Court Should Have Taken Defendant's Costs Budget Into Account
Posted on 22nd February 2024 at 09:18
By Sean Linley, Senior Costs Draftsman
In the case of Woolley v Ministry of Justice [2024] EWHC 304 (KB) (16 February 2024) the Claimant appealed the Costs Management Order made in relation to their Costs Budget. The Claimant contended that the Judge had refused to have regard to the Defendant's budget (which had been agreed) when determining what were 'reasonable & proportionate' costs. It was also contended that the court had failed to "ensure that the parties [were] on an equal footing". The Defendant's Costs Budget had been agreed at £37,727 (estimated) and the court had allowed future costs of £26,225 for the Claimant (some 42% less).
Speed Read
For those wanting a quick read the decision can be summarised as follows:
- Claimant appealed a Costs Management Order in a claim for personal injury sustained in prison after they were allowed future costs of £26,225 whilst the Defendant's estimated costs were agreed in £37,727.
- The Claimant argued that the Judge had failed to take into account the Defendant's Costs Budget and should have done so. They also argued that the Judge had failed to ensure the parties were on an equal footing.
- The Defendant argued that the comparison of budgets was unhelpful and the decision reached was within the Judge's range of discretion.
- On Appeal the court found that:
- The Judge should have heard arguments about the comparison to the Defendant's budget. "Some comparison between budgets may be informative", as was said in Various Claimants v. Scott Fowler Solicitors.
- The Judge's use of language raised concerns over whether there could be a perception of a party not getting a fair hearing. She had suggested that the Claimant was not familiar with the budgeting rules and her repetition of the words 'imagine' and 'strange'.
- It would be 'unattractive' to say that a line of argument a Judge was not open to would not have altered the decision reached: "the agreement of a budget phase removes the court's ability to set a budget for that phase"; but the other party's unagreed figure for the same phase may be approved at a lower or higher level; the agreed figure may be "only of passing interest to the court"."
- If agreement of a budget is reached, the court and parties are bound by it, though the court can record comment upon it. An agreed budget does not mean it is a reasonable budget.
- The court remitted the whole of the Claimant's costs budget back to the County Court for consideration by another judge, unless agreement was reached within 14 days of the court's order.
Background
The claim related to an assault which took place whilst the Claimant was a remand prisoner. The Claimant brought a claim for personal injury. The claim was valued at up to £80,000 though the Defendant stated they believed this to be unreasonable.
The Claimant submitted a Costs Budget in the sum of £121,886 which comprised of incurred costs of £50,705 and estimated costs of £71,181. The Defendant's agreed Costs Budget was claimed at £58,894 comprising of incurred costs of £21,257 and future costs of £37,727.
The Defendant in its Precedent R contented that the Claimant's costs budget was disproportionate. The Claimant declined to respond to the Defendant on the basis that the directions were not agreed (the Claimant submitted the claim required a 5-day trial, the Defendant a 2-day trial) but did agree to the Defendant's budget stating that "[s]ubject to our reservations that your budget is pitched tactically and unrealistically low, it is agreed".
The CCMC proceeded on 2 June 2023 whereupon the Judge accepted the agreed budget of the Defendant and then invited the Defendant to address her on proportionality as she said "[i]t does not seem proportionate to me on the face of it."
The court recorded in the Costs Management Order that it had concluded that the "Claimant's budget appeared disproportionate"
The Appeal
The Claimant submitted that the court should have had agreed to the Defendant's agreed budget because the Judge had a duty "under rule 3.17 because the amount to be allowed for the claimant's budget was a "case management decision" and the court was therefore required "to have regard to any available budgets of the parties"".
In any event the Claimant argued that they should have been allowed to make submissions based on the content of the Defendant's budget for the various phases and the Judge misdirected herself by not doing so. The Claimant referred to the fact that the Judge had indicated that a figure in the range of £60,000 to £80,000 overall would be "about right for a case such as this one". It was said that the Defendant's budget totalling £59,000 would have been assistive, in principle, in determining proportionate equivalent figures for the various phases of the Claimant's budgets.
