This was a decision of Master Rowley (costs judge) dealing with four preliminary issues raised by the defendant in respect of the claimant’s bill of costs.
Background
In January 2011 the claimant suffered a stroke which resulted in him being admitted to hospital and five days later he was operated upon to replace his aortic valve. He consulted Irwin Mitchell solicitors in March 2012 to pursue a clinical negligence claim on his behalf against the Andover Memorial Hospital who he alleged had failed to treat the chest pains that he had experiencing since 2010 and which ultimately appeared to have led to him suffering the stroke.
He initially instructed Irwin Mitchell on a privately paying basis with the benefit of legal expense insurance. On 22 March 2013 that retainer was converted to a CFA with a success fee of 100% rebated to 70% in the event that the matter settled more than 3 months before trial.
In both the private retainer and the CFA the hourly rates for the work to be done were as follows:
Grade A |
£260 |
Grade B |
£225 |
Grade C |
£195 |
Grade D |
£140 |
Both the private paying retainer and the CFA contained a term allowing for the hourly rates to be increased annually. The annual review was said to take place in May but the first letter revising the hourly rates set out above was not sent to the client until 22 January 2015. it said that the rates set out within it were effective from 1 May 2014. The revised rates were:
Grade A |
£340 |
Grade B |
£285 |
Grade C |
£220 |
Grade D |
£140 |
A letter dated 17 September 2015 revised those rates further as from 1 May 2015 by adding £10 per hour to the Grade A rate and £5 per hour to the other rates.
Proceedings were issued in 2013 and served on two defendants, Dr Griffiths and the Hampshire Hospitals NHS Foundation Trust in January 2014. Another defendant, another GP, was named in the Claim Form but he was not served.
A CCMC took place on 11 March 2015, in respect of which the claimant filed two costs budgets in form Precedent H. The first was lodged with the claimant’s directions questionnaire in October 2014 (“first budget”). The second, updated, budget was filed in February 2015 (“second budget”).
Pre action costs were said to be £6,030. These were all solicitors’ charges with no disbursements.
The relevant section of the first budget was as follows:
|
|
RATE
|
PRE- |
ACTION COSTS |
|
|
(per hour) |
Incurred costs |
Estimated costs |
|
TOTAL |
|
|
£ |
Hours |
£ |
|
Fee Earners’ time costs |
|
|
|
|
|
1 |
Grade A |
£265.00 |
£2,756.00 |
|
|
£2,756.00 |
2 |
Grade B |
£230.00 |
£391.00 |
|
|
£391.00 |
3 |
Grade C |
£195.00 |
£2,262.00 |
|
|
£2,262.00 |
4 |
Grade D |
£135.00 |
£621.00 |
|
|
£621.00 |
5 |
Total Profit costs (1 to 4) |
|
£6,030.00 |
|
|
£6,030.00 |
15 |
Total (5 + 14) |
|
£6,030.00 |
|
|
£6,030.00 |
In the second budget the pre-action costs were said to amount to £7,216.50 with again all of that time relating to solicitors’ charges and no disbursements. The equivalent section of the second budget was as follows:
|
|
RATE |
PRE-
|
ACTION COSTS |
|
|
(per hour) |
Incurred costs |
Estimated costs |
|
TOTAL |
|
|
£ |
Hours |
£ |
|
Fee Earners’ time costs |
|
|
|
|
|
1 |
Grade A |
£340.00 |
£3,536.00 |
|
|
£3,536.00 |
2 |
Grade B |
£285.00 |
£484.50 |
|
|
£484.50 |
3 |
Grade C |
£220.00 |
£2,552.00 |
|
|
£2,552.00 |
4 |
Grade D |
£140.00 |
£644.00 |
|
|
£644.00 |
5 |
Total Profit costs (1 to 4) |
|
£7,216.50 |
|
|
£7,216.50 |
15 |
Total (5 + 14) |
|
£7,216.50 |
|
|
£7,216.50 |
|
|
|
|
|
|
|
Although not explicit in the judgment it can derived that the claim settled on a payment of around £500,000 on a c50% liability basis against the second defendant (referred to hereunder for convenience as the defendant, unless otherwise stated).
