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Cost management decisions: to appeal or not appeal?

The Rolling Stones famously sang,

“You can’t always get what you want, but if you try sometimes, well you just might find, you get what you need.”

This may be a treatise on society, relationships or any number of issues. It is however, also very apt when considering costs management.

Introduction

Since the advent of costs management, the CCMC (costs case management conference) has become the new battleground for dealing with costs. Once directions are dealt with the Court settles down into the nitty gritty of how much everything will cost. Traditionally the Defendant wants to pay less than what the Claimant wants. Submissions are made and the Judge makes decisions on what is reasonable.

Now sometimes the decisions are harsh but within the realm of reasonableness. In these instances, you work within the set parameters. Sometimes the decisions might not appear to make any sense.

Is it worth appealing the cost management decision?

The case

The case of Easteye Limited -v- Malhorta Property Investments Limited & Others [2019] EWHC 2820 (Ch) dealt with this very issue. This was an appeal against a costs management decision made in the Business and Property Court in Newcastle. Importantly (for reasons explained below), the initial decision was made without an oral hearing.

The index action relates to a property dispute which arose when various landowners fell out whilst planning redevelopment in Newcastle city centre. The Claimant issued proceedings for declarations that the Defendants did not have purported rights over a specific piece of land and sought injunctions. The case was then elaborated upon and (at the time of this judgment) it was expected that a 12 day trial would be needed to resolve the issues. Many of the complexities in the case arose from the number of historic buildings involved and the “perplexity of the landholding.”

Costs budgets were prepared and an order was made on 3 May 2019 in relation to costs management. The order was made without any oral representations. The order stated at paragraph 5 that:

“£120,000 is allowed in respect of the Claimant’s trial phase and instruction of leading Counsel is not approved.”

The reason for the appeal

The Claimant appealed the decision on the primary basis that the Judge had not provided adequate reasons for determining that leading Counsel should not be allowed.

This was not a micro-managing argument

Before continuing it is worth highlighting that the appeal was not brought on the basis that the Court should not micromanage how approved sums are expended. The appellate Judge (Mr Justice Nugee) makes it very clear that the initial decision does not necessarily preclude the Claimant from actually utilising a leading Counsel. Judge Nugee makes reference to PD 3E paragraph 7.10 which makes it clear that the Court are to allow a phase total only. As such if the Claimant remained within budget but did engage leading Counsel at various points, these costs would not be automatically excluded as a matter of principle.

The Appeal

When considering the matter the Court clarified that the purpose of an appellate court is to identify flaws in the lower court’s decisions. Judge Nugee gives various examples, such as considering:

• Whether there has been a failure to take relevant matters into account;
• Or having taken irrelevant material into account in reaching a decision, reaching a reason that no lower court could properly have reached;
• Or going wrong on a question or principle, or
• Reaching a decision that was so unreasoned as to be unfair it does not enable the losing party to know what it is that they have lost (per the English v Emery case).

Put simply, an appeal is not simply a matter of asking the appeal Judge to reach a different decision but identifying whether the lower court went wrong. This is not an easy bar to reach.

When considering whether the Deputy District Judge had gone wrong, the appellate court considered a number of issues including whether the Judge considered the right tests and whether sufficient reasons were given.

In considering these issues, the appellate Court observed a number of key factors:

• In this case there was a stark choice between the Claimant’s position that leading Counsel was justified and reasonable (and that a figure of £210,000.00 should be allowed for the phase), and the Defendant’s position which was that leading Counsel was not justified or reasonable (and that a figure of £120,000.00 should be allowed for the phase).
• The Deputy District Judge had to choose between them
• The Claimant’s reasons were set out in a detailed witness statement
• The Defendant’s written submissions say (more than once) that the case did not merit the employment of leading Counsel

Further,

• It was not irrelevant that the Deputy District Judge had previously been a full time District Judge and was now retired.
• It was not irrelevant that Deputy District Judge had himself seen the case twice before, both for case management and costs management purposes
• As such, per English v Emery, Judges should be assumed to know what they are doing unless it can be shown that they have gone wrong.