The Claimant made further submissions reflecting that the Claimant had a higher burden of proving their cases and would consequently and ordinarily have higher 'front-loaded' costs whereas for the Defendant they would incur significant costs at a later stage of the case.
Reference was also made to the offers put forward by the Defendant in their Precedent R which were higher, in some circumstances, than what the Judge had allowed. It was again said the Judge had refused to hear these arguments.
The Defendant's position was that the setting of the making of the Costs Management Order (and setting of the budget) was not a case management decision and as such there was not a requirement to have regard to the Defendant's costs budget. They also averred that the relevance of the Defendant's budget as a comparison was of limited use and referred to a number of cases where the court had made this observation/questioned the usefulness of such an exercise.
It was the Defendant's case that the Judge was entitled to take into account the Overriding Objective and ensure the litigation was conducted at proportionate cost and it was right to have regard to the overall phase total (incurred plus estimated). The Claimant's budget as approved totalled £76,930 versus the Defendant's agreed budget of £58,894.
The Defendant further argued that the Judge had taken into account of the complexity of the issues and vulnerability of the claimant and it was ultimately open to her to dismiss those arguments.
The Decision
The court considered the arguments and accepted that costs case management is a speedy exercise done under pressure and that there will not always be a high level of detail given over the decisions reached. It was also reflected that the comparison of budgets is generally limited and in some cases nil. The court noted that parties will often tactically agree an opponent's budget, as in the case here.
The court continued:
40. A defendant may budget on the low side in a personal injury claim knowing that it is unlikely (because of qualified one way costs shifting) to recover its costs even if successful in defending the claim, in the hope of exerting a downward pull on the claimant's budget. Conversely, a claimant may have little incentive to challenge the amount of the defendant's budget, knowing that the claimant is unlikely to have to pay the defendant's costs even if the claim fails and preferring to use the size of the defendant's budget to make the claimant's appear the more respectable. Thus there are good reasons for caution about the value of comparison between budgets.
41. That is not the same as saying that the other side's budget is intrinsically irrelevant and should a priori be disregarded as an irrelevant consideration. None of the authorities goes that far. Chief Master Marsh rightly recognised that "some comparison between budgets may be informative". That obvious proposition flows from the equally obvious point that the parties are litigating the same case on the same issues; and, particularly in the latter stages of trial preparation and conduct of the trial, the tasks to be performed tend to be quite similar – though less so in the early stages of the claim where the claimant's costs are front-loaded.
42. Third, in the light of those observations the rival interpretations of CPR rule 3.17 are not critical and I need not express a concluded view on them. There is some force in both sides' arguments. On the one hand, approving the amount of a budget phase is, as a matter of ordinary language, an act done as part of the court's management of the case. On the other hand, Part 3 treats case management separately from costs management. Whichever interpretation is correct, rule 3.17 is clearly directed primarily at the expense of a procedural step such as disclosure or expert evidence, rather than at the making of a costs management order.
43. Fourth, agreed budget phases are outside the scope of the court's approval function, but are subject to the court's right to comment if it has reservations about the agreed amount. In the words of Chief Master Marsh, "the agreement of a budget phase removes the court's ability to set a budget for that phase"; but the other party's unagreed figure for the same phase may be approved at a lower or higher level; the agreed figure may be "only of passing interest to the court".
At the CCMC the Judge had said she did not believe it be a complicated claim and that it had a limited value and only a 2-day trial.
Referring to the advocacy in the CCMC the judgment reproduces this passage:
54. At that point, he sought to allude to the defendant's budget, saying:
"If we are looking at the budget from the defendant they, not having the burden, have a cost associated roughly at £19,000. If we take the, so it appears strange for any offer made to the defendant [sic - claimant] not to at least match those fees."
55. The judge again repeated Mr Grütters' word back to him, this time the adjective "strange", twice:
"Well, strange or not the Court is not interested in strange, I am afraid. It is interested in proportionality and I remind myself of the limited value of this claim. I am going to budget it for this phase, £8,000, how you spend it is a matter for you."
