Litigation in the technology and construction court

Adam Constable KC; Lucy Garrett and Calum Lamont

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CHAPTER 8 Costs budgeting in the TCC

Introduction

8.1 Costs budgeting is a creature of the Jackson reforms and is now well established in TCC litigation. It applies automatically to all cases commenced after 22 April 2014 of a value up to £10 million (see CPR 3.12, 3.13 and PD 3E.1 – up from £2 million under the old regime for cases commenced before 1 April 2013 but before 22 April 2014), and at the Court’s discretion thereover (see CPR 3.12(1A) and CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd 1). 8.2 Undoubtedly, the motivation behind the introduction of costs budgeting was sound. Clearly, it is in the interest of all parties to litigation that proceedings are undertaken expeditiously and proportionately. All practitioners will have had experience of cases which have become unmanageable and frequently incapable of settlement on account of costs. Given that (1) the Court will rarely depart from the costs budget at assessment stage (see CPR 3.18(b)) and (2) changes to costs budgets have to be the subject of an application to the Court (see PD 3E, paragraph 7.6), it is obviously helpful to parties to have a clear understanding of their exposure in relation to costs at all relevant stages of the proceedings. 8.3 Notwithstanding the good intentions behind the reforms, it is probably fair to say that costs budgeting is not a popular procedure, at least among Court users. This is for a number of reasons. 8.4 Firstly, the recoverable costs of preparing Precedent H schedules – the complexity of which is a task not to be underestimated – is capped at the higher of £1,000 or 1 per cent of the agreed/approved budget, save in exceptional circumstances (see PD 3E, paragraph 7.2). In addition (and understandably), lawyers may well find the procedure of preparing and submitting costs budgets difficult to ‘sell’ to clients (if indeed it is commercially feasible to charge at all). In practical terms, therefore, and particularly in relation to complex cases, the preparation and consideration of costs budgets is likely to be (at best) a loss leader. 8.5 Secondly, in light of Mitchell v News Group Newspapers Ltd 2 (as to which, see further below), the issue of costs budgeting is frequently the subject matter of tactical manoeuvring and threats ahead of the first CMC, as the prima facie sanction is that a failure to serve a budget on time is to limit recovery of costs to applicable Court fees (see CPR 3.14). Despite the guidance from the Court of Appeal in Denton v T H White Ltd 3

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emphasising that deadlines should not be treated as ‘tripwires’, this does not, in practice, prevent parties taking points, often of dubious merit. 8.6 Thirdly, there remains a tendency to use (or rather abuse) the costs budgeting process so as to apply pressure to other parties to the litigation. One common example is for one particular party, commonly insurance backed, to lowball its budget, in a somewhat artificial effort to enable it to raise criticisms against other parties’ budgets (either for being disproportionate generally, or too high at one or more specific stage(s)). Recent jurisprudence suggests that this approach will not be tolerated (see Findcharm Ltd v Churchill Group Ltd 4), but it would be premature to say that the practice is dead. 8.7 Finally, the approach of the TCC to costs budgeting may well come down to which particular Judge has been assigned to the costs CMC, particularly in the absence of any further guidance, be it from the Court of Appeal or from appropriate revisions to the CPR. In practical terms, this makes advising clients as to the likely outcome of the costs budgeting hearing somewhat difficult. 8.8 From the perspective of the Court, the procedure also gives rise to various headaches, aside from the somewhat unattractive proposition of the Friday list becoming exclusively congested by contested costs budget hearings. Principal among these, it is suggested, are: (1) inconsistencies in presentation of costs budgets, meaning that sensible comparison and analysis of rival budgets is made more difficult than it might be; and (2) where budgets are in issue, insufficient time being set aside in the Court’s diary for consideration of the same. If the parties, by sensible cooperation, can avoid these headaches for the Court, the more likely it is that a decision can be made efficiently.

Presentation of costs budgets

8.9 One common problem for practitioners, particularly at costs CMC stage, is that of presentation. It is often difficult to fully digest and understand costs budgets given the multitude of different parameters in play (for example, differing hourly rates (although rates should not now be considered at costs budgeting hearings – see the recently revised PD 3E, paragraph 7.10); different ways of presenting time, the delphic issue of brief fees and differing contingencies). 8.10 At the time of writing, it is understood that moves are afoot to standardise the presentation of costs budgets to enable them to be dealt with more efficiently by the Court. 8.11 In the absence of any standardised template, the authors offer the following schedules as an example of how one might sensibly present rival costs budgets. These are put forward as examples only and may not be appropriate in all cases. They assume five-party litigation. 8.12 The first schedule, which is basic, sets out an overview of the parties’ positions in Precedent H forms. It covers the scenario where, as is often the case, different parties have allowed for different contingencies, and examples of ‘outlier’ budgets which

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may be thought of as being (1) disproportionately high and (2) deliberately low. See Table 8.1. 8.13 The second schedule, which is more detailed, is a suggested format of how a party may present a summary of the challenges to a particular party’s costs budget, while comparing costs at each stage against its own budget, as well as recording any offers contained in the Precedent R forms. It is suggested that the numbers which are italicised should be presented to the Court in a different colour for ease of reference. See Table 8.2. 8.14 Perhaps the best guidance that can be offered is to liaise with the Court at an early stage if there is any preference as to how the issues concerning costs budgets should be presented. As is apparent from the relevant jurisprudence, it would appear that the approach of the Court to costs budgeting matters is likely to depend on the preferences of the assigned

Table 8.1 Suggested sample presentation table for costs budgets

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