Costs management hearings – Be realistic or pay the price?
Dealing with budgeted multi-track cases and assume you’ll always have costs in the case for initial budgeting of the case? Think again, and consider the decision of Master Brown in Reid – v – Wye Valley NHS Trust & 1 Or (2023) EWHC 2843 reported in November last year.
The case before the Court was in clinical negligence involving allegations of negligent delay in diagnosis of cauda equina syndrome, and substandard and delayed surgical treatment of it once identified. The case came before Master Brown for costs management, Master Stevens previously having given directions at an earlier hearing, and it was accepted by the Master as realistically valued at in excess of £1 million. While observing the advantages of having case management dealt with separately and prior to costs management, Master Brown commented that there is good reason in such a situation to think that parties would take reasonable steps to agree the costs, when the primary hurdle to most such agreements in the context of ‘all-in’ CCMCs, dispute over directions, has been removed.
Costs in the case was accepted to be the usual order for costs of and incidental to a costs management hearing, but the Defendant contended that there should be no order for costs in respect of the hearing, because the Claimant had not properly engaged in seeking to resolve the budgeting issues by negotiation. Master Brown was shown by the Defendant what to his mind was entirely without prejudice communication (and there is a useful reminder in that of how frequently parties misunderstand the principles and law in relation to without prejudice communication, and the need to make sure that practitioners are clear as to the nature of offers they make), though in the absence of objection from the Claimant privilege was taken to have been waived. The content is not entirely apparent from the judgment but it can be assumed that the communication maintained a position for the Claimant at or close to the budget claimed.
Master Brown took guidance from Lord Woolf’s decision in AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507, in that the CPR were intended to impose a higher discipline on parties in the conduct of ordinary litigation, and considered that there was no good reason why costs orders should not be used in the context of costs management hearings to incentivise such discipline.
The Master was concerned by the Claimant’s budget in that there were elements of it which seemed unrealistically high, and outside the bracket of realistic contention. Whilst an hourly rate of £425 was claimed for a grade A fee earner, that was not necessarily a concern in itself, but rather the almost complete lack of delegation to junior fee earners which was not considered realistic. In addition, the Issue/Statements of Case, Expert Reports, Trial Preparation and Trial phases of the budget were singled out for excessive charges proposed for the solicitors. There followed in consequence what is described as a considerable reduction to the budget, though the exact figures are unknown.
Master Brown considered the competing arguments of the parties, though ultimately the deciding factor appears to be his view that ‘it would be concerning if the claimants or their solicitors, thought that they advance budgets which were made without any real constraint or consideration as to whether the claim was reasonable’, and therefore, effectively in line with AEI Rediffusion, a variation to the starting point of costs in the case was warranted so as to disincentivise such an approach.
With that in mind, a reduction of 25% would be made, which may relate to the hearing alone, or capture elements of costs incurred in the approach to it, the judgment is not entirely clear. What is clear however is the need to make responsible estimates of costs in budgets, that can be supported and explained, and in turn to make every reasonable effort to compromise in negotiation of budgets. If you want assistance with either aspect, please get in touch.
Dominic Woodhouse, Advocate & National Training Manger
18.01.2024