Following the introduction of cost budgeting there has been much discussion about how the court can assess a bill of costs that does not correspond in format with the costs budget. Over two years on the rules committee have just introduced the requirement to file a Precedent Q with the bill of costs. In BP –V- Cardiff & Vale University Local Health Board the recently appointed new Senior Costs Judge (SCJ), Master Gordon-Saker also gives some guidance on issues re bill format when a claim has been subject to costs management and when a claim spans the 'old' and 'new' proportionality tests. The Master also raises an interesting point about the costs of costs budgeting.
Proportionality and Bill Format
In the judgement the SCJ outlines the two tests and recites the process to be taken with the current test at paragraph 16. First decide what costs are reasonable. Then “stand back” and consider whether the figure you are left with is proportionate. If not then, thirdly, make "an appropriate reduction”. Opinions differ as to whether this two stage test has been strictly applied by trial judges in the well reported costs budgeting hearings.
In the present case, proceedings were issued after 1st April, 2013 so the new test did apply but not to work done before 1st April, 2013 – see paragraph 17.
Unfortunately the bill in question was not divided along these lines. The SCJ was forced to guess. He commented that the result of doing so was not fatal to this case where pre and post 1st April 2013 costs were proportionate to the complex clinical negligence issues where liability and causation were disputed. The patient had died after instructions were given to her solicitors but well before proceedings were issued and the case continued to be run by her dependents. Had she lived, damages would have been much higher. The potential value of the claim at the outset was the one in the mind of the SCJ.
Had the later costs proved to be disproportionate, he would have been in difficulties.
The SCJ commented that a bill with 2 proportionality tests in play should be split accordingly; Paragon Costs have been preparing bills in this manner since the introduction of the new proportionality test.
The SCJ then referred to budget phases. When assessing costs the court will have regard to the last approved budget (CPR 3.18). For each phase, the court looks at pre and post budget costs. The judge then noted the requirement (from 01/10/15) to serve with a bill of costs a breakdown for each phase, where a costs management order has been made. The breakdown will only show totals and the SCJ thought it necessary and convenient to draw a bill which corresponded with phases of the budget, using bold type, italics or some other device to distinguish between pre and post budget costs. The subject bill had not been so divided and many awaiting assessment are doubtless in the same boat. He suggested the use of schedules to help the court.
The finding of non compliance with CPR 3.18 did not prevent the bill from being assessed.
The SCJ referred to paragraph 7.2 of PD 3E and noted the need to divide the bill so as to identify the costs of completing Precedent H and other costs of budgeting “unless these costs can clearly be identified in some other way”. The failure to do this had taken up valuable time in the case and there would have been costs penalties for the Claimant had he won overall (the final costs total was less than the amount paid on account and the Claimant was ordered to pay the Defendant’s costs of detailed assessment).
With the requirement now to serve a Precedent Q when commencing detailed assessment proceedings this issue should no longer arise. Paragon Costs have been 'phasing’ all of their cases for some time and therefore will be able to produce a Precedent Q at a touch of a button.
Costs of budgeting
Here, the SCJ was asked to consider whether the costs cap in the Practice Direction included VAT and additional liabilities. He suggested that additional liabilities were included but not VAT. We find this comment surprising given that the CPR clearly states that recoverable costs of the budget shall not exceed the higher of £1,000 or 1% of the approved or agreed budget and the costs in the budget are base costs only?
So, a quick and concise run through the issues on proportionality and budgeting (until the new form of bill comes riding to the rescue) and how the bill should be divided. This case is, I suspect, intended to be a warning shot for the transitional period until the new bill arrives.