The Judge went further:
"Mr Grutters, you need to be familiar with the rules. You have agreed that budget. That is the defendant's costs. That is a matter for you. The whole idea of the budgeting process with these [Precedent Rs] and each party putting forward their respective positions is designed to try and get the parties to reach agreement. If they do not, the Court budgets and the Court's primary regard is proportionality in relation to the whole overall of the claim, which is why I said what I said at the start about £60,000-£80,000 and also in terms of the individual phases. So, that is what it is going to be £3,250."
On Appeal the court considered that this intimated that the Judge did not think the Defendant's costs budget was reasonable and that there was no willingness from the Judge to consider the Claimant's arguments about the the amount of the defendant's budget and phases within it. The court was also critical of the Judge's comments that the Claimant was not familiar with the rules, a point to which it returned in its judgment below.
The court concluded its judgment as follows:
63. In my judgment, it is inescapable that that judge closed her mind to any argument based on a comparison with items in the defendant's costs budget. It is no answer to that proposition that the judge said she had read the bundles. She had not had sufficient time, through no fault of her own because of her overloaded list, to look at the documents in detail. She did not claim or demonstrate familiarity with the defendant's budget or the figures in the defendant's Precedent R. Her responses to Mr Grütters' attempts to refer to the defendant's budget show that she was not prepared to entertain arguments based on its content.
64. The judge thereby disregarded a relevant consideration, as the claimant asserts in the first ground of appeal. The defendant's budget was not intrinsically irrelevant; "some comparison between budgets may be informative", as was said in Various Claimants v. Scott Fowler Solicitors. The defendant's budget did not become irrelevant merely because it was agreed or because the judge may have disagreed with the reasonableness of the amounts in it. Mr Grütters was entitled to make submissions about it, for what they were worth, and was prevented from doing so.
65. There was accordingly, in my judgment, a procedural or other irregularity within CPR rule 52.21(3). The irregularity was the judge closing her mind to a relevant consideration and not entertaining argument on it. It was, in my judgment, a serious irregularity because of the language used by the judge when addressing Mr Grütters on three occasions: when she used his word "imagine"; when she used his word "strange", twice; and when she suggested he was not familiar with the rules.
66. I have some sympathy with the judge because of the difficult, pressurised conditions in which she had to do her job. Most judges have experienced similar stresses in their court work and it may be difficult to maintain the utmost courtesy at all times, but when treatment of a party or his counsel falls short as in this case, the appellate court's duty is to say so. The language used was indefensible.
67. It may be thought that Mr Grütters' points based on a comparison with the defendant's budget were likely to be weak forensic jury points which may not have impressed the court. That is of potential relevance to the question of remedy, to which I will come shortly. It does not excuse the refusal to hear the arguments. The first ground of appeal succeeds on that basis.
68. I do not uphold the arguments of the claimant supporting the second part of the first ground of appeal. The claimant asserts that the judge overlooked specific points about the complexity of the issues and the vulnerability of the claimant. I reject that. I agree with Mr Carington that the judge understood and considered the arguments about those matters.
69. She was aware the claimant would contend that the defendant tolerated his assailant's reprehensible and illegal activities at the prison. The claimant agreed that the trial would be listed for two days and, therefore, whatever complexities lay in the issues and any vulnerability of the claimant could not take more than two days in all to air in court. I find no merit in this part of the appeal.
Concerning the argument that the parties should be on an equal footing, the court said that this added nothing to the first ground of appeal and that the court should have considered the amount the Defendant would have to spend and should have considered arguments int his regard.
The Remedy
The court firstly had to consider whether the Judge's decision in relation to the Costs Management Order was wrong. The court considered that:
"[73.] The claimant's allowed budget for estimated costs was within the range open to the judge and not so low that the claimant is unable to bring his claim to court and secure justice. Had the judge been willing to hear the claimant's arguments about the defendant's budget, the outcome might have been no different. But the real problem with the decision below is that it was marred by a serious procedural and other irregularity, as I have explained."