Decision

This appeal was dismissed.

Judge Nugee ultimately found that it was, “possible to discern from the Deputy District Judge’s very brief expressed reasons that he preferred the submissions of the defendants as to the appropriateness of employing leading Counsel and that that can only have been because he was not persuaded that the value, complexity, and heaviness of the case justified leading Counsel.”

Judge Nugee said he appreciated that the Claimant is left “not knowing precisely whether he (the Judge) thought it was not reasonable, or although reasonable was not proportionate, but the overall message is clear he was not satisfied that this was a case that justified leading Counsel.”

He also went on to say that, “had it been a matter for me, I can well see that there is much to be said on those factors, but that is not the exercise on which an appellate court is embarked. An appellate court is not there to substitute its own view on the material placed before it in substitution for the decision in the lower court. The appellate court is there to set aside decisions which are wrong.”

Summary

This decision was an appeal to a costs management decision made without oral representations. The Judge’s decision was brief and to the point. The issue in question was simple – is leading Counsel justifiable? The parties’ positions were simple and contrasting. The Court sided with one, which implied that the other side’s position was rejected. The appellate court found this sufficient. It is hard to fault such an approach where the decision is between a simple yes or no.

Where the decision made is more nuanced and the issues more complex (i.e. where there are a number of costs factors in dispute), we would expect to see more appropriate reasoning provided.

Key Observations

The initial decision was made without a hearing

• The fact that the decision was made without a hearing is key because it can be more difficult to discern the Judge’s reasoning where you are simply presented with a written order. There is much less scope for alleging lack of clarity where there is advocate present at the hearing.
• In most cases the parties will be present (either in person or by telephone) at a costs management conference. Any advocate worth their salt will ask the Judge for their reasoning if they cannot see the path the Judge went down to reach their decision. If the Judge fails to elaborate then that opens the door. Realistically, it is much better practice for the advocate to interrogate the decision at the hearing, rather than holding back and then expending costs seeking an appeal.

There may still be a “good reason to depart”

• In this instance Judge Nugee made it clear that refusal to agree with the Claimant on the issue of leading Counsel did not close the door on the Claimant later seeking to establish a “good reason” to depart from the budget, should leading Counsel be utilised. In fact, the Judge does suggest that the retrospective approach affords a greater degree of precision to justify an overspend (however that is an argument for another day).
• We wouldn’t recommend hanging your hat on establishing a good reason down the line. The Courts are notoriously keen on a pro-active rather than a retrospective approach. That being said the right arguments can still be made at a later date.

Lessons learnt

Cost management will usually result in at least some reduction to a claimed budget.

This decision serves as a reminder that if you do not agree with the amount allowed by a Judge, then you need to carefully consider whether to appeal:

• Are you appealing because you disagreed with the decision?
• Or was the decision somehow flawed?
• Did the Judge give reasons? Were these sufficient?

If the CCMC is held in person, this raises more issues. You will also need to consider whether the advocate asked for clarification or was there an implicit acceptance of the decision?

Decisions on costs management hearings are usually exercises of discretion. This discretion is extremely wide, and Judges generally give some form of reasoning, however brief.

Appealing a cost management decision can be a costly exercise, but there may well be instances where it is worthwhile and commercially sensible.

How your costs services provider can help

The best way to avoid the need for an appeal is to start with a robustly drafted budget. The next step is to engage in sensible budget negotiations. Thirdly, and perhaps most importantly you need to instruct a well-prepared advocate who is willing to address these issues.

If you do not get what you want at the cost management process, remember that the door is not closed on establishing a “good reason to depart.” That however, is another process fraught with hurdles and risks.

If the CCMC doesn’t go your way, sometimes you might have to just take comfort in the Rolling Stones.

Seamus Kelly| Advocate and Chartered Legal Executive | Partners In Costs Ltd
Tel: 0191 500 8460| Email: seamus.kelly@pic.legal

13/02/2020