the information in the constituent parts of the Budget but that the information was only provided for reference purposes to assist the Court. Jacobs J stated that “The vice of the Master’s approach is that the parties do not know at an early stage where they stand” and “The Master’s approach of approving hours in advance seems to have the effect of removing the flexibility of the party in deciding how to spend the budget in the light of the way the case develops”.
It was also held that the Master should not have left the hourly rates, and thus the sum for each phase, to be argued at a detailed assessment as this significantly undermined the reliance that could be placed on the Budget. The Budget, once approved, was there to be relied upon and should only be departed from for good reason (see Henry v News Group Newspapers Ltd  EWCA Civ 19. The intention of the cost budgeting process was for there to be a figure which was given for the costs for each phase of the proceedings which would provide the parties with certainty and would reduce the issues to be addressed at detailed assessment (see Harrison v University Hospitals Coventry and Warwickshire NHS Trust  EWCA Civ 792).
This is a useful case as it provides some guidance as to how a Costs Management Order should be made. The Court should not attempt to micromanage a Budget but should have regard to whether the total figures for the budgeted costs for each phase are within a reasonable range. At PIC we are aware that there is an inconsistency of approach in cost budgeting from Court to Court and sometimes even within the same Court. This does occasionally result in a Costs Management Order that is not always clear and in turn, when the parties have been unable to agree the scope of an Order, a detailed assessment will be required to resolve the issues between the parties. It is hoped that this case will assist the judiciary and in turn provide the parties with the consistency which is so greatly needed.
If you have any queries regarding the outcome of this case or any aspect of costs budgeting please contact Caroline Brook.
Caroline Brook ~ Senior Costs Consultant ~ Partners in Costs