Sharp & Ors v Blank & Ors [2017] EWHC 141 (Ch)
Practice Direction 3E – Cost Management, establishes that parties in Multi-Track claims valued at less than £10 million must file and exchange budgets. The case will then be subject to cost management. But what about cases with a value exceeding £10 million? When will they be cost managed?
Sharp & Ors v Blank & Ors addresses this question, confirming that even in cases with a value considerably exceeding £10 million, the matter will be cost managed when the Court determines that to do so is in accordance with the overriding objective, furthermore the matter is still subject to proportionality considerations.
Cost Management
Mr Justice Nugee first addressed the Court’s ability to make a cost management order in a high value claim. This turned on interpreting CPR 3.15:
(1) In addition to exercising its other powers, the court may manage the costs to be incurred (the budgeted costs) by any party in any proceedings.
(2) The court may at any time make a ‘costs management order’. Where costs budgets have been filed and exchanged the court will make a costs management order unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made.
The Court’s ability to cost manage then is clear, a cost management order can be made ‘at any time’ and ‘will do so’ unless satisfied costs would be proportionate without such an order.
So why would the Court order cost management in a considerable case? Mr. Justice Nugee explains:
“I regard this as a case where the purpose of budgeting is to enable the parties to keep an eye on whether the costs that have been incurred, and are expected to be incurred, are reasonable and proportionate, with a view to asking for a costs management order if they can make out a case that they are not.”
Proportionality
Proportionality then, plays a key role in justifying the making of a Cost Management Order. Cost management can be an expensive process (cost management for both parties in Sharp & Ors v Blank & Ors was estimated at £225,000.00). As such, arguably the making of a cost management order itself could be disproportionate.
There are examples of cases where a judge has determined costs of a claim are prima facie disproportionate based on a costs to damages ratio, however Mr. Justice Nugee disagrees with this approach. Despite the Defendant’s budget totaling approximately 7% of the value of the claim, this was not sufficient to show that the costs were proportionate. Instead, whether costs are proportionate should be a consideration of whether the budgeted costs are proportionate compared to the work involved, very much blurring the line between reasonableness and proportionality.
In this claim, the question which drove Mr. Justice Nugee to making a Cost Management Order was simple:
“(would) the making of a costs management order be something that is likely overall to save expense and thereby enable the court to deal with the case more justly and more in accordance with the overriding objective.”
For reasons closely related to the funding methods of the action, Mr. Justice Nugee determined that the additional certainty which cost management would offer, could result in potentially considerable savings. As a result a Cost management Order was made.
How Does The Decision Impact In Practice?
Making up a critical part of litigation for approaching 5 years, proportionality and cost management are increasingly familiar to many practitioners. The likelihood is that the importance of these principles will only continue to grow, applying the same rules to high value claims is reflective of this. Even in very sizeable claims, proportionality is likely to be of importance to a judge when considering the costs incurred, so significant damages will not be carte blanche for recovering disproportionate costs.
Whether a case is a year defining multi-million pound class action, or a more modest but still important ‘routine’ claim, proportionality and cost management should be at the forefront of practitioners mind. For advice, assistance or guidance, MRN Solicitors knowledge will help navigate these often complex and rapidly changing principles.