MISCERTIFICATION
The defendant expressed concern at the inaccuracy of the figures claimed for the incurred costs. It was noted that “the time claimed for the incurred costs in the pre-action phase did not alter between the first and subsequent budgets but, by virtue of the hourly rate increasing, the costs claimed against the defendants for this work had increased significantly.”
The defendant highlighted the signed statement of truth prescribed by CPR Part 22 which states that
“This budget is a fair and accurate statement of incurred and estimated costs which it would be reasonable and proportionate for my clients to incur in this litigation”
The defendant’s case was summarised by Nick Bacon QC, as follows:
“the use of any hourly rates in the incurred column of the budget which were above those for which the claimant was contractually obliged to pay, rendered the statement of costs to be neither fair nor accurate. The upshot of this was that neither the defendants nor the court were presented with appropriate figures when it came to setting the budget and considering directions. The court, in accordance with CPR Part 3, was required to have regard to the costs already incurred when determining the directions to be made and the costs which would be reasonable and proportionate in implementing those directions. The defendants had to state whether they agreed the claimant’s costs and having unreliable figures for the incurred costs prevented the defendants from considering this issue properly.”
Mr Bacon said that the court and the opponents should be able to rely upon the certificate given to Precedent H. He referred to the well-known dictum of Henry LJ in Bailey v IBC Vehicles Ltd [1998] Cosrs LR 46 in relation to certification of a bill of costs:
“The relevant Court rule requires the solicitor who brings proceedings for taxation to sign the bill of costs. In so signing he certifies that the contents of the bill are correct. That signature is no empty formality. The bill specifies the hourly rates applied, and the care and attention uplift claimed. If an agreement between the receiving solicitor and his client (here the trade union) restricted (say) the hourly rate payable by the client, that hourly rate is the most that can be claimed or recovered on taxation (see General of Berne Insurance Company v Jardine Reinsurance Management Limited above). The signature of the bill of costs under the Rules is effectively the certificate by an officer of the Court that the receiving party’s solicitors are not seeking to recover in relation to any item more than ;hey have agreed to charge their client under a contentious business agreement. “
The defendant sought an order in accordance with CPR 44.11 for the disallowance of all or part of the costs in the bill as a result of the conduct of Irwin Mitchell in allegedly mis-certifying the costs budgets.
The Claimant’s Position
The claimant’s case was summarised in a witness statement by Mr Steven Green, a partner in Irwin Mitchell and the National Head of his firm’s Costs Department. Referring to the use of composite hourly rates, he said:
“[these are] calculated by my team at the time when a costs budget is prepared which reflects: (a) the fee earner’s original hourly rate; (b) the fee earner’s current hourly rate at the time when the budget is prepared; and (c) the future hourly rate which the fee earner is likely to charge at the time when the case concludes (i.e. at trial)”
It was said that one of the main reasons for using a composite rate was to get around a difficulty encountered with the Precedent H form, namely that there is no opportunity to use different hourly rates to reflect increases that may occur to the hourly rate during the length of the case. Consequently, Irwin Mitchell use a blended rate albeit that it is higher than the rate actually charged to the client at the time the budget is prepared; this does not breach the statement of truth because it remains a fair and accurate statement of the estimated costs being incurred in the future.
Mr Marven submitted that the budget was not intended to be accurate to the last penny. The purpose of fixing a budget was for an overall figure that was reasonable and proportionate for each phase. The rules governing the budgeting process specifically caution the judge not to assess appropriate hourly rates and the claimant’s approach of using a blended rate might be more expensive in relation to the incurred costs but would often work out cheaper in respect of the estimated costs.
To the extent that the figures in the budget were too high for the incurred costs, Mr Marven submitted that the defendants were not prejudiced by them. It was the claimant who would suffer.
