- When he introduced the process of cost budgeting, one of Jackson L.J.’s main concerns was that the costs of cost budgeting should not become disproportionate and, as such, a source of conflict in their own right. The costs of the cost budgeting process are therefore carefully limited by PD 3E paragraph 7.2 to £1,000 or 1% of the agreed or approved budget for initially completing the budget (Precedent H), plus 2% of the agreed or approved budget for “all other recoverable costs of the budgeting and costs management process”.
- So far so simple. If costs relate to budgeting and costs management then they fall within the cap and are thus excluded from the budget and, more importantly, the budgeted costs. If only it were that simple …
- In April 2016, a series of amendments were made to PD 3E, including the introduction of paragraph 6(b) which brought for the first time an obligation on parties to “follow the Precedent H Guidance Note in all respects”.
- The Guidance Note to Precedent H contains a table setting out the types of work that should and should not be included within different stages of the completed Precedent H. The Guidance Note says that within the CMC phase, parties should include within their budget the costs of:
“Arranging a CMC
Reviewing opponent’s budget
Correspondence with opponent to agree directions and budgets, where possible
Preparation for, and attendance at, the CMC
Finalising the order”
- Similarly, the Guidance Note provides that the PTR phase should include the costs of:
“Preparation of updated costs budgets and reviewing opponent’s budget.
Correspondence with opponent to agree directions and costs budgets, if possible
Preparation for and attendance at the PTR”
- These items though are clearly part of the costs of the “…budgeting and costs management process”. Some tension may therefore be perceived between the Guidance Note and the cap set by PD 3E paragraph 7.2.
- Under paragraph 7.2, the recoverable costs of cost budgeting and costs management are meant to be swept up within the 2% cap. Under the Guidance Note though, some costs may also be included within the budget itself and thus the figure upon which the cap is set. If these costs are included within the budget though, how can the 2% cap apply?
A v Abertawe Bro Morgannwg University Health Board
- The tension between PD 3E paragraph 7.2 and the Guidance Note were considered by the court in A v Abertawe Bro Morgannwg University Health Board.
- A was a clinical negligence claim. As often happens in such claims, the majority of the directions were agreed between the parties and the matter proceeded to a CMC with the only substantive points in dispute the Defendant’s failure to respond to a Part 18 request, and the Claimant’s costs budget.
- The main point in dispute on the budgets was the approach to the CMC phase of the proceedings. In accordance with the Guidance Note, the Claimant had included within the CMC phase of its budget all the costs of preparing for and attending the CMC hearing. The Defendant in contrast argued that the only allowance in the CMC phase should be a few hours in relation to dealing with directions after the CMC hearing, with all other costs, including in particular the costs of the CMC hearing itself, falling within the 2% cap under the Practice Direction. This, the Defendant argued, was the only way in which the Practice Direction could be read. If costs related to budgeting and costs management in any way, they were not to be included within any of the phases of Precedent H, but instead they would fall within the cap, to only be added to Precedent H once approved or agreed.
- The CMC was heard by DJ Llewellyn who noted the opposing views of the parties and directed that the correct approach to setting the budget for the CMC phase of proceedings should be determined as a separate issue.
- On 20 January 2017, he handed down a reserved judgment, in which he found that there was an inherent tension between the provisions of PD 3E paragraph 7.2 and the Guidance Note. In DJ Llewellyn’s view, both were strict requirements that could only be read in one way, and both had to be met. He therefore found that some of the costs relating to the CMC hearing had to be included within Precedent H when it was initially completed, but that they should then be excluded when the budgets came to be set. The Claimant appealed.
- The Claimant was granted permission to appeal on the papers by HHJ Vosper QC, who then heard the appeal on 25 May 2017. In a reserved judgment handed down on 22 September 2017, HHJ Vosper QC allowed the appeal, finding that (per PD 3E paragraph 6) the Guidance Note had to be followed and this meant setting budgets that included work indicated on the Guidance Note, even if that work might be deemed part of the costs of “… the budgeting and costs management process”.
- At paragraphs 60 he summarised the position as follow:
“In my judgment the following principles apply. The Practice Direction and the Guidance Note must be read together. They are part of the same document and should be construed consistently with each other.
The words of the current Practice Direction and the Guidance Note should be given their ordinary meaning. No assistance is to be obtained by tracing the origins of the provisions. This is a new area of practice which is still evolving.
