Unrealistic and ambitious budget leads to cost sanctions for Claimant.
The High Court has provided a stark reminder that parties are not immune from cost considerations in costs management hearings. In the recent judgment of Jenkins v Thurrock Council [2024] EWHC 2248 (KB), the Claimant was found to have presented and maintained disproportionate costs, despite being given an opportunity to modify their position. This resulted in the Claimant being ordered to pay the Defendant’s costs of and occasioned by the Costs Management Hearing. It was also ordered that the Claimant’s own costs of costs management (to the extent that they were recoverable) be reduced by 35%. The judgment makes an interesting read for all litigators involved in costs management and highlights the importance of realistic budgets, along with the requirement to adapt your position in line with case decisions made by the Court.
The Claimant sustained a significant injury to his right foot in the course of his employment. There was also an alleged psychological aspect to the claim. Liability was admitted before proceedings were issued and the Particulars of Claim relied on the admission. The Claim Form indicated that damages were in excess of £200,000.00.
The Claimant served two budgets:-
- A full budget to the trial of all issues – Totalling £1,195,754.26; and
- A budget to a second CCMC – Totalling £730,396.28.
The Defendant’s budget to trial totalled £383,417.20 and also provided for two additional experts.
The parties were unable to reach agreement about the Claimant’s costs.
On 7 June 2024, a Case Management Hearing took place. Directions were given through to a five-day damages trial and two additional experts were permitted. Preliminary observations were also made about the apparent disproportionality of the Claimant’s budget. In accordance with routine practice by King’s Bench Masters, a separate Costs Management Hearing was listed for 17 July 2024 and the parties were given the opportunity to revise their budgets and Precedent Rs in light of the directions made at the Case Management Conference. It was also expected that the parties would adjust their costs management positions by taking in account comments made about budgeting at the Case Management Hearing and engage in progressive discussions about budgets.
In response to the Case Management Hearing, the Claimant served an updated budget in the sum of £944,537.16.
A discussion subsequently took place between the parties’ Costs Lawyers in attempt to negotiate the Claimant’s budget. Whilst offers and counter-proposals were made, the parties remained a long way apart. No further discussions took place. The Claimant, in effect, taking the stance his budget was reasonable.
On 17 July 2024, the Costs Management Hearing took place, and the Court was satisfied that the Claimant had maintained an “unrealistic and inappropriately ambitious budget”. Despite the Claimant offering slightly reduced figures, the Court found that the Defendant’s submissions on proportionality remained far closer to a reasonable range.
The Court determined that the Trial Preparation, Trial and ADR phases would be deferred to a later date when the Court might be in a more informed position. The Claimant’s remaining budgeted costs were set at a total of £159,253.00.
This is compared to the £331,990.67 claimed in the revised budget for the same phases and the £206,879.00 the Claimant had offered to accept. Thus, the Claimant’s budgeted costs had been reduced on a global basis by c. 52% against those claimed and c. 23% below the Claimant’s counter offers.
Defendant’s cost submissions
In light of the significant percentage deductions to the Claimant’s budget, the Defendant submitted that an order other than “in the case” should be made.
The Court’s decision
Master Thornett followed a similar path to his decision in Worcester v Hopley [2024] EWHC 2181 (KB) and concluded that the “Claimant had presented and maintained an unrealistic and disproportionate approach to his estimated costs in the context of the demands and requirements of this case. He continued to do so despite the opportunity to modify his position in response respectively to the Defendant’s first Precedent R, observations made at the Case Management Conference and then overtures made by the Defendant during an intervening period before the Costs Management Hearing, a period as prescribed by the court specifically to facilitate appropriate discussion and negotiation. The hearing on 17 July 2024 therefore could well have been avoided had a more reasonable modified approach been taken by the Claimant. If and in so far as the hearing should be taken as having still been necessary, then in terms of success and conduct I see no reason why the Claimant should be the beneficiary of a “costs in the case” direction. In real terms, the fact that liability is admitted means he is likely to receive his costs despite the events I describe.
On that basis, the Claimant was ordered to pay the Defendant’s costs of and occasioned by the Costs Management Hearing on 17 July 2024.
However, the Court did not stop there. It also wanted to cap the Claimant’s later recovery of costs management costs in light of his approach throughout and given the several budgets prepared. Therefore, it was ordered that the costs of the Claimant’s costs management as assessed (to the extent that they are recoverable) be reduced by 35%.
Summary and take away points:-
- Parties are not immune from costs sanctions during the costs management process.
- Parties will have a high hurdle to overcome if unrealistic and ambitious budgets are presented and maintained.
- Parties need to take stock after case directions are made, adapt their positions accordingly and continue to strive to narrow the issues in accordance with the Overriding Objective.
- Whilst separate Cost Management Hearings may be listed as standard practice in some Courts, it should not be assumed that the costs order will be “in the case”.
How can PIC help?
Partners in Costs (PIC) are an expert team of costs lawyers and draftsmen with a wealth of experience in preparing budgets and attending Cost Management Hearings.
If you require any assistance, PIC can be contacted on 03458 72 76 78.
Michelle Farlow, Legal Costs Service Manager
12.09.2024