Firstly, because it was more likely that the judge would take the view that the costs incurred were too high and make adverse comments about them; and
Secondly, the budgeting judge would potentially reduce the amount allowed for the estimated costs in order to reflect the costs already incurred
It as argued that the defendants had failed to establish that they had been prejudiced in any way by the alleged miscertification. Therefore, even if CPR 44.11 was engaged, any sanction, if any ought to be modest. The Master was invited to conclude that no sanction at all should be implemented even if he was with the defendants that improper or unreasonable conduct had occurred given the “very high” threshold. Reference was made to the case of Fletamentos Maritimos SA –v- Effjohn International BV [2003] Lloyd’s Rep. PN 26 CA which distils the definitions in Ridehalgh v Horsefield & Anor [1994] EWCA Civ 40 as follows:
“Improper conduct is that which would be so regarded according to the consensus of professional (including judicial) opinion”.
“Unreasonable conduct ‘aptly describes conduct which is vexatious, designed to harass the other side rather than advance the resolution of the case and it makes no difference that the conduct is the product of excessive zeal and not improper motive …the acid test is whether the conduct permits of a reasonable explanation’. Negligent conduct was to be understood ‘in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession”
In Mr Marven’s submission, Irwin Mitchell had taken a sensible and pragmatic approach to completion of the Precedent H. In this case, the position had become more striking because the claimant had originally been charged too low an hourly rate by Irwin Mitchell based on their usual hourly rates for the value of the damages involved in this case. Once that error had been noticed, the hourly rates as from l May 2014 had been increased to rectify the situation. in the absence of that rectification (e.g. from £260 to £340 per hour for a Grade A) the difference between the contractual figures and those claimed in the budget would be very modest.
MASTER ROWLEY:
34. I have no doubt that the costs incurred by Irwin Mitchell to the date that a budget is drawn are available to the drafter of that budget based on the hourly rates charged to the client. It would be a simple matter for the figures for each grade of fee earner to be set out in the incurred costs part of the precedent H. There is no formula involved and the value of each grade of fee earner’s work can simply be inputted into the form. It is not at all clear to me why Irwin Mitchell would seek to recalculate the sums no doubt appearing on their electronic ledger by reference to a blended hourly rate. It seems to be an unnecessary task which leads, as Mr Marven submitted, to potential problems for the claimant if the resulting costs appear to the budgeting judge to be too high.
35. Whatever the reason, it is an approach which must be deprecated. It is self-evident that a solicitor preparing a costs budget should not overstate a party’s liability to his solicitor for costs that have already been incurred. It is to all intents and purposes a breach of the indemnity principle. It is bound to mislead both the opponent and the court in circumstances where neither has any opportunity to examine the costs claimed in any detail at a budgeting hearing. It is no answer to say that the opponent’s liability to pay such costs is ultimately protected by the option of going to a detailed assessment. The whole purpose of costs management is meant to limit the need for detailed assessments and part of that must involve the parties and the court being able to rely upon the information provided by the other party.
36. The costs that are necessarily estimated for work yet to be done can quite properly, in my view, be subject to calculation using an hourly rate which acknowledges that increases upon the current hourly rate are likely to be imposed by the solicitor before the case concludes. But I cannot see any justification for using that same ”blended” rate for work already carried out and for which the client is patently liable at only the contractual rate.
37. In my judgment, this is not an approach which would be endorsed by solicitors in general and as such it seems to me to satisfy the threshold of improper conduct in accordance with Ridehalgh. To the extent that this approach has been taken unknowingly, it would also merit the description of unreasonable conduct in failing to act with the competence required by the profession. But I did not gain the impression from Mr Green’s evidence that there is any happenstance in the approach taken. In my judgment the approach is improper and satisfies the test set out in CPR 44.11(1)(b).
38. During submissions, I queried whether or not an effect on the administration of justice would be sufficient to engage CPR 44.11 if, as it appeared, the defendants had not necessarily suffered any prejudice in terms of the amounts ultimately claimed in the bill of costs.
