Litigation costs update – Additional Liabilities, Proportionality and Costs Budgets

February 2015 Litigation Costs Update

In this month’s legal update, we look at a number of different aspects of the issues currently affecting practitioners, which continue to stem from the changes introduced in April 2013 and recent case law.

We will look at issues relating to proportionality and the approach of the court, we have further case law updates relating to costs budgeting and an update on the “Coventry” case.

Additional Liabilities – Coventry

On February 9,10 & 12 the Supreme Court heard the appeal in Coventry and others v Lawrence and another (No2) [2014] UKSC 46.

In the original decision in July 2014, the Supreme Court refused to allow the successful party to recover a success fee and ATE premium on the basis that it breached the paying party’s right to a fair trial under Article 6 of the European Convention on Human Rights.

Given the potential ramifications of a declaration of incompatibility, not least the possibility that millions of previously settled claims could be appealed directly against the Government, the Supreme Court heard from 7 interveners. These included the Secretary of State for Justice and the Association of Costs Lawyers.

Judgment is not expected until July 2015 so many interested parties wait with bated breath.

Be sure to check in on further future bulletins, as we will be closely following this story.

Proportionality

The new test of proportionality under CPR 44.3, introduced on 1 April 2013, has been causing headaches for solicitors and costs draftsmen alike. Gone are the days of the “certainty” of the Lowndstest and given that the issue has not been addressed by the Court of Appeal as yet, the application of proportionality at the County Court level is still not consistent.

However, in Savoye and Savoye Ltd v Spicers Ltd [2015] EWHC 33 (TCC)the High Court has attempted to provide some guidance on the issue.

Factors that the Judge should be considering are

a) The value of costs in relation to the damages or remedy
b) The amount of time spent in view of the issues
c) The context in which that time was spent
d) The extent to which the case is a novel or test case
e) The importance of the case to either party.

Costs Budgeting

In the ever evolving world of budgeting, the Courts have set out some stark warnings about getting the cost budget right at the outset, otherwise face the consequences.

In the case of Excelerate Technology Ltd v Cumberbatch & Ors [2015] EWHC 204 (QB), HHJ Brown held that it is not possible to increase a budget once costs have been incurred, no application for variance has been made and no contingencies have provided for the increased items. This is the case even if those increased costs are both reasonably incurred and proportionate in amount.

Any appeal against a costs management order is likely to be fraught with difficulties following the comments of HHJ Freedman, sitting in Newcastle in Havenga v Gateshead NHS Foundation Trust & Anor. The appellant will need to show that either the District Judge “exceeded the generous ambit of his discretion” or show that the revised budget does not fall in to a range that is either reasonable or proportionate. Given that a Judge’s discretion is notoriously generous and a reduction of a budget will surely move it towards “reasonable and proportionate”, both of these tests seems extremely difficult to overcome.

However, the High Court has given some useful guidance as to what constitutes a recoverable contingency within a costs budget in Yeo v Times Newspapers Ltd [2015] EWHC 209 (QB). A contingency must include work that does not fall within any of the main categories of the Precedent H, it must be possible to identify to the opposing party and the Court what that work would be and it must be foreseen as more likely than not to be required.

Remember,  we work alongside our clients to ensure we prepare a tailor made budget to fit the requirements and challenges your case may bring. For more information on our budgeting services, pleasecontact us.

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