REUTERS | Yuriko Nakao

Keep to your costs management budget

The TCC’s pilot scheme on costs management (which is governed by Practice direction 51G) has now been in force for over six months. Rather surprisingly we have yet to see a judgment from that court relating to the workings of the pilot, although an interim report was produced by Nicholas Gould and others in February. This indicated mixed opinions of the pilot. It was recognised that the pilot had assisted with early attention to costs, but concern was expressed at the time it takes to comply with it.

Defamation costs management pilot

The TCC’s pilot isn’t the only costs pilot running. There is also a defamation costs pilot, which is similar in outline but not identical in terms. Last week, Costs Judge Hurst of the Senior Courts Costs Office handed down judgment in Sylvia Henry v News Group Newspapers Ltd, which related to the defamation pilot.

The problem for Ms Henry was that by the time of detailed assessment, her costs for disclosure and witness statements had risen substantially, in particular in the case of the latter from some £12,000 to £216,000. The overall rise in her costs from her approved budget was from £380,000 to £650,000.

Both sides criticised the other’s conduct of the case, but it was significant that Ms Henry was found not to have kept the defendant up to date with the increase in costs. The defamation pilot (unlike the TCC pilot) requires the parties to liaise monthly to check that the budget is not being exceeded. If it is exceeded, either party can apply to the court to fix a costs management conference.

Costs Judge Hurst held that the provisions of the defamation pilot are mandatory and were “largely ignored” by Ms Henry in her conduct of the action. He came to the conclusion that there was therefore no good reason to depart from the approved budget. He made this finding even though he accepted that, on detailed assessment, she would be able to argue “very strongly that the costs incurred were both reasonable and proportionate”.

The crucial point which militated against any acceptance of an increase from the approved budget was that Ms Henry had not kept the defendant informed of the rise in costs and this indicated that there was no good reason to depart from the budget.

Given the significance of the issues raised, permission to appeal was granted, allowing a binding decision to be given.

Would the same apply in the TCC?

It is worth remembering that each case must be approached on its facts and each pilot may be construed by the costs judges differently. For example, there is no provision for a monthly review in PD 51G, but the parties are required to inform the court and each other of any discrepancy from their budget at each costs management conference, CMC or pre-trial review (PTR).

This suggests that the TCC pilot is somewhat less “regulated” than the defamation pilot. However, it seems unlikely that a different result would have been reached in the TCC as, presumably, the claimant would have failed to keep the court and the defendant informed of the discrepancies in advance of the relevant hearings.

Therefore, this case provides a clear warning that the approved costs budget must be adhered to and any discrepancies reported as soon as they arise. If this is not done, then (subject to any contrary finding on the appeal), the “excess” costs may well be disallowed, even though they might otherwise appear to be reasonable and proportionate.

Wider costs management is coming

It appears likely that the position will be the same under the costs management procedures that will apply to all multi-track cases commenced in the High Court or the County Court (apart from the Commercial Court) from April 2013. You have been warned.

3 thoughts on “Keep to your costs management budget

  1. To allow practitioners time to familiarise themselves with the new rules and to prepare for the changes ahead, details about the new costs management regime and proportionality test, due to be introduced in April 2013, were released at a Law Society seminar on 29 May 2012 (see Legal update, A revolution in litigation practice: details of the costs management rules taking effect in April 2013).

    Ramsey J’s speech (annexing the new rules and Precedent H) can be accessed on the Judiciary website.

  2. In a speech in March 2013, Lord Dyson has warned practitioners that the Court of Appeal’s decision was made under the pre-1 April 2013 CPR, stressing non-compliance with procedure would now face a tough approach.

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