Any PI lawyer engaging in the costs budgeting process will have considered this predicament at one time or another since 2013; do I include estimated costs for obtaining surveillance evidence on my opponent?
The litigator’s dilemma
The dilemma is quite straight forward but could have a significant impact on either the outcome of the main action or the level of your client’s recoverable costs. If you include an estimate for the costs of obtaining the surveillance evidence in the Precedent H costs budget, you are putting your opponent on notice of this intention. They would become more vigilant and potentially cover up any deceitful actions that would otherwise have been revealed through skilfully obtained surveillance evidence. Depending on the circumstances, evidence of that deceit could greatly reduce or even wipe out the level of damages that your defendant client is liable to pay; or could undermine a defence or counterclaim providing a clear path to a successful outcome for a claimant.
So instead you purposefully omit these costs from your client’s costs budget and proceed to successfully record the opponent in their deceitful act without their knowledge. The claim is resolved in your client’s favour and they seek to recover their costs from the opponent. In this instance CPR 3.18 provides that, on the standard basis assessment, the Court must not depart from the approved or agreed costs budget of the receiving party unless there is a good reason to do so. If you were always intending to obtain the surveillance evidence and knowingly omitted it from the estimated costs at the budgeting stage, case law and CPR would suggest that you would be on difficult grounds when seeking to recover the associated costs in addition to the approved budget.
The High Court’s solution
This appears to be a no-win situation for the litigator. Either you risk exposing your strategy to the opponent and harming your client’s chances of a successful outcome in the main action; or you protect the secrecy of the surveillance evidence but forgo the recoverability of those costs on assessment.
Thankfully the High Court considered this problem in 2015 when His Honour Judge Moloney QC had to make a costs award in a claim where the Defendant's surveillance evidence had exposed a deceitful Claimant and caused the Claimant to accept a Part 36 offer out of time. In Purser v Hibbs & Anr  EWHC 1792 (QB), the Claimant was awarded costs up until the date of the Part 36 offer as the Defendant couldn't prove any wrongdoing before that date, but the Defendant received costs on the indemnity basis from the expiry of the offer in order to punish the Claimant's deceitful actions which had been exposed by the surveillance evidence.
The Defendant had not included the costs of the surveillance evidence in their Precedent H costs budget. On considering the appropriate costs award to make, HHJ Moloney QC sympathised with the Defendant’s dilemma and agreed that the Court had the power under CPR 44.2 to award the Defendant their costs of the surveillance evidence. The unique status of surveillance evidence, and the strategic impetus not to put the opponent on notice of an intention to obtain such evidence, properly justified the Defendant's decision to omit these costs from their costs budget.
Analysis on the scope of this decision
The decision to make an indemnity costs order in favour of the Defendant may have provided HHJ Moloney QC with greater scope to depart from the approved budget in any event; however it is clear from his discussion of surveillance evidence at paragraph 17(D) of the Judgment that the Court should consider the costs of this work in a different way to any other costs that fall outside of the costs budget.
It is important to note that the Judge emphasised that the successful application of the surveillance evidence to the defence of the claim, which caused the Claimant to go back and accept an earlier offer out of time, was essential to his finding of a 'good reason' to depart from the approved costs budget. It seems that a party would struggle to recover the costs of hours of unhelpful, irrelevant and unbudgeted surveillance footage.
Practical application of this decision
Reverting to the litigator’s dilemma at the start of this article, it appears that the Courts have enabled clients to protect their strategic approach to evidence gathering and purposefully omit surveillance costs from their Precedent H costs budgets. This still poses a calculated risk with regards to costs recovery, but the Court should be willing to depart from an approved costs budget on assessment where the litigator can demonstrate that the omitted surveillance evidence was reasonably and properly obtained, and had a material impact on the outcome of the main action.