On 25 September 2013, The Honourable Mr Justice Coulston heard the case of Willis v MRJ Rundell & Associates Ltd and Grovecourt Ltd [2013 EWCH 2923 (TCC). This is a case following the pilot scheme in the TCC so, whilst not strictly a new regime costs budget case, it is broadly similar and offers some guidance as to how the Courts may deal with costs budgets.
By way of background, this is a construction case to which PD 51G applies (Costs Management in the TCC). The claim concerns building works carried out on the Claimant’s property in Notting Hill. The total value of the original claim was Pleaded at £1.6 million but has since been reduced to £1.1 million. A Case Management Conference took place in December 2012 with a Trial being fixed for October 2013. At this CMC the parties produced budgets of £821,000 (with VAT) for the Claimant and £616,000 for the Defendant. There was insufficient time to deal with the costs budgets in any great detail at the CMC but The Honourable Mr Justice Coulston commented that the costs appeared disproportionate and on the high side. Neither party brought the budgets back before the Court.
Due to significant slippage of the timetable, an adjournment was required and therefore, in light of the earlier concerns as to the costs and the impact an adjournment would have, a Costs Management Hearing was listed for 25 September 2013. The parties provided revised costs budgets in the sum of £897,000 (plus VAT) for the Claimant and £703,000 for the Defendant. The budgets were deemed disproportionate to the overall claim value of £1.1 million, in that they totalled approximately £1.6 million. It was also noted that insufficient detail was available to enable proper consideration of the budgets and alternative figures could not be offered. Therefore the Court refused to approve the budgets, though considered they were insufficiently equipped to make a Costs Management Order. The Honourable Mr Justice Coulston commented that this would not preclude the successful party from recovering their costs at the conclusion but rather that his adverse comments on the budget should have bearing on the outcome.
I must admit that I was surprised to see the sum total of both parties’ budgets being the appropriate figure when considering proportionality. Whilst I can appreciate that the overall ‘legal spend’ may be a commercial consideration, it is not either parties' risk (that they may pay all the costs of both parties in order to recover damages) and therefore I would question the viability of this approach. I am quite sure that Claimant lawyers will be concerned to think that the damages must exceed both parties’ costs in order to fulfil the new proportionality test. Defendant lawyers on the other hand may see benefit from putting in a higher budget as a tactic to achieve a negative proportionality ruling.
Further, the reading of this case left me wondering whether my advice to solicitor clients in relation to preparation of costs budgets would be contrary to that which I have provided to date; i.e to make the budget brief and lacking in detail! This Judgement suggests that, had greater detail been provided in the budget, a Costs Management Order would have been made. I surmise that this would result in a harsher result than no CMO and a Detailed Assessment at the end with no approved budget to be referenced.