Sanctions where Claimant's budget "considerably reduced"
Posted on 9th September 2024 at 15:18
Another decision from the High Court which saw the Claimant sanctioned after their "unrealistic and inappropriately ambitious" budget was "considerably reduced" at the Costs Management Hearing. Here Master Thornett ordered a 35% reduction to the Claimant's costs of costs management (to the extent that they were ultimately recoverable) and that the Claimant pay the Defendant's costs of the Costs Management Hearing. It's a warning of the strategic complexities at play in Costs Management and the importance of pitching things appropriately from an early stage.
Jenkins v Thurrock Council [2024] EWHC 2248 (KB) (09 September 2024) is a reminder for the need for a robust Costs Budget with the burden to explain and justify the same falling upon the claiming party. Moreover, the High Court set out clear expectations as to the need for parties to engage in negotiations and discussions which should be "within a reasonable range". A party who does not engage reasonably is open to a costs sanction.
Speed Read
A speed-read for those wanting to quickly get to grips with the case of Jenkins.
1. Parties are not immune from costs considerations in costs management hearings.
2. A party with a high costs budget should be prepared to have justifications for the same. There is a burden upon the claiming party "to explain and justify [their] position".
3. The present claim was a liability admitted Accident at Work claim with a pleaded value of over £200k that would require a 5-day trial. Master Thornett regarded the complexity of the case to be towards the lower end of claims in the High Court.
3. In the case at hand, there was a CMC first to deal with directions. The court made preliminary observations around proportionality of the Claimant's budget at the CMC.
4. The parties were to prepare revised Costs Budgets and Budget Discussion Reports with a Costs Management Hearing to take place absent agreement.
5. The court were clear that parties should seek "discussion and negotiation about each party's budget." Here the Claimant made counter-offers but the Defendant did not accept the same reflected their position on proportionality. No further discussions took place with the Claimant determining that the Defendant's counter proposals "had sufficiently little currency to deserve any further attention".
6. At the Costs Management Hearing it was found that the Claimant was maintaining an unrealistic and inappropriately ambitious budget, having regard to the the requirements of the case. The Defendant's proposals were found to be closer to what was considered "within a reasonable range".
7. Only three phases were budgeted with the rest deferred, reductions per phase ranged from circa 40% to 75%.
8. Given the significant percentage reductions received it was right to consider any costs implications. The Claimant had presented and maintained an unrealistic and disproportionate approach to the estimated costs and could have altered its position between the CMC and Costs Management Hearing (but did not). Ultimately the Costs Management Haring could have been avoided and the approach undertaken by the Claimant had increased the time spent on Costs Management overall.
9. It was appropriate to award the Defendant the costs of the Costs Management hearing and to order that the Claimant's costs of costs management (to the extent they were recoverable) be reduced by 35%.
The Case
The case related to an Accident at Work claim with a pleaded value of over £200,000. The Claimant had sustained significant injury to his foot and ankle together with consequential psychological sequalae. Liability was admitted. The Provisional Schedule of Loss, it was noted, pursued "a loss of income claim, treatment and therapies, care and assistance, a modest claim for accommodation adaptation and allied head of loss". Master Thornett stated that "in short, the level of sophistry of the case is – without of course being insensitive to importance of the claim to the Claimant personally – towards the lower end of claims as case and costs managed in the High Court and entirely typical of claims case and cost managed in the District Registries. The point here being that, at least according to the Statements of Case, there is nothing obviously to suggest why this case should see significantly high estimated legal costs. Neither did the Case Management directions engaged through to trial engage anything more (or less) than a typical approach to budgeting. In seeking substantial future legal costs, the Claimant therefore had a reasonably high burden to explain and justify his position at the costs management hearing."
A Case Management Hearing took place on 7 June 2024 where directions to a 5-day trial were given. A separate Costs Management Hearing was listed for 17 July 2024. This was to allow parties revise their Costs Budgets and Budget Discussion Reports and to "facilitate further discussion and negotiation about each party's budget."