39. Mr Marven was clear that the case I mentioned, namely Jones v Caradon Catnic Limited [2005) EWCA Civ 1821 was not relevant. Mr Bacon’s approach was simply that I should impose a sanction regardless of whether the defendant had been caused any loss and therefore it did not matter whether there had been any prejudice as such.
40. Mr Marven submitted that any improper conduct found here should not justify any sanction being imposed for the reasons set out at paragraph [35]. It is a bold submission that improper conduct should suffer no penalty and I do not accept it. The question is what should an appropriate sanction be?
41. It does not seem to me that the second defendant’s suggestion of ordering the claimant to pay the second defendant’s costs of dealing with the claimant’s budgets is attractive. I have some doubt as to how simple the quantification of such costs would be. But in any event, it does not seem to me that it has been demonstrated by the second defendant that any additional costs were incurred during the budgeting process by the inaccurate quantification of the incurred costs. It appeared to me that it was only once the detailed bill has been produced that the discrepancy had been spotted.
42. It also seems unattractive to me to award the costs of the detailed assessment proceedings in whole or in part to the defendants at this stage as a sanction. As Mr Marven submitted, such an approach risks entirely distorting the parties’ incentives to settle this case short of a hearing.
43. CPR 44.11(2)(a) indicates a possible sanction of disallowing “all or part of the costs which are being assessed”. The sums claimed in the bill themselves do not offend the indemnity principle and I do not think a general disallowance of, for example, a percentage of the overall bill would be appropriate. It seems to me that the egregious aspect of the conduct here relates solely to the approach to the costs management of the underlying claim. Consequently, it is the costs claimed in the costs management activities that should be penalised.
I have concluded that, in order sufficiently to mark the court’s disapprobation of Irwin Mitchell’s conduct in this case, I should disallow all of the costs management elements, or “non-phase” part, of the bill.
SUCCESS FEE
Irwin Mitchell’s CFA provided for a success fee of 100% rebated to 70% if the case settled more than 3 months before trial. It is worthy of note that having initially been instructed privately with the benefit of legal expenses insurance, by the time the CFA was entered into in March 2013 Irwin Mitchell had been instructed for a year. During that period, a cardiologist was instructed on the question of causation and a general physician was instructed to advise upon breach of duty.
The Risk Assessment made the following observations:
- Both expert reports were supportive of the claimant’s case. However, these were preliminary reports with further investigation being required.
- Evidence from a neurologist and microbiologist might be required before the extent of the claim was clear.
- There was a significant risk that the defendant would strongly argue against the claimant’s evidence as to his ongoing difficulties and this was considered a high risk.
- As for quantum, the following specific risks were identified:
- the length of time before the claimant’s prognosis could be established with any certainty
- the prospect of a significant loss of earnings and loss of opportunity claim being made; and
- the fact that the defendant would argue against the extent of the claim were identified as risks.
There was also a generic description of the risk of a Part 36 offer being made and to this being a high risk factor.
At the end of the Risk Assessment under the heading ‘trial risks” three additional risks were identified if the claim progressed to within three months of the date fixed for trial, namely:
- Your opponent will have been legally advised that they have good prospects of winning at trial;
- The parties shall have exchanged all relevant evidence and if no settlement has been achieved it is assumed that the claim will be fought to trial;
- The outcome at trial when numerous unpredictable factors could arise will be very difficult to predict.
The Defendant’s Position
The defendant argued that the success fees claimed of 70% up to three months from trial and 100% thereafter was an unreasonable assessment of the risks, especially bearing in mind the supportive expert reports. He accepted that it was more risky against the other two defendants contemplated at the time (as was confirmed by the discontinuance against one defendant and a loss at trial against the first defendant). However, it was not in his view a 50-50 case as against the second defendant, against whom the claim ultimately succeeded. In Mr Bacon’s submission, this was essentially a quantum case and a 30% success fee would be appropriate taking into account the prospect of a Part 36 offer.
