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Costs Budgeting and Costs Management

Costs Budgeting and Costs Management WarringtonCosts Budgeting and Costs Management Warrington

We now have a number of decisions in relation to cost budgets and costs management, some of which are set out below:

The Case of Findcharm -v- Churchill (2017) EWHC 1108 (TCC)

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It was held that an abnormally low budget constituted an abuse of costs management.

Para 9 β€œIn my view, Churchill's Precedent R is of no utility. It is completely unrealistic. It is designed to put as low a figure as possible on every stage of the process, without justification, in the hope that the court's subsequent assessment will also be low. In my view, therefore, it is an abuse of the cost budgeting process.”

Para 12 β€œBecause of the critical need to ensure that the Precedent R process is carefully and properly adhered to by the parties to civil litigation, I will arrange for this short Judgment to be put on BAILLI.”

Payments on account of costs in budgeted cases:

Cleveland Bridge UK Ltd -v- Sarens (UK) Ltd [2018] EWCH 827 (TCC)

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Assuming success at Trial, where there is an approved costs budget, the starting point was 90% of the budgeted costs, plus in respect of incurred costs the Court had to determine a reasonable sum.

I v Hull & East Yorkshire Hospitals NHS Trust

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Interim payment secured in ongoing clinical negligence case.

Thomas Pink -v- Victoria’s Secret Ltd

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Judge awarded 90% of approved budget at Trial.

MacInnes -v- Gross

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Judge awarded 90% of approved budget at Trial.

Revising budgets:

Elvanite Full Circle Limited -v- AMEC Earth & Environmental (UK) Limited [2013] EWHC 1643 (TCC)

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It was held if a budget is too low you are stuck with it. Can only amend the budget if there has been a significant development.

Al-Najar (A Protected Party by Her Litigation Friend Khadia Al-Almulla) & Ors -v- The Cumberland Hotel (London) Ltd [2018] EWHC 3532 (QB)

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It was held if the assessment in the budget was a reasonable one then what had occurred was something that fell outside that reasonable assessment.

Para 8. From the Practice Direction and the decision of Chief Master Marsh I would derive the following broad principles:

(a) Whether a development is "significant" is a question of fact which depends primarily on the scale and complexity of what has occurred.

(b) If what has occurred is something that should reasonably have been anticipated by the party seeking to revise its budget, then that party will probably be unable to label it significant or, for that matter, a development.

(c) However, there is no requirement that the development must have occurred other than in the normal course of the litigation. That is clear from the final sentence of para.37 of Master Marsh's decision which I have quoted and also from the fact that in that case a revision of the trial estimate, the disclosure of 984 documents and the service of an expert report were all characterised as significant developments.

(d) As a matter of policy, it seems to me that the bar for what constitutes a significant development should not be set too high because, otherwise, parties preparing a budget would always err on the side of caution by making over-generous (to them) assessments of what was to be anticipated.

(e) Lastly, and I think this is uncontentious, if there has been a significant development, then the question is whether the figures in the revised budget are reasonable and proportionate in the light of the development.

Para 9. I have come to the clear conclusion that there has been a significant development. The disclosure has been of a scale and complexity that is much larger than was actually budgeted for, which was not, in fact, envisaged and which could not reasonably have been envisaged. In coming to that last conclusion I ask the question: was the assessment in the original budget a reasonable one? If it was, then ex hypothesi, what has occurred is something that falls outside that reasonable assessment. What is required is a standard of reasonableness. It is no answer to the application to say that disclosure on the scale that has occurred could have been foreseen or anticipated. That would be to impose an altogether unrealistic burden and encourage the sort of bloated, defensive budgets which are to be deprecated. I find that the assessment of the disclosure phase in the original budget was a reasonable one. It follows that disclosure that has come in at approximately double what was then anticipated amounts to a significant development in the litigation.

Para 10. As to the amount that is now sought in the revised budget, it seems to me that with one qualification it is reasonable and proportionate. It is in fact less, one can work out, than the amount that Master Marsh allowed in the Sharp case, if the arithmetic is done on a pro rata basis. It amounts to very roughly three hours per ring-binder of documents disclosed and that seems to me if anything an underestimate. It allows double the figure for counsel, which again seems about right. The only figure that has caused me to raise an eyebrow is the eightfold increase in the expert's costs. That is unexplained and that figure, at the risk of tinkering, I will not approve. I would allow a doubling in the expert's costs but no more than that.

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