In the matter of Tim Yeo MP v Times Newspapers  EWHC 209 (QB) Warby J has provided some helpful guidance following a costs management hearing. He has commented on costs management generally and also provided some information into the use of contingencies.
In this case budgets were filed and exchanged after service of the defence; a little over seven days before the case management conference. No order was made at this case management conference and no agreement was reached. The order at this case management conference gave the parties permission to restore for further directions and costs budgeting.
Both parties prepared revised budgets for the case management conference in January 2015. Oral submissions went on for two hours and Warby J reserved his decision in light of the relatively untested implementation of the same; he therefore wanted to give some guidance as to the particular issues. He made the following comments in relation to budgeting:
Incurred costs: These are not subject to the approval process but a budget may be reduced for reasons which apply equally to incurred and estimated costs.
The approach to approval: Approval will only relate to total figures for each phase. Whilst it is generally only reasonableness and proportionality which should be considered during costs budgeting, it is a requirement that hourly rates and amount of hours are included on the Precedent H. In a case involving large costs (six to seven figures) it would be appropriate to consider CPR 44.3(5) but also the hourly rates and hours as would be done at a summary assessment. This is not the same as undertaking a detailed assessment.
Contingencies and revision: In this case the claimant had two contingencies and the defendant four; not one of the contingencies was common to the two parties.
The claimant's included contingencies for 'strategy review and consultation' and ‘possible further work'.
The guidance notes on Precedent H state that contingencies should be used for "anticipated costs which do not fall within the main categories set out in this form...Costs which are not anticipated but which become necessary later are dealt with in paragraph [7.6] of the Practice Direction".
PD3E 7.6 provides that "Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions".
PD3E 7.9 provides that "If interim applications are made which, reasonably, were not included in a budget, then the costs of such interim applications shall be treated as additional to the approved budgets."
In relation to contingent costs; Warby J laid down the following criterion:
• Contingencies must involve work that does not fall within the main phases
• It must be possible to identify to the opposing party and the court what the work would be; otherwise it is not possible to determine whether the work falls into a specific phase
• How likely it is that the work would be required. The test should be whether the work was reasonably likely. If work is not considered more likely than not to be required then it should reasonably be excluded from the budget. The time and cost of estimating the work and time are not easily justifiable if the work is not likely. If something occurs which was not considered likely then the costs will be added to budget in line with PD3E 7.9. If the development is significant (in line with PD3E 7.4) then a prepared budget should be prepared and either agreed or approved.
Warby J went on to consider the parties’ respective budgets.
In relation to the claimant's budget:
• He reduced the figures having considered that the solicitor’s hourly rates were 20-25% too high and that there was, in instances, excessive partner time.
• Disclosure costs were also reduced as the disclosure exercise was going to be more onerous on the defendant than on the claimant.
• The claimant would have no more than one additional witness and in light of the costs incurred it was appropriate to keep these estimated costs well below the estimate.
• Preparation time for the PTR was considered excessive.
• Counsel’s brief fee was included in trial preparation but was moved to the trial phase in line with the guidance notes and the defendant's budget.
• The claimant’s contingencies were for ‘strategy review and consultation' and ' possible further work’. There was considered to be an allowance in the main phases for ' strategy review and consideration' and 'possible further work' did not fill any of the above criteria. Accordingly both contingencies were found to be non applicable.
In relation to the defendant’s budget:
• The majority of the defendant’s budget was approved.
• Three of their four contingencies were found to be non applicable as they were not considered to be more likely than not.
• The fourth contingency related to costs associated with costs budgeting. These were allowed at approximately £8,500 on the basis that it did not exceed 3% and that the costs of budgeting would be more significant in this case than ordinarily.
Finally, the judge made some comments in relation to timing. Libel and other publication cases are rarely undefended and are almost invariably assigned to multi-track. Therefore, in these cases early intervention in relation to costs may be warranted. He did not go so far as to say that this should be routine but there may be cases where it is relevant; such as cases where there is a wide disparity in resources meaning that costs should be managed in order to ensure an equality of arms. If budgets are required at an early stage then this may not be necessary for the entire litigation. PD3E 6 stating that "In substantial cases, the court may direct that budgets be limited initially to part only of the proceedings and subsequently extended to cover the whole proceedings”.
In the ever-developing world of costs budgeting, it is useful to have some guidance and an idea of how courts and judges might be approaching the issue. However it is important to keep in mind that the approaches will be different, depending on which court, and which judge you find yourself before. Discretion, as ever, is a far reaching concept.
Find the full judgment here: http://www.bailii.org/ew/cases/EWHC/TCC/2015/33.html