Court “can adjust” added columns on Precedent H

The High Court has had to deal with an unusual problem in which one party’s approved budget included two extra columns on the first page of the Precedent H that apportioned its spend between the claim and counterclaim.

Roger Wyand QC, sitting as a deputy High Court judge in Sony Communications International AB v SSH Communications Security Corporation [2016] EWHC 2985 (Pat), had to decide the extent to which he should depart from the apportionments.

In the case – for which budgets had been agreed and approved by the court – Sony successfully sought the revocation of SSH’s patent, but the judge ruled on the counterclaim that he would otherwise have ruled that Sony had infringed the patent.

The extra columns on Sony’s Precedent H were under the heading ‘Apportionment’ and were individually labelled ‘Infringement’ and ‘Validity’. For each phase, there was an apportionment between the two by percentage, adding up to 100%.

Mr Wyand QC said: “For instance, the entry for CMC for which the costs had already been incurred, is apportioned as to 50% for each of infringement and validity. Sony seeks 100% of its costs for the CMC on the basis that these cannot be apportioned and represent general costs which go to the overall winner. SSH submits that Sony is bound by the apportionment it entered on Precedent H, even though apportionment is not required in Precedent H.”

Sony relied on paragraph 7.3 of Practice Direction 3E as an indication that it was only the total figure for each phase that was important for present purposes and that the apportionment was added as a guide and was not binding on it. It said that if the apportionment were to be binding, then so would the other workings, such as those identifying the solicitors expected to do the work, the hours taken by each of them and their charging rates.

SSH accepted that the court’s approval only related to the total figures for each phase, but said this was a case where the budgets were agreed between the parties and that the wording of the practice direction distinguishes between budgets which were agreed and those which were approved. It submitted that an agreement on the budgets was a contract that could not be unilaterally varied. It also argued that by varying the percentages to increase the validity percentage, Sony was actually increasing its budget in respect of validity.

Mr Wyand QC said: “I do not believe that the practice direction intended any such distinction to be drawn between budgets which have been agreed and those which have been approved. The consequence of SSH’s submission would be that, if Sony’s solicitors realised that their apportionment was wrong, they would have to seek SSH’s approval to change it and, failing approval, would have to apply to the court for approval. However, the court’s approval only relates to the total figure for each phase. If it is only the apportionment that is being changed, that is outside the remit of the court’s approval.

“SSH relies particularly on the fact that the CMC costs had already been incurred by the time the budget was drawn up so that Sony would have been in a position to be able to assess the proportions at that stage. However, I see a stated apportionment of 50/50 as being no more than that these costs are general costs of the action.

“Where it is apparent that the allocated apportionment is wrong, I believe it would be invidious if the court could not, with the assistance of the parties, make its own assessment.”

The judge was also asked to approve overspends on some phases in Sony’s budget and laid out a helpful summary of his view of the underlying principles in such matters:

– The budget is not a cap but a guideline which the court has the power to depart from;
– Each phase of the budget is to be considered separately and it is not legitimate to combine two phases where one is overspent and the other is underspent;
– The court will only depart from the budget where it is satisfied that there is a good reason to do so;
– The parties have a duty to revise their budgets if significant developments in the litigation warrant such revisions;
– The court can depart from the budget even if the parties have not revised their budgets as the litigation proceeds. The passage in the judgment of Moore-Bick LJ [in Henry v News Group Newspapers in 2013] could be read as suggesting that it would be more difficult to establish ‘good reasons’ for departing from the budget if the parties have been assiduous in updating their budgets. However, that would be encouraging parties to ignore their duty to update;
– In considering whether there are good reasons for departing from the budget, the court should take into account all the circumstances of the case;
– A particular consideration is the function of the budget in ensuring that the costs incurred are proportionate and reasonable. If the budget is being considered before the result of the trial is known, both parties have an interest in trying to ensure that both their own and the other side’s costs are reasonable and proportionate. Once the result is known, the two parties have conflicting interests in that the winning party will seek to recover as much of their costs as possible and the paying party will seek to reduce the costs it has to pay. This makes it much more difficult for the court to assess what costs are reasonable and proportionate; and
– A further function of the budget to be considered is the value to the opposing party to understand what is being done and what it is going to cost. Accordingly, a factor in the assessment is whether any requested increase in the budget, post-trial, will be whether the increase would take the paying party by surprise.

This post was posted in ACL e-Bulletin

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Costs News
Published date
01 Dec 2016

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