4th June, 2024

To Costs Budget, or not to Costs Budget – that is the question

Julie-Anne Luck, instructed by Scott Insley from Clyde & Co, successfully applied for a costs management order in a personal injury case pleaded in excess of £10,000,000, involving a child Claimant, who has since reached majority.

The relevant cost rules under CPR 3.12(1), provide that costs management applies to all Part 7 multitrack cases, save in certain excepted cases. The exception’s include:-

  • Where the value of the claim pleaded on the Claim Form is £10,000,000 or more (CPR 3.12(1)(a).
  • Where proceedings are made by or on behalf of a person under the age of 18 (CPR 3.12(1)(c). This exception continues to apply once the child reaches majority, unless the court orders otherwise.

In this on-going case, the court had previously dispensed with costs budgeting, (applying the exceptions at 3.12(1)(a) and (c)), and ordered a trial on liability as a preliminary issue. However once liability was compromised, the Claimant supplied an estimate of costs in the sum of £2.2 million in support of an application for an interim payment on account of costs. Unsurprisingly, the Defendant’s insurers became very concerned about escalating costs, and therefore decided to apply to set aside the previous Court Order, and in its place seek a costs management Order.

Julie-Anne, representing Clyde & Co / the Defendant’s insurers, took the court through the relevant law and case authorities including:-

1. CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd [2014] EWHC 3546 (TCC), in which the Defendants sought costs budgeting in a claim worth in excess of £10 million. The Honourable Mr Justice Coulson observed:

i. There is express advice from the President of the Queen’s Bench Division in a Statement of 18 February 2013 that, even where the exceptions might apply, the use of costs management should always be considered [14](c ) and [20].

ii. The exercise of the discretion is “unfettered”, stating “the court has to weigh up all the particular circumstances of the case, in order to decide whether, in the exercise of its discretion, such budgets should be provided.” He went on; “There is no presumption against ordering costs budgets in claims over … …. £10 million, and no additional burden of proof on the party seeking the order.” [19] and [27]

iii. The rational is as follows [28]:
“Costs budgets are generally regarded as a good idea and a useful case management tool. … … Thus, whilst the fact that the claim is worth over … … £10 million means that the court has to exercise its discretion in favour of the application before the filing and exchange of costs budgets are ordered, it seems to me that such an exercise of discretion should take into account all of the relevant material, without prejudging or making any specific assumptions one way or the other.”

2. Transworld Payment Solutions UK Ltd v First Curacao International Bank NV [2023] EWHC 2407 (Ch), in which Deputy Master Collaço Moraes considered that a costs management order would “assist with providing a more level playing field” [59], for the following reasons:

The advantage of a cost management order is that it provides a quantification of the potential liability that will enable the parties - and I say all the parties - to assess their financial position in respect of adverse costs orders, and enable them to take efficient and cost effective measures to cater to that risk, reducing expenditure on costs that might otherwise be incurred in the event that a reliance is simply placed on the cost estimates currently provided”. [58]

Deputy Master Collaço Moraes noted in particular, the need: “(i) to avoid excessive or extravagant budgets; and (ii) to control the costs of the litigation.” [69].

3. The case of CXS v Maidstone And Tunbridge Wells NHS Trust [2023] EWHC 14 (KB), which concerned a child Claimant. Julie-Anne argued this could be distinguished, due to the respective ages of the Claimants and stage of the proceedings. Unlike CXS, the court was able to make substantive quantum directions, and the index case was therefore not typical of the kind of case the CPRC costs sub-committee had in mind when approving 3.12(1)(c).

Julie-Anne submitted that there had been material developments since the original Order dispensing with cost budgeting was made, in particular:-

    (i) The Claimant had reached majority.
    (ii) The case was ready for substantive directions as to quantum.
    (iii) The Claimant had produced a cost estimate claiming significant costs.

The application was successful, and the court accepted it was appropriate to replace the previous Order with a Costs Management Order, to:

  • Enable the court to control the future costs
  • Place the parties on an equal footing; and
  • Enable the Defendant to assess their liability in respect of adverse cost orders, which in turn could promote timely resolution of the case.

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