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Acceptable contingencies

In a recent libel case, the High Court clarified the judiciary’s approach to contingencies within budgets. In the dispute, contingencies accounted for around 10 per cent of both sides’ future estimated costs.

Tim Yeo MP v Times Newspapers Limited [2015] EWHC 209 (QB)

Link to judgment

http://www.bailii.org/ew/cases/EWHC/QB/2015/209.html

This case involved a libel dispute between the claimant, Tim Yeo MP, and the defendant, Times Newspapers Limited (TNL).

During the course of the dispute, both parties filed and exchanged costs budgets, as required by the CPR. However, after several months – and two hours of oral argument at a second case management conference - the parties continued to disagree over their revised budgets. Eventually, a budget was imposed on both parties in relation to future costs by Mr Justice Warby. The approved budget was set out in Warby J’s judgment, handed down on 4 February 2015.

When seeking approval for their revised budgets, both parties requested substantial contingencies - representing around 10 per cent of the total estimated future costs. Mr Yeo claimed contingences in excess of £50,000, while TNL requested contingences worth almost £54,000.

Mr Yeo claimed two separate contingencies: (A) “strategy review and consultation” (£18,350) and (B) “possible further work” (£31,950). TNL, meanwhile, requested four: (A) “app. to s/o honest opinion” (£15,125.00); (B) “app for specific disclosure” (£15,125.00); (C) “app for 3rd party disclosure” (£15,125.00); and (D) “costs associated with costs budgeting” (£8,453.50).

Delivering his judgment, Warby J struck out £95,675 of the £104,128.50 future contingencies claimed by both parties. He also made several observations regarding when contingencies are – and are not – appropriate:

“70. The first point to make about contingencies is that they must involve work that does not fall within the main categories on Precedent H. Secondly, in order for work to qualify as a contingency it must be possible to identify to the opposite party and the court what that work would be. Otherwise it would be impossible to determine whether the work falls within or outside a specified category, and it is hard to see how any assessment could be made of what its cost would be. Thirdly, there is the important issue of how likely it needs to be that the work will be required, before it can properly be included as a contingency. Mr Browne submitted that the test should be whether the work was "reasonably likely" at the time the budget was approved.

71. In my judgment work should be included as a contingency only if it is foreseen as more likely than not to be required. This seems to me a clear criterion that provides a practical solution, consistent with PD3E 7.4 and 7.9. If work that falls outside one of the main categories is not thought probable, it can reasonably and should be excluded from the budget. The time and costs involved in estimating how much work would cost are not easily justified if the work is no more than a possibility or is unlikely. If work identified as a contingency is included in a budget but not considered probable by the court no budget for it should be approved. If the improbable occurs, in the form of an unexpected interim application, the costs will be added to the budget pursuant to PD3E 7.9, unless the matter involves a "significant development" within para 7.4 in which case, if time permits, a revised budget should be prepared and agreed or approved.”

In the light of these observations, Warby J disallowed both of Mr Yeo’s requested contingencies, and thee out of the four contingencies requested by TNL.

In relation to Mr Yeo’s contingency requests, the judge ruled: “I consider that the main sections allow enough for ‘strategy review and consultation’ which is not a separate contingency. "Possible further work", he added, “meets none of the three criteria for a contingency that I have identified above.”

In relation to the four claims made by TNL, Warby J said: “Contingency A seems to me very unlikely. Contingency B is possible but no more. Contingency C was not understood by Mr Browne, nor by me. I have allowed Contingent cost D on the basis that it does not exceed the cap of three per cent of approved costs to which I have referred above, and the costs of budgeting in this case will have been more significant than they ordinarily would be.”

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