An issue was also raised by Mr Bacon as the legality of the two-stage success fee applied in the CFA [51 – 55]. Claimant’s response at [60] and Master Rowley’s determination and dismissal of the point at [65].
The Claimant’s Position
The claimant disputed the relevance of the medical evidence referred to in the risk assessment. The breach of duty report, Mr Marven said, referred to a failure of the claimant’s GP to make a referral to the hospital. The causation report supported the notion that an earlier referral would have led to treatment to prevent the stroke. It was clear, he said, even from these brief comments, that the reports were supportive of claims against the general practitioners i.e. the first defendant and the defendant GP not subsequently pursued and had no bearing on the claim against the second defendant.
In fact, according to Mr Marven, breach of duty was denied throughout by the second defendant and the case got very close to trial before the settlement for a little under half the full value of the claim. Whilst these events occurred after the CFA was made, they provided a useful crosscheck against the validity of the risks as assessed by the claimant’s solicitors. There was no issue regarding the value of the claim because it had been agreed at £1 million. The discount related entirely to the risk involved.
The CFA was a CFA Lite and produced no fees after a Part 36 offer had been made that was not subsequently beaten. Therefore, it was particularly relevant that the condition and prognosis evidence was going to be in dispute since that would bear directly upon the risks involved in rejecting a Part 36 offer. In fact, in Mr Marven’s submission, this was a high risk case because there was no positive evidence at the time the CFA was made. The claimant could not be blamed for entering into a CFA at that early stage against the second defendant.
MASTER ROWLEY:
62. … I accept that there was no supportive medical evidence against the second defendant available to the claimant the time at the CFA was made. I note from the chronology that the supportive evidence was not received until October 2013 when a general physician’s report became available.
63. In my view this is an unusual case on which to assess the success fee for it is clear that at the time CFA was entered into, the second defendant was not the primary prospect for a successful claim and therefore to some extent, there was not a lot of thought directly given to the prospects of success against the second defendant. The quantum and Part 36 risks were essentially the same whichever defendant was successfully pursued and therefore the assessment of those risks applies equally to the claim against the second defendant. But the prospect of success against the second defendant on the fundamental issues of breach of duty and causation arising from it are not at all clear from the risk assessment.
64. In my experience, where the issue of liability is clearly in play, the success fee is set at a significant level, regardless of whether quantum is difficult to assess and that is entirely understandable. If the case does not succeed on liability, then the level of quantum becomes irrelevant. Where, as here, the claimant has no supportive medical evidence, it seems to me inevitable that the issue of liability is in play. Whilst many cases of clinical negligence are brought successfully. It is well-known that many are not. I do not think that a success fee of 70%, which represents prospects of roughly 58% is an unreasonable assessment in the circumstances of this case. Consequently, bearing in mind the dicta of the Court of Appeal in C v W [2008] EWCA Civ 1459 regarding a margin of appreciation to be observed when solicitors carry out assessments, I think that the 70% success fee originally claimed is a reasonable one.
65. …
66. The trial on liability was due to start on 3 May 2016 and the parties were aware of that fact from 30 June 2015. The second defendant’s offer to settle was made on 25 April 2016 following a joint settlement meeting the previous week. The consent order is dated 29 April 2016.
67. The CFA provides for a 100% success fee if the case settled within three months of the date of trial i.e. 4 February 2016. The settlement as … clearly fell well within this period. I have set out the trial risks as described in the risk assessment at paragraph [47] above. It seems to me that the three factors referred to were all relevant in this case. The trial against the first defendant went ahead unsuccessfully. At the roundtable meeting, the second defendant maintained its defence on causation albeit accepting breach of duty on a without prejudice basis. That position was no doubt the product of legal advice based upon medical evidence exchanged. Therefore, whilst the description of the risks was generic in nature, the risks themselves were undoubtedly real.
