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Costs budgeting and incurred costs, to comment or not to comment

Chief Master Marsh considers the purpose and effect of commenting on incurred costs at a costs management hearing under CPR 3.15 and PD 3E.

Cliff Richard v The British Broadcasting Corporation (BBC) & Anor [2017] EWHC 1666 (Ch)

Key Points

  • A degree of caution is appropriate when the court considers whether to make a comment about incurred costs.
  • A comment is not a finding of fact, but merely a matter to be taken into account.
  • There is little or no value in the court recording a general comment about incurred costs along the lines that the incurred costs are "substantial" or they are "too high".

Link to Judgment

This was a costs management conference directed by Mann J and heard by Chief Master Marsh in the litigation between Cliff Richard and the BBC.

A focus of the hearing was the question of whether the court should make any comment about the Claimant's incurred costs. The Master noted that:

"The court's power to make a comment about a party's incurred costs is contained in CPR 3.15 and the power is repeated in a similar form in Practice Direction 3E. There is no doubt that it is a discretionary power and the discretion is a very broad one. Neither the rule nor the practice direction gives any guidance about the circumstances in which a comment may be, or should be, made."  and that "A comment about incurred costs is to be taken into account in any subsequent assessment proceedings (rule 3.15(4))."

The Master went on to make the following observations:

"Although a comment must be taken into account, that falls some way short of it being binding on the Costs Judge. On a detailed assessment, the Costs Judge will have far more information than the judge at the Costs Management Conference. It seems to me that a Costs Judge is entitled, having take[n] a comment into account, to disagree with it or to put it to one side, if on the detailed assessment a fuller picture emerges." [3]

"Although not all of the 11 standard phases will need to be approved in every case, and often the first two phases will only comprise incurred costs, the court has a substantial task to undertake where there are disputed elements in both budgets. The exercise is necessarily a summary one that often has to be undertaken briskly... the approval can only be undertaken at an impressionistic level" [4]

"...a degree of caution is appropriate when the court considers whether to make a comment about incurred costs. It is asked to do so in the context of the overall costs management exercise and the restraints that are clearly stated in PD3E para.7.3. The exercise of producing budgets and their review is, necessarily, an exercise based on limited information, even in relation to incurred costs; the amount of information that is to be included in the budget is very limited indeed." [6]

"....in Mr Eardley's skeleton argument (he appears for the BBC) he observed that the Claimant's incurred costs are unreasonable and grossly disproportionate and invited the court to register its strong disapproval... In the course of the hearing, I asked Mr Eardley to formulate what comment or comments he would like the court to make and he suggested the court should say something along the following lines:

 "The incurred costs based on information available appear to be excessive and disproportionate". [7 -8]

"I have indicated that the court should exercise a degree of caution.  Here the figures that have been incurred are substantial. In aggregate they amount to £1,167,144.83.  The pre-action costs total £526,437.97 and the issue and pleadings costs are £324,611. The difficulty for the court, however, is that, although those figures appear to be substantial in absolute terms, it is quite impossible for the court today to form any meaningful view about whether those costs can properly be characterised as being unreasonable and/or disproportionate, let alone to be significantly or substantially unreasonable and/or disproportionate." [9]

"To my mind there is little or no value in the court recording a general comment about incurred costs along the lines that the incurred costs are "substantial" or they are "too high". If the court wishes to record a comment that the incurred costs are "excessive" or they are "unreasonable and disproportionate" it will wish to be sure that the comment is made on a sound footing, rather than impression, because commenting is quite unlike the exercise of approving a figure per phase for future costs. The court will also wish to consider the utility of making a comment unless it is specific and well-founded." [10]

"There is no significant benefit to be gained in the court making the sort of anodyne comment that the BBC proposes. A comment is not a finding of fact, but merely a matter to be taken into account. Making a comment does bear the risk, however, that on a detailed assessment disproportionate weight might be given to it, although the comment is based on limited information." [11]

"The costs judge, on a detailed assessment, will have the benefit of a full review of all the work that has been carried out. That is a far safer basis for a review to be taken. I am not persuaded that a comment should be made for the reasons I have given. I am also concerned that a comment could unfairly skew a detailed assessment at a later stage. That consideration,  set against there being no real benefit to the BBC in making such a comment, other than a short term tactical advantage, leads me to conclude that in the exercise of my discretion I should reject the BBC's request." [12]

"I do not accept Mr Eardley's submission that there is a danger that, if a comment is not made, a Costs Judge will proceed on the basis that the costs are both reasonable and proportionate.  That is a fanciful suggestion, given that Costs Judges are experienced in dealing with costs in many different types of claim and drawing conclusions about reasonableness and proportionality in a wide range of different circumstances." [13]

 

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