Failure to comply with CPR 47 PD 5.8 (8) results in Claimant being directed to redraw £950,000.00 Bill of Costs
Bob Hanlon – Advocate/Costs Lawyer
The practicalities of costs budgeting and detailed assessment has been occupying the attention of the court again. Master Nagalingam sitting in the SCCO was asked to consider the position where a Costs Management Order (CMO) had been made and the receiving party had failed to prepare a phased Bill reflecting the approved figures.
The Claimant was represented by Mr Mallalieu of counsel and the Defendant by Mr Dunne of counsel.
In Vertannes -v-United Lincoln Hospitals NHS Trust (SCCO ref: PN1706607) 29/10/18, (click here to view) the Claimant had prepared an old style Bill of Costs which was compliant with Part 47 PD 5.8(3) in that it had been split into parts to show the costs incurred pre and post April 2013, but not the phases of the budget.
The case had been costs managed and a Costs Management Order (“CMO”) had been made on 9/4/15.
The Defendant objected to the format of the Bill and sought an order that the Claimant serve a phased Bill.
The Claimant’s position was set out in the Replies below:-
- “The Claimant is aware of CPD 47.6, para 5.8 (8) and CPR 47.6.1.c. However, the Claimant’s stance is that these in light of the circumstances of this case and the orders referred to above, the CPR 47 PD 5.6(8) and 47.5(1)(c) no longer apply.”
- “Further or alternatively that in light of the matter set out, this is a case where it is appropriate for the Court to order that the detailed assessment proceed on the basis that CPR 47 PD 5.6(8) and CPR 47.6.1(c) shall not apply to the Bill and assessment of this case.”
- “Further, or in the alternative, the Claimant will contend, as necessary, that to the extent that the original CMO is held to continue to apply in principle, the facts and circumstances of this case as set out above and in the narrative to the Bill are clearly such as that the Court should conclude that there are good reasons to depart from the original CMO.”
The Claimant’s case was that there had been considerable developments in the case such that the Claimant deemed the initial approved budget of 9/4/15 to have been superseded and that there was no approved budget in the case. The Claimant noted that the court, at a CMC on 4/4/16, had ordered that updated budgets should be filed.
The Defendant referred the Master to CPD 5.8 (8):-
“Where a costs management order has been made, the costs are to be assessed on the standard basis and the receiving party’s budget has been agreed by the paying party or approved by the court, the bill must be divided into separate parts so as to distinguish between the costs shown as incurred in the last agreed or approved budget and the cost shown as estimated”.
Counsel for the Defendant put forward three questions and answers:
- Has a Costs Management Order been made? Yes
- Is this an assessment on the standard basis? Yes
- Has the receiving part’s budget been agreed by the paying party or approved by the court? Yes, it has been approved by the court.
The Defendant maintained that the practice direction had been triggered and that the word “must” meant that there was no discretion for departure.
The Defendant then considered whether the later orders of 4/4/16 and 5/9/16 set aside the order of 9/4/15 and referred to paragraphs 7 and 8 and paragraph 3 of the orders which stated respectively:
“7. The parties, if so advised, to file and serve any amended budgets by 4.00pm on the 1st April 2016. 8. There be a Costs Case Management Hearing to consider the revised budgets on the first available date after the 15th April 2016, time estimate 2 hours and reserved to D.J. Capon. Not by telephone.”
And
“3. The Costs Case Management Hearing and the question of the costs reserved of the Hearing of 4 March 2016 be adjourned to the first available date after 19 September 2016, time estimate 2 hours, reserved to District Judge Capon.
a) The hearing be in person.
b) Parties to file dates of Counsel’s availability by 12 September 2016.
c) Parties to file and exchange short skeleton arguments on the question of the costs of the hearing of 4 March 2016, limited to no more than 4 sides of A4, 2 clear days before the Hearing by e-mail.
d) The parties shall seek to agree the costs budgets.
e) The Claimant shall draft the following documents as soon as practicable (and to submit these to all other parties for comment, with a view to the contents being agreed at least 10 working days before the costs case management conference): #
case summary incorporating a statement of issues;
chronology;
All parties must cooperate with the process to enable the Claimant to comply with the direction for the preparation and filing of the hearing bundle.”