68. It seems to me that an increase in the success fee to 100% is justified in this case. Breach of duty and causation had not been admitted at the time the success fee was agreed between the claimant and his solicitor and if the case got to a trial on those matters there must have been a very real prospect of being unsuccessful Therefore, specifying a circumstance where, if the case reached a trial (or got very close), it would justify a 100% success fee, is in my judgment a reasonable one in this case and I allow the success fee accordingly.
HOURLY RATES
The defendant argued that the starting point for considering the appropriate hourly rates was either the Guideline Hourly Rates for National Band 1, based on the claimant’s location, or National Band 2, given that Irwin Mitchell’s offices are in Sheffield.
It was said that:
- The day-to-day conduct of the case was run by a solicitor admitted on 17 October 2011 with supervision by a partner and with the use of counsel to advise and deal with issues arising during the claim.
- Separate specialist fee earners dealt with the special damages calculation and the costs budgeting.
- As such, there was no great responsibility accepted by the lead fee earner, or indeed any of the other fee earners such that it would justify any significant enhancement upon the guideline rates.
- The work had been done competently but not exceptionally or in some way that has led to costs savings elsewhere.
The defendant also queried the number of fee earners involved in terms of an alleged duplication between fee earners. Master Rowley however commented that this point did not seem to me to bear on the hourly rates themselves since the amount of time appropriately spent by the fee earners was a matter for the detailed assessment itself.
The defendant also took issue with the timing of the increase to the hourly rates. The claimant was not notified until 22 January 2015 that the rates had changed with effect from 1 May 2014. Mr Bacon submitted that a privately paying client would not agree to being charged retrospectively in this fashion and would expect to be charged only those rates of which he was aware until the date of the notification of the new rates.
The defendant offered:
Grade A £225
Grade B £200
Grade C £155
Grade D 111-146
The Claimant’s Position
The claimant maintained the rates put forward on the basis that:
- The guideline hourly rates are of little value in a case of this nature.
- It was a high-value clinical negligence claim with complex issues affecting causation and upon which Counsel was only used to advise.
- Specific issues in the day-to-day conduct of the case required knowledge and skill beyond the sort of case for which guideline rates would apply.
- The value of the case placed it in a class of claims for which the locality becomes less relevant and as such the geographical nature of the guideline rates bears less relevance.
MASTER ROWLEY:
74. I have already described the nature of this case during the course of this judgment. On a full liability basis, damages were agreed at £1 million. The claimant’s solicitors were always aware of the value of this case and consistently indicated to the legal expense insurers in the early part of the case that it was worth at least several hundreds of thousands of pounds. The claimant’s stroke was a life changing injury and as such the compensation sought was obviously of great importance to him. The case itself was not straightforward as can be seen by the varied outcomes of the claims brought against the three potential defendants and required specialist clinical negligence practitioners to pursue the claim successfully in my view.
75. I do not accept that the day-to-day conduct of the case by a junior solicitor with supervision from a partner and some input from counsel in some way minimises the responsibility upon either the lead fee earner or the supervising partner. It seems to me a reflection of a specialist firm who would be prepared to allow a case of this weight and complexity to be run by a junior solicitor. That specialism ought to attract higher hourly rates than would otherwise be the case. It will no doubt subsequently be relevant to the amount of time claimed.
76. My task is to allow reasonable hourly rates for the work done and although the guideline hourly rates are a starting point. They are not only to be “enhanced” where the solicitors have proved to have been exceptional in the manner suggested by the second defendant.
77. In my view, there are specialist clinical negligence practitioners around the country who would have been able to deal with this case. But in my experience, they would all have charged higher sums than are offered by the second defendant. The hourly rates claimed seem to me to be well within the bracket of rates charged by specialist clinical negligence firms for this sort of case. Indeed, many of them contend for rather higher hourly rates in the bills that come before me. It seems to me that the rates claimed should be allowed as sought and consequently I do so.