The Budgets
Master Thornett summarised the budgeting position as follows:
"7. In this case, the court had indeed made preliminary observations at the Case Management hearing about apparent disproportionality of the Claimant's budget. The Claimant had unsuccessfully maintained at the CMC that the case should be listed through to another CCMC rather than trial. Accordingly, the Claimant had served a "full budget" to a trial of all issues that totalled £1,195,754.26 and a second budget through to a 2nd CCMC that totalled £730,396.28. The Defendant's budget reflected directions through to trial, featured two additional expert medical disciplines (permission for which the court granted) yet was in a considerably lower sum of £383,417.20. By comparison, the Claimant's incurred costs were £355,640.61, being only £27,765.59 less than the Defendant's entire budget.
8. Whilst I remind myself that there can be a variety of reasons why defendants' budgets (especially in personal injury and clinical negligence claims) are frequently if not always lower, such that comparison with a claimant's budget is not always an easy or even useful exercise, the feature of an opposing party's budget still being about a third of another's plainly calls for careful consideration and reflection by the party with the much higher budget suitably in advance of the hearing. Particularly when, as here, the court had provided and directed a separate hearing for the purposes of costs management, with an interim period provided to facilitate reflection and negotiation.
9. In consequence to the Case Management Hearing, the Claimant served an updated budget reduced to £944,537.16. This was nonetheless still a very high sum, even if necessarily reflecting the additional two expert disciplines as had been permitted."
The Claimant and Defendant were unable to reach agreement on the Claimant's Costs Budget and as such a Costs Management Hearing was requested.
"11. I pause here to comment that subsequent specific Costs Management hearings are not always inevitable. Many parties have agreed their respective budgets by the time of the Case Management Conference. Many still do so subsequently, such that the Costs Management hearing as provided becomes unnecessary and is vacated. Under no circumstances can parties therefore assume that because a hearing has been listed, and because that hearing is interlinked with case management, that the order at the next hearing will be bound to be "in the case". The resources and time of both the court and other parties, as with any hearing, always have to be considered by all those participating; and, critically, throughout the period leading to the hearing. In short, a continuing realistic appraisal (as is required before any hearing) why the hearing is proceeding and whether, having regard to the Overriding Objective, a more costs efficient alternative approach is possible.
12. Mr Asbury describes how, in preparation for the 11 July 2024 hearing, a further discussion took place with the Claimant's costs lawyer on 9 July 2024 in attempt to negotiate. The Claimant was invited to, and did, present some counter-budget proposals in writing. However, the counter-figures still did not reflect the Defendant's position on proportionality neither, as it transpired, the court's similar views at the subsequent hearing. No further discussions took place, the Claimant in effect taking the view that his budget was reasonable and that the Defendant's counter submissions had sufficiently little currency to deserve any further discussion."
It is clear that the court's expectation is that parties will pursue negotiations up to any hearing, something which will ultimately further the over-riding objective. An unreasonable refusal to engage in negotiations will carry the risk of costs consequences.
The Costs Management Hearing
On 17 July 2024 the Costs Management Hearing took place, it was noted that:
"13. [...] the court was entirely satisfied that the Claimant was maintaining an unrealistic and inappropriately ambitious budget, having regard to the requirements of the case. Despite the Claimant having attempted to offer slightly reduced figures, the court found that the Defendant's submissions as to proportionality remained far closer to what, on any objective terms, could be submitted as within a reasonable range. Further, this was in respect of the management of such phases the court decided could be costs managed, despite the polarity between the figures.
14. Critically, the court concluded that that the high figures proposed for Trial Preparation and Trial phases would accordingly be better deferred to a date closer to the Trial Window, at which time the court might be in a more informed position, on the evidence as had by then transpired, to gauge whether the Claimant's estimated costs totalling £204,742.98 had any greater foundation than was apparent at the Costs Management Hearing.
15. Likewise, ADR costs management was adjourned for the same or similar reasons, the court noting the Claimant's figure in excess of £49,000 for this phase seemed considerably higher than normally seen for an ADR phase; indeed, even in catastrophic cases."
The judgment appends a table at the bottom of the judgment which shows the budgeted costs offered by the Defendant, the Claimant's counter offer and the amount allowed. There were reductions to the Issue / Statements of Case phase by nearly 75%, a reduction to disclosure by nearly 45% and a reduction to expert reports by over 40%. The Trial Preparation, Trial and ADR phases were all deferred as per the above.
