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The allowance of out of scope costs on budgeted claims

The allowance of out of scope costs on budgeted claims

In the decision of Mr Justice Marcus Smith in the case of Pasricha v Pasricha [2021] EWHC 1017 (Ch), it was held that out of scope costs can be allowed when a budget has been limited to court fees only.

Background

In this case the court was required to determine the appropriate costs order to make when a trial was aborted through no fault of any party, and in particular the relevance of the costs budget when making that costs order.

All parties had attended the first day of the trial when they were notified that there were no trial judges available. The mistake had occurred as a result of the failure to review the availability of a trial judge at the PTR hearing as well as some confusion regarding the payment of the listing fee. Because of that it was accepted that the trial was aborted due to the court’s administrative error rather than the fault of any party.

The adjournment of the trial caused the First Defendant to incur additional costs which the budgets naturally did not anticipate. Consequently, the First Defendant sought recovery of their brief fee for the first day of the aborted trial which was in the sum of £6,500. Judge Lochrane refused the First Defendant’s request and ordered “no order for costs”, his reasoning being that the First Defendant had failed to file a costs budget.

The First Defendant appealed the costs order. Mr Justice Marcus Smith heard the appeal and considered a two-stage approach was necessary; (1) was the reasoning of the Judge that he could not, as a matter of jurisdiction, make a costs order in favour of the Appellant (First Defendant); (2) If the Judge was mistaken in his understanding of the rules, then he must reconsider or re-visit the discretion as to costs.

Jurisdiction

The Judge on appeal decided that the first instance Judge was mistaken, and he did, in accordance with CPR 3.14, have jurisdiction to allow costs in addition to the court fee only budget. He concluded that in this instance the circumstances had changed and therefore costs in addition to the budgeted costs, or in other words costs that fell outside the scope of the budget, could be allowed.

The Judge turned to CPR 3.18 which deals with the assessing of costs on the standard basis where a costs management order has been made. Rule 3.18 provides as follows:

“In any case where a costs management order has been made when assessing costs on the standard basis, the court will:

(a) have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings;

(b) not depart from such approved or agreed budgeted costs unless satisfied that there is a good reason to do so; and

(c) take into account any comments made pursuant to rule 3.15(4) or para.7.4 (Practice Direction 3E) and recorded on the face of the order.”

He considered that this rule applies at any stage where a costs order is sought on a standard basis and therefore can apply when a Judge is being invited to make an order for costs whether that is detailed or summary assessment. Consequently, he concluded that when a Judge is invited to make a summary costs order on a standard basis, the court must have regard to the costs budgeting question and should not depart from it unless satisfied that there is good reason to do so.

It was therefore open to Judge Lochrane to depart from the budget and Mr Justice Marcus Smith concluded that Judge Lochrane had been incorrect in determining that he could not make any such order.

Discretion as to costs

The cause of the additional, out of scope costs was considered. This was not the usual scenario where the loser pays the winner’s costs, the additional costs had been necessary as a result of the court’s administrative error and therefore under those circumstances it was unjust to cause any party to pay the other party’s costs in this case. The court concluded that the proper order to make was that each party bear their own costs and that there be no order for costs.

Conclusion

Mr Justice Marcus Smith came to the same conclusion as the first instance Judge that “no order for costs” was the right order but for different reasons. He found that the costs order was the correct order because there was no fault of any party and therefore it was unjust to expect one party to pay another party’s costs in those circumstances.

In terms of the costs of the appeal, the court ordered that there be no order for costs because again neither party was at fault for the losses sustained as a result of the adjourned trial.

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

Published 29.04.21

 

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