78. The rates eventually notified to the claimant … would in my view probably have been difficult to justify from the beginning of the case. There is certainly little prospect of them having been allowed for the later work having agreed lower rates earlier with the client. As such it seems to me to have been an entirely sensible approach for Irwin Mitchell not to have sought to justify that jump in the later parts of this bill. This does not mean, however, that the lack of a timely indication of the increase in rates should prevent them being claimed from 1 May 2014. It is entirely clear from the client care correspondence that the client was well aware of the dates from which he would be liable for increased rates and the modest increase actually claimed is one which I have little doubt would have been allowed on a solicitor and client assessment.
GOOD REASON TO DEPART
Lastly, the defendant invited the court to rule that there was also a good reason to depart from the budget as a result of the miscertification of the incurred costs, on grounds that:
“the inaccuracy of the stated incurred costs … results in the court allowing a budget in excess of what would otherwise have been allowed but for the inaccurate composition of the incurred costs. This results in IM ineffectively creating a cushion of protection as it increases the prospects of the actual incurred total costs of the case being less than the budgeted costs with the result that IM can rely on CPR 3.18(b) and avoid a closer interrogation of the costs incurred.”
Claimant’s Position
Mr Marven for the claimant rejected this contention, arguing:
- To the extent that costs have been claimed as incurred at a higher figure than appropriate, this can only prove to be a detriment to the claimant.
- If the increased costs are still considered to be reasonable and proportionate by the budgeting judge, they will have no effect on the sums allowed for the costs still to be incurred.
- If however, the increased costs cause judicial concern, then the only effect would be to reduce the estimated sums from the figures that would otherwise have been allowed.
The Costs Management Order made by Master Cook on 11 March 2015 included the following:
“The Court reviewed the Claimant’s budget and
(i) made alterations and
(ii) made the foilowing comments;
(a) the costs incurred to the date of the budget of £105,925 are very high and are indicative of an advanced state of preparation on the issues of liability and quantum.
(b) the costs incurred under the issue pleadings phase are high and have been taken into account when varying the costs under this phase.
(c) the costs incurred under the experts’ phase are high and have been taken into account when varying the costs to be incurred under this phase.”
MASTER ROWLEY:
84. It seems to me that Master Cook’s Order entirely supports Mr Marven’s argument. The budgeting hearing has reduced the costs allowed for future work. It may be that Master Cook would have considered those future costs to be too high in any event. But it is clear from paragraph 2 of his Order that he has specifically reduced the future costs in certain phases having taken into account the costs so far incurred.
85. Given that the claimant has already conceded that there is a good reason to depart from the budget in this case [as a result of succeeding against only one defendant], the only reason for my being invited to rule on an additional good reason would seem to be for it to be applied on other cases such as those anonymised cases referred to in the defendant’s witness evidence. That is not an attractive proposition in my view given that my role is as a first instance judge and I should only deal with the case in front of me.
86. Mr Bacon’s argument seems to be that if an inflated sum is allowed for the incurred costs, the overall figure in the budget will necessarily be different from the one that would be allowed if the incurred costs had been correctly calculated. That higher figure will then make the actual costs more difficult to challenge because they have more scope to fit within the budgeted sums. I reject that argument for two reasons.
87 The first is that the court is not approving the budget in relation to the incurred costs such that a good reason to depart from the budget is required. CPR 3.18 only applies to the estimated costs and the second defendant is able to challenge all of the costs in the incurred sections of the bill if it wishes to do so.
88. Secondly, there is nothing in this case to say that the overall costs have been increased by the mis-certification. The estimated costs have been reduced because of the mis certified incurred costs. If the costs had been accurately calculated at a lower sum, there is no reason to assume that Master Cook would still have reduced the estimated costs by the same amount. Given the comments that he recorded in his Order, it seems to me to be at least as likely that Master Cook would have made a lesser reduction in the estimated costs to allow the same budgeted figure overall.
89. As such, inflation of the incurred costs does not in my view necessarily produce a good reason to depart from the budgeted sums for estimated costs. It seems to me to be inevitable that it is a matter to be decided on the facts of the specific case.
90. I extend the time for the parties to make any application for permission to appeal until 20 June so that any application can be made at the end of the detailed assessment.