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Monitoring Costs Budgets – Part One: Successful at trial? The role the Costs Budget plays when quantifying a payment on account of costs

When the trial concludes, and you are the successful party, then attention invariably turns to making a request for a payment on account of the legal costs that have been incurred. It is CPR 44.2(8) that allows this:

“Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.”

Prior to the introduction of Costs Management, the general rule of thumb was that parties achieved in the region of 50% of their request for costs, and this remains the case for non-budgeted matters. This is in line with the widely known case of Mars UK Limited v TeKnowledge Limited [1999] 2 Costs LR 44 .

An alternative approach has emerged in relation to costs budgeted matters. This allows higher payments to be obtained for those claims that are subject to a costs management order, as the quantification of the payment on account is determined by analysing the approved costs budget.

In the cases of Thomas Pink Ltd v Victoria’s Secret UK Ltd [2014] EWHC 3258 (Ch) (31 July 2014) and the later case of MacInnes v Gross [2017] EWHC 127 (QB) (03 February 2017), the court determined that 90% of the approved costs budget was a reasonable payment on account.

In Thomas Pink the Judge commented that:

It seems to me that the impact of costs budgeting on the determination of a sum for a payment on account of costs is very significant although I am not persuaded that it is so significant that I should simply award the budgeted sum. Bearing in mind that unless there is good reason to depart from the budget, the budget will not be departed from, but also taking into account the vagaries of litigation and things that might occur and the fact that it is, at least, possible that the assessed costs will be less, although no good reason why that is so has been advanced before me, I will make an award of 90% of the sum in the claimant’s budget (£644,829.10)”.

In MacInnes the Judge commented that:

In my view the approved costs budget is the appropriate starting point for the calculation of any interim payment on account of costs. CPR 3.18 makes plain that, where there is an approved or agreed costs budget, when costs are assessed on a standard basis at the end of the case, “the court will…not depart from such approved or agreed budget unless satisfied that there is good reason to do so.” The significance of this rule cannot be understated. It means that, when costs are assessed, the costs judge will start with the figure in the approved costs budget. If there is no good reason to depart from that figure, he or she is likely to conclude the assessment at the same figure”.

He went on to say that:

“When making an interim payment on account of costs in a case with an approved costs budget, the days of the educated guesswork identified by Jacob J in Mars UK Limited v TeKnowledge Limited [1999] 2 Costs LR 44 are now gone. Instead, the court can be confident that there is a figure for costs which, because it has already been approved, is both reasonable and proportionate”.

In the later cases of Cleveland Bridge UK Ltd v Sarens (UK) Ltd [2018] EWHC 827 (TCC) (18 April 2018) and Puharic v Silverbond Enterprises Ltd [2021] EWHC 389 (QB) (22 February 2021) the Court analysed the incurred costs when assessing the amount to allow for the payment on account of costs. It was recognised that the incurred costs included in the costs budgets had not been subject to any form of assessment and because of that, in both cases, the court allowed 70% of the incurred costs and 90% of the budgeted costs.

Key points

When assessing the amount of any payment on account of costs, the court must not depart from the last approved budget unless there is a good reason to do so. If a good reason to depart either upwards or downwards can be shown, then this opens the court up to departing from the costs budget. Consequently, to secure the maximum payment on account be ready to defend any good reason that your opponent may raise.

Conversely, if you are opposing a payment on account an analysis to identify any good reason to depart down from your opponent’s costs budget is recommended. One example of a good reason is where the full amount of a particular phase within the costs budget has not been fully incurred.

Monitoring the budget throughout the lifetime of the claim allows you to quickly identify the up-to-date costs position, which assists for a number of reasons, and in this instance allows the quick identification of costs to support and maximise the request for the payment on account. The costs associated with monitoring budgets are recoverable from the opponent, and forms part of the 2% of the approved budget that is allowed in terms of costs management.

Sue Fox is A & M Bacon’s Head of Costs Management. You can contact her on 01733 359036, or by email to Sue.Fox@aandmbacon.co.uk

Please do get in touch with the team regarding any queries you may have in relation to any of your legal costs requirements on 01733 350 880 or by email mail@aandmbacon.co.uk. For more information please do visit our website www.aandmbacon.co.uk

Published 8 July 2021

Author – Sue Fox

 

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