On 11 August, judgment was handed down from the Senior Courts Costs Office on a matter concerning the structure of Bills of Costs, when Precedent H cost budgeting applies, as well as subsequent impacts on detailed assessment, where interpretive inconsistencies of governing legal provisions arose.
An order, with respect to budgeted costs, was made on 18 May 2016, by District Judge Avant in the Central London County Court. A further CMC, listed for 6 December, was then aborted, on the day of the conference, since the Court was not supplied with the case’s file, leaving parties without substantive progress or a revised or agreed budget. Shortly after, the matter was settled.
Problems then arose, regarding the way that the Bill of Costs was drafted by the claimant’s Costs Lawyer. Precedent H costs separate fees claimed on a phase by phase basis, of which each phase has a budgeted limit. As recently as last week, we discussed the relevance of departing from a Costs Management Order at detailed assessment, since ‘good reason’ is required once agreement on budgeted costs has been reached.
The predominant issue in this case surrounded the allocation of Precedent H budgeted costs in Case Management Conference (CMC), Pre-Trial Review (PTR) and ‘non-phase’ segments of the Bill of Costs, namely, whether there should be ‘wholly’ and ‘exclusive’ correspondence, in order to prevent the need for cumbersome, ‘item by item’ resolution.
In Woodburn, the claimant’s costs Lawyer included all of the CMC-related costs, except costs budgeting and case management-related fees, which were placed in a separate ‘non-phase’ section of the Bill of Costs. ‘Non-phase’ items were attributed to categories within CPR Practice Direction 3E, paragraph 7.2, underlined below:
The motivation behind the receiving party’s decision to separate all costs affiliated with costs budgeting and case management from the ‘CMC phase’ of the Bill of Costs, relied on the decision of Costs Judge, Master Gordon-Saker, in BP v Cardiff & Vale University Local Health Board  EWHC B13 (Costs):
‘On a detailed assessment it will be necessary to identify (a) the costs of initially completing Precedent H and (b) all other costs of the budgeting and costs management process. Where a costs management order has been made and the receiving party’s budget has been agreed by the paying party or approved by the court it will be both necessary and convenient that the bill be divided so as to identify the costs of initially completing Precedent H and the other costs of the budgeting and costs management process, unless those costs can be clearly identified in some other way.’
However, the defendant, who would be the paying party, submitted that many of the ‘non-phase’ costs were included in the ‘CMC phase’ of the Precedent H budget, in line with the Guidance Note, and should therefore have appeared in the ‘CMC phase’ of the Bill of Costs, which was exceeding the budgeted limit in any event.
Indeed, at paragraph of Practice Direction 3E, it states (see underlined text):
Moreover, paragraph 4 of the Precedent H Guidance Note directs, if read narrowly:
The table, annexed to the Guidance Note, lists relevant ‘phase assumptions’ (see underlined for assumptions at play in Woodburn):
At detailed assessment, Master Victoria McCloud, sitting as Deputy Costs Judge at the Senior Courts Costs Office, considered the inconsistencies between Precedent H Guidance and Practice Directions, which seemed to factor costs budgeting and case management costs within the remit of Precedent H ‘CMC’ and ‘PTR’ phases, and the guidance of Master Gordon-Saker in BP.
The judge deemed the ‘assumptions’ in Precedent H Guidance to be the starting point. She diminished the significance of the ordinary meaning of ‘guidance’, at paragraph 4, considering:
‘... the requirement in the PD that it must be followed in all respects, which at face value elevates it beyond guidance and into the realm of that which must be obeyed in all respects, the meaning is nonetheless clear enough. In drafting the Precedent H the costs lawyer should follow the Guidance. An unspecified sanction could presumably result from breach if the Costs Judge disapproved of a departure from the Guidance’.
Inclining ‘to the narrow view’ of paragraph 4 of the Guidance Note, Master McCloud reasoned that the assumptions on which a budget is approved, or agreed, is the ‘best guide’ as to how costs should be set out in the Bill of costs, so to ameliorate any future uncertainty over ‘what goes where and how to treat it’, such as which budget limit costs are effective. This would mean ensuring that the Bill phases were identical to the Precedent H phases.
Although the Deputy Costs Judge ‘did not purport to suggest that the approach is the only, or the ideal approach to take but only that it is the approach which was taken here’, she held, at paragraph 21:
‘I therefore directed that the items in the ‘non phase’ part of the Bill which fell within the CMC phase assumptions of the approved Precedent H (and Guidance) should be treated as if they had been pleaded in the CMC phase of the Bill, and that all other costs of costs budgeting and costs management should remain in the non-phase part of the Bill and be subject to the 2% (and 1%, as appropriate) caps’.
Concluding her judgment, Master McCloud emphasised, at paragraphs 23 and 24:
‘The above approach is not ideal. Whilst it ensures that the CMC budget phase matches exactly the Bill CMC phase, it has the undesirable effect of dividing the costs budgeting costs into two parts (those subsumed into the CMC budgeted phase and those in the 'non phase', non-budgeted part of the Bill). Separating those in that way then arguably causes difficulties in application of the 2% cap on budgeting costs, and in this judgment I was not asked to rule on the question as to whether the costs budgeting costs in the CMC phase were subject to the budget for that phase only, or whether they were subject to both the phase budget and the 2% cap.
It may be helpful for the Rules Committee to consider whether the Guidance for Precedent H should stipulate a simple solution, namely that any costs referable to costs budgeting and costs management are not to be included in the Precedent H other than for the purposes of the 1% and 2% caps on budgeting costs. Taking that approach would mean that CMC budgets would be as their name suggests, budgets for case management conferences and case management, and not the costs management aspects of the case, which (consistently with the Senior Costs Judge's guidance in BP v Cardiff & Vale University Local Health Board) could helpfully be spelled out in one clear part of the Bill to which the relevant percentage cap can easily be applied’.
The full judgment can be accessed here.