The Defendants stated that neither order did not and could not set aside the CMO of 9/4/15 and that the court could not give effect to CPR 3.18 without a phased bill.
The Claimant’s response was that a CMO had been made and that the orders of 4/4/16 and 5/9/16 did not set aside the costs management order. The intention of those orders was to recognise that the budgets of both parties needed to re-assessed. There had been five occasions when the Claimant revised his budget and two when the Defendant revised its budget. The court was clearly working on a basis that the budgets needed revisiting. The “intended effect” of the orders was that the CMO was no longer of any effect
If the Claimant was wrong and the CMO was not superseded by the orders of 4/4/16 and 5/9/16 then the court could use its inherent powers under CPR 1.1 to further the overriding objective and depart from the practice direction which was the handmaid of how the bill was to be drafted. There was no utility in drafting a bill in phases from April 2015 for a case which settled 2 years later and in which there had been substantial developments
If the court was not with the Claimant on those positions than there were good reasons to depart from the original CMO and no utility in re-drafting the Bill.
In response the Defendant pointed out that the Claimant could have applied for the CMO to be set aside during the claim but did not do so. It could not be right to say that because the court provided the parties with the opportunity to review their budgets then the existing CMO is set aside.
The Master noted that, despite the comments in the Bill of Costs and the Replies, the “inescapable reality “was that a CMO had been made on 9/4/15 and that there was no mechanism which allowed a CMO to be deemed superseded.
The Master referred to CPD 3E 7.6 and CPR 3.18(b) as providing the only circumstances in which a CMO may be altered. The order of 9/4/15 cannot be set aside by inference and that for a CMO to be superseded a new CMO must be take its place.
So far as the Claimants proposition that the court use its inherent powers under CPR 1.1 the Master noted that rule 1.1(2) includes “(f) enforcing compliance with rules, practice directions and orders so far as practicable “. The Claimant’s proposition did not sit well with the Defendant’s interpretation of CPD 5.8 (8).
The Master went on to say:-
70.Further, there is no justice at all in allowing the detailed assessment of a costs managed case to continue in the absence of a phased bill. A costs management order was made and remains in force. Events may have occurred in the litigation since the making of the costs management order but the order was never set aside or amended. Paragraph 5.8(8) of the costs practice direction to CPR rule 47 requires a receiving party to divide their bill into separate parts so as to distinguish between the costs claimed for each phase of the last approved or agreed budget, and within each such part the bill must distinguish between the costs shown as incurred in the last approved or agreed budget and the costs shown as estimated. It would not have been impracticable to draft the bill as such and so CPR rule 1.1(2)(f) is engaged.
And later;
- I do not consider it unfair to the Claimant to require them to adhere to a costs management order and paragraph 5.8(8) of the costs practice direction to CPR rule 47 simply because the expected cost of the litigation increased due to “substantial” or “considerable” developments. If it is unfair to require a party to draw a bill in compliance with a costs management order and relevant practice direction in those circumstances, it would lead to an escape route from the costs controls that the costs budgeting regime was introduced to provide. One must also consider the fact that unexpected developments in costs managed case are often and routinely dealt with by separate orders for costs which sit outside of the budgeted costs, and are either summarily assessed or subject to detailed assessment outside of the budgeted costs. Indeed, such orders are a feature of the index case. Thus it does not automatically follow that even significant developments will lead to approval of budget revisions. Further, the risk of any unfairness in these circumstances is extinguished by the Claimant’s ability to argue there is “good reason” to depart from the budgeted costs.
The Master directed that the Claimant file and serve a phased bill in accordance with Part 47 PD 5.8(8).
NB: It is important be proactive during the lifetime of litigation. Leaving costs to be dealt with purely at the end is no longer a wise idea. If you require any assistance or if you have any queries relating to this article, please contact Bob Hanlon by clicking here
Bob Hanlon – Advocate/Costs Lawyer – Partners in Costs – 14.01.19