The court then concluded as follows:
76. In this case, I have concluded that the decision was unjust and cannot stand for a number of reasons. First, the irregularity occurred. Second, it was unusually serious because it occurred in court and violated the fundamental principle of equal treatment of the parties before the court. Third, it is an unattractive proposition to say that a person whose mind was closed to a particular line of argument would have made the same decision if her mind had been open to it.
77. Fourth, I am far from sure that the outcome would have been the same if the judge had heard Mr Grütters' submissions in full. The judge might have adopted the offered amount of £9,000 for trial preparation, instead of £8,000. She might have adopted the offered amount of £11,000 for the trial, or a figure closer to that amount, than the £3,250 she chose. She had previously shown interest in some, though not all, the amounts "offered" by the defendant in its Precedent R document and had adopted some, though not all, the defendant's offered amounts.
78. That is normal practice and in the spirit of CPR rule 3.15(2)(a), requiring the court to indicate to what extent the budgeted costs are agreed. If the agreement is reached before the costs management hearing, the court and the parties are bound by it. Figures may also be informally "agreed" at the hearing in the manner that happened in this case, by the claimant accepting a figure offered in a Precedent R document and the judge adopting that figure. While that is not normally treated as agreement within rule 3.15(2)(a), the defendant's offer can exert an influence on the court.
79. Fifth, the parties have faced uncertainty about the claimant's budget since this appeal has been pending. They have known since the appeal was brought that the judge's decision is challenged and, since Sir Stephen Stewart's order of 20 October 2023 granting permission to appeal, that the challenge would be allowed to proceed. The trial is fixed for this summer, in July 2024. I do not know what sums may have been expended by the claimant during the period of uncertainty but if any have, the balance between incurred and estimated costs will have changed.
80. The just solution is, in my judgment, to remit the whole of the claimant's costs budget back to the county court for reconsideration by another judge, unless the amount of that budget is agreed. If it is not agreed within 14 days of the court's order in this appeal, the matter should be relisted in the county court.
Consequences
The decision in Woolley highlights that the court has a duty to ensure parties are equally treated and where they are not matters may well have to be considered again.
Here the court should have had regard to arguments about comparisons with the Defendant's costs budget and whilst this may not have altered the outcome, the fact the argument would not be heard meant it could not be possible to say definitively if it would or would not have.
There is also an important reminder that an agreed budget does not equivocate as a base line as to what an opposing party may be allowed (where their budget is not agreed). Moreover, even where a budget is agreed the court can still pass comment upon the same.
Practically speaking advocates should be prepared to put forward arguments with comparisons to an opposing parties' budget, even if they may not always be persuasive and Judge's should be open minded to such arguments, even if they ultimately do not agree them.
For practitioners it's important to reflect that the court does have a wide-scope of discretion and where a budget is not agreed they will set the budget on the basis of proportionality. This amount could be lower than an opponent's budget. An opponent offering a lower amount than they themselves claim is not wholly relevant and it is up to a party as to whether they agree an opponent's budget. In addition, it's really important to be aware that the proportionate amount may appear low but so long as the court feels it is sufficient to bring a claim to trial with competent representation then they are unlikely to deviate. There is a difference between a harsh decision and a wrong one. A harsh decision is not necessarily wrong and if it is not wrong then any remedy (if at all) is unlikely.
Judge's should also consider the language they use and the implications of the same. The appendix to the judgment offers a transcript of the discussions between Judge Baucher, the Claimant's representative and the Defendant's representative and is worth a read. The case also offers up a reminder of the pressures placed upon Judge's themselves and the resources they have available. There are perhaps larger questions to be asked around this.
Costs Budget is a very tactical exercise and Woolley adds to the sense of this and leaves advocates, practitioners and judges all with something to think about.
Do you want to discuss matters around Costs Budgeting or simply general costs matters? We are always happy to have a chat and provide a view or advice on strategy, tactics and/or approach. Master Brown's comments show the importance of making sure the Costs Budget is reasonable and justified when drawn so it's important proper thought and consideration is put into budgeting. Should you want to discuss this or any other issues, then you can give us a call on 01482 534 567 or email info@carterburnett.co.uk.
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