The court should approach the most recent Excel version of Precedent H on the www.justice.gov.uk website on the basis that it has been designed to accord with the Practice Direction and the Guidance Note. It is of course possible that those responsible for the Practice Direction and/or for the Guidance Note and/or for the Excel version of Precedent H failed to understand what they had written or created and failed to appreciate that these documents and/or the software were inconsistent with each other. But the court should approach this issue on the basis that these materials have been carefully and competently prepared. “
- Which led him to the following conclusion at paragraph 63:
“These costs relating to the budgets [i.e. those described within the Guidance Note] are therefore not only properly included in the CMC and PTR phases of Precedent H but are directed to be included by the Guidance Note, unlike the cost of preparing the budget for the first CMC which is expressly excluded. These costs are all part of the budgeted costs which the court is required to revise and approve under CPR 3.15, if they are not agreed. They will therefore form part of the approved or agreed budget.”
- Before commenting as follows at paragraphs 68 and 69:
“The current Excel version of Precedent H accords with the conclusion to which I have come. The 2% cap, calculated automatically by the software, is 2% of the budget total in Precedent H which (as District Judge Llewellyn correctly decided) must include the costs relating to budgeting directed in be included in the CMC and PTR phases. The Excel form is set up in a way which leads to the additional of the 2% to the agreed or approved budget, calculated, as I have said, in accordance with the Guidance Note. This also accords with paragraph 7.7 of the Practice direction which requires the parties to file a budget containing the recast figures after a costs management order.
I acknowledge the force of Mr Marven’s argument that this approach does not fit easily with the words of paragraph 7.2(b) of the Practice Direction; that the costs directed to be included in the CMC phase and the PTR phase are part of the budgeting and costs management process, and that therefore they should not be included in the calculation of the cap. But there are in my judgment the following answers to his argument:
The 2% cap is a rough and ready but inexpensive approach to the determination of the recoverable costs of budgeting and costs management.
The amount which the budgeting costs directed to be included in the CMC phase and the PTR phase contribute to the overall budget is likely to be small. The overwhelming bulk of the costs is Precedent H will be what he calls trial costs.
It is likely that there will be other costs of budgeting and costs management which are not directed to be included in the CMC and PTR phases.
The 2% cap is a cap. It is open to the court to allow a lesser sum I persuaded that it should so so.
His argument cannot outweigh the words of the CPR, the Practice Direction and the Guidance Note, and the working of the software of the Excel Precedent H form, all of which must be assumed to have been intended to be consistent.”
HHJ Vosper QC did, however, go on to reject the Claimant’s argument that the 2% cap only applied to work done managing the costs after a costs management order was made. Although the Guidance Note seemingly captures all of the costs management work to be done before the first CMC (and thus before any CMO can be made), HHJ Vosper QC held that there might be other costs management work that arose that would, in his view, be subject to the 2% cap.
- On any analysis PD 3E paragraph 7.2 and the Guidance Note do not make happy bedfellows. The judgment in A v Abertawe therefore provides a welcome clarification for practitioners on the correct approach to the preparation and setting of budgets at both the CMC and PTR stages. In the correct climate, that can only be helpful.
- The case also forecloses (as much as a decision at circuit judge level can) the argument often deployed by defendants that the CMC phase of the budget should be limited to the costs of dealing with directions only. As was noted by DJ Llewelyn at first instance; the definition of a costs management conference at CPR 3.16 is a hearing at which only costs are discussed. A case management conference, or even a costs and case management conference (a description that is strictly inconsistent with CPR 3.16 – just don’t tell the court listing office that) therefore aren’t costs management conferences and the costs of preparing, traveling to and attending the CMC can rightfully be included in the CMC phase of the budget.
- The case does though leave several issues open not least what happens in the case of subsequence case management conferences at which budgets are discussed. The Guidance Note says that subsequent CMCs are not to be included within the CMC phase of the budget – they are therefore by implication to be dealt with as a contingency – but it is not clear whether time spend reviewing and discussing budgets in connection with a subsequent CMC will fall inside the budgeted costs or the 2% cap. Presumably a consistent approach will be taken and, on the basis that any case where the hearing is not limited sole to a discussion about costs, such work will fall within the budget for the subsequent CMC and not the 2% cap.
- More importantly, the case leaves open what was referred to in argument as the ‘detailed assessment question’ – i.e. when the 2% cap can be imposed on detailed assessment notwithstanding that the costs of (for example) reviewing and discussing budgets have already been included as part of the CMC phase of proceedings. The comments at paragraph 69 (quoted above) suggest that HHJ Vosper QC does not think that it can and that the 2% cap can only apply to ‘other’ budgeting costs; e.g. the internal process of monitoring, reviewing and revising one’s own budget, but the point is one for another day.
James Wibberley acted for the successful Claimant, instructed by Linda Schermer Oliver & Co Solicitors. The Defendant was represented by Robert Marven of 4 New Square.
 N.B. following the most recent rule change, PD 3E paragraph 7.4 prevents the court from looking at costs incurred before the date of any management hearing. Even if the costs of (for example) reviewing and discussing budgets are to be included within the CMC phase, those costs cannot be approved by the court.