Master Rowley, leading costs judge, has provided authority in the case of Jallow v Ministry of Defence [2018] EWHC B7 (Costs) regarding the ever popular issue of whether a reduction of the hourly rates in the bill of costs to the parts which represents the ‘incurred’ costs section of a costs budget, is a good enough reason to depart from a parties agreed or approved costs budget.
By way of a brief background, the case involved a Gambian National who came to the UK to join the British Army. Whilst completing a tactical exercise he sustained Non-Cold Freezing injuries to his hands and his feet, and as a result of the injuries left the army.
Liability was agreed in the case prior to proceedings, however quantum was vigorously disputed and following the commencement of proceedings a Costs and Case Management Conference took place, where the Claimant’s budget was approved in the global sum of £120,000.00, £41,494.50 of which were incurred costs.
The terms of the Cost Management Order were unconventional in that the judge at the CCMC set a single figure for the budget as a whole, as opposed to totals for each phase, but it was clarified in paragraph 5 of the judgement that nothing turns on that point in the decision in this case.
Following the making of a Cost Management Order the case settled 4 weeks prior to Trial in the sum of £90,000.00.
Following the commencement of Detailed Assessment proceedings, the Defendant argued there be reasonable departure from the approved budget on two grounds, valuation and reduction of hourly rates for incurred costs.
- The claim had been pleaded at £300,000.00 and settled for £90,000.00
- During the detailed assessment of the incurred parts of the bill, reductions were made to hourly rates claimed ranging from £330 per hour to £140 per hour
The Defendant’s case was that if Master Rowley was with them on the hourly rates point, then the reductions should also apply to the budgeted parts for the relevant fee earners. The Defendant further added, that if Master Rowley was with them on the ‘value’ point, then in addition to reducing the hourly rates, the Defendant would argue that all other items challenged by them in the Points of Dispute in the budgeted section should also be considered.
Master Rowley rejected both arguments for the following reasons:
Value
It was clarified that the last submission made on behalf of the Claimant that if the Defendant had felt the budget had been set on a ‘false’ value then they ought to have appealed that decision rather than pursue the point at detailed assessment, as from time to time the paying party, where it is the defendant, will inevitably seek to argue that the budget set by a judge at the CCMC was determined based upon a false understanding of the value of the claim.
Master Rowley relied on the tests under the old proportionality regime outlined in Lownds v Home Office [2002] EWCA Civ 365, that
“a claimant should be allowed to incur the cost necessary to pursue a reasonable claim but not allowed to recover costs increased or incurred by putting forward an exaggerated claim and a defendant should not be prejudiced if he assumes the claim which was made was one which was reasonable and incurs costs in contesting the claim on this assumption.”
He confirmed that
“the essence of the point is whether it was reasonable for the claimant to believe that his case was worth the sum that he claimed. It is only if he could not reasonably have had that belief, because his claim was exaggerated in some way, that the budget might be considered to have been set on a false premise and as such should be departed from on assessment”.
Master Rowley, despite the Defendant’s contentions, found that was the position in this case, opining that the Claimant had not over exaggerated his case, and had put forward alternative cases as to quantum which demonstrated he was alive to the issues surrounding the potential level of damages to be recovered.
Rates
It is highlighted at this point that the Claimant had sought different hourly rates within the bill than were used within the budget, opting to allocate the case to a more experienced fee earner towards the end of the case. In respect of this point, Master Rowley confirmed at paragraph 31 that:
“The fact that the hourly rates allowed at the detailed assessment are different from those originally used in the budget does not, in my view, found a good reason. This case is a good example of why the make-up of the estimate on which the budgeted costs are subsequently agreed or approved is not relevant to the subsequent detailed assessment”
It was further added at paragraph 35 that:
“….it is for the party and his or her solicitor to determine who exactly does the work that needs to be done. Where the costs overall are within the budget that has been set, there can be no legitimate criticism in using a senior or a junior solicitor, leading or junior counsel to carry out the work.”
Regarding what he regarded as the ‘real nub of the Defendant’s challenge’, which was the tension between the need to allow reasonable and proportionate costs on an item by item basis in detailed assessments and the need for certainty of recovery as expected by the use of CMOs, Master Rowley confirmed that :-
“ …if the sums subsequently claimed in the bill are within that budget they are, on the face of it, also reasonable and proportionate”.
Analysis
On the face of it, this is a very good decision for receiving parties, and addresses the two major challenges which are raised by paying parties during both the assessment process, and for which they fight so hard at CMC by seeking comment from the court
The decision means that as long as Claimant’s can demonstrate that they have reasonable pleaded their case, based on legitimate evidence, despite other alternative outcomes, then there should be no reasonable grounds at assessment for their budgeted costs to be reduced in this way.
In respect of the hourly rates point, it is most welcoming to see common sense prevail, and an acknowledgment of the fact that it is not always possible for the same rates to be applied from the budgeting stage through the entirety of the case. As long as the figures remain within budgeted amounts then there again should be no reasonable departure from the budgeted costs because of the support shown from the SCCO.
The impact of this judgement on CCMC’s remains to be seen as to whether or not it will place greater emphasis on case valuation at hearings, bringing available evidence under more scrutiny, however for the meantime the decision is welcomed by receiving parties.