The Sanctions
The costs of the Costs Management Hearing were reserved "having regard to the significant percentage deductions to the Claimant's budget. The court also expressed an observation that the Claimant's incurred costs seemed high at £358,762.51, given the case had proceeded on quantum since March 2021 and only two quantum expert reports had been disclosed by the Claimant. The court specifically described the Disclosure phase as apparently "significantly disproportionate"."
Master Thornett stated that:
"18. My conclusion is that the Claimant had presented and maintained an unrealistic and disproportionate approach to his estimated costs in the context of the demands and requirements of this case. He continued to do so despite the opportunity to modify his position in response respectively to the Defendant's first Precedent R, observations made at the Case Management Conference and then overtures made by the Defendant during an intervening period before the Costs Management Hearing, a period as prescribed by the court specifically to facilitate appropriate discussion and negotiation.
19. The hearing on 17 July 2024 therefore could well have been avoided had a more reasonable modified approach been taken by the Claimant. If and in so far as the hearing should be taken as having still been necessary, then in terms of success and conduct I see no reason why the Claimant should be the beneficiary of a "costs in the case" direction. In real terms, the fact that liability is admitted means he is likely to receive his costs despite the events I describe.
20. I instead direct, for the reasons discussed, that the Claimant pay the Defendant's costs of and occasioned by the Costs Management Hearing on 17 July 2024.
21. I am satisfied that there is a further relevant point on costs that should be recognised: the extent to which the Claimant's costs of preparing several budgets through to the hearing on 11 July 2024 ought to be capped having regard to the approach he adopted.
22. I accept that some costs would always have to be incurred in preparation but conclude these, if the Claimant becomes a receiving party, should not be to an extent that incorporates crafting an inappropriate and unrealistic approach. The costs of the Claimant's costs management as assessed, to the extent recoverable having regard to the consequences of the order at Paragraph 20 above, should be reduced by 35%."
What does this mean for me?
Jenkins is now the third published judgment which has seen the court impose costs sanctions upon a Claimant for a Costs Budget which was found to be both "unrealistic" and "disproportionate". There is a clear and unequivocal message from the judiciary, high Costs Budgets will not be tolerated unless there is a strong justification for the same.
The importance of getting a robust Costs Budget drawn up from the outset is clear. Practitioners will need to reflect the individual nuance of each case to include a consideration of the work undertaken pre-budget. It will mean undoubtedly that there will be a greater need for pragmatism.
Secondly, the High Court could not be clearer as to the requirement and need for parties to engage in budget negotiations. Any party declining to engage in such discussions will be at risk of costs sanctions. As Master Thornett makes clear "Parties are not in principle immune from costs considerations in costs management hearings."
It should, however, not be overlooked that a reduction to a costs budget alone ought not to see a costs penalty so long as there were justifications in support of the budget drawn. It should be stressed that the court is ultimately looking for budgets and offers which are "within a reasonable range" with the caveat that what a reasonable range would be is ultimately at the court's discretion.
There is a clear fine line between encouraging parties to engage sensibly and amicably and fostering an environment which discourages some parties from negotiating on the basis that they are incentivised to take a chance at a Costs Management Hearing. It remains to be seen how parties will react on the coal face.
What is clear is that parties are pushing, with more regularity, for costs sanctions within Costs Management and that the court is open and willing to make such orders. Here the Claimant has not only sustained adverse costs for the Costs Management Hearing but also seen a 35% reduction to its recoverable costs of the Costs Management process.
So ensuring there is a robust Costs Budget in place is the first part with an emphasis on active budget negotiations the second otherwise the risks are now very clear.
See also; Costs Sanctions for Claimant's Unrealistic & Disproportionate Costs Budget and Costs Sanction for "unrealistically high" Costs Budget.
Do you want to discuss matters around Costs Budgeting and strategies? We are always happy to have a chat and provide a view or advice on tactics and/or approach. Master Thornett's comments reiterate the importance of putting forward a robust Costs Budget and the need for a reasoned approach to subsequent discussions and negotiations. 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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