High Court seeks detailed budget in security for costs bid

A party seeking an order for security for costs does not have to provide a costs budget in the precise form of Precedent H, a High Court judge has ruled, but the court should expect a full schedule, “showing how the sub-totals under the various specified heads were arrived at, including the rates being charged and hours estimated”. 

Mr Justice Roth, sitting as both Chancery Division Judge and President of the Competition Appeal Tribunal, was also critical of elements of the summary budget he was provided with as being disproportionate.

Agents’ Mutual Ltd v Gascoigne Halman Ltd (t/a Gascoigne Halman) [2016] EWHC 2315 (Ch) dealt with an application from the defendant for additional security for costs in an action, which concerned the terms of membership of online property portal OnTheMarket.

The claimant had already given security of £500,000, but the defendant sought a further £1m – the claimant was only prepared to pay £500,000. The security related only the issues before the Competition Appeal Tribunal (the overall case remains in the Chancery Division), but the trial of other issues in the High Court have been stayed, pending this ruling.

Roth J said, “Accordingly, it is necessary to look with some care at Gascoigne Halman’s estimate of its costs”. This was put at £2.54m, excluding VAT, by the company’s original solicitors, Hill Dickinson, although it covered the costs of the whole action.

The defendant changed solicitors in June and instructed Quinn Emanuel Urquhart & Sullivan. In support of the application for further security, Roth J observed, “Quinn Emanuel have chosen not to update or revise the costs budget produced by their predecessors, but instead served on 1 August 2016 a one-page summary schedule which, as subsequently corrected, shows the total costs estimated at just over £2.8m.

“Moreover, those costs, going forward, relate only to the trial of the competition issues in the tribunal.”

In his witness statement in support of the present application, Boris Bronfentrinker, Quinn Emmanuel’s London head of EU and competition litigation, said the firm had not produced a revised Precedent H as this would be “both unnecessary for the purposes of the security application and premature, given that the tribunal has made no order in respect of the claimant’s application for active costs management”.

Roth J said, “I have to say that, in reaching that view, Mr Bronfentrinker is labouring under a serious misapprehension. Gascoigne Halman is coming to the tribunal seeking an order for payment. The difference between what the claimant has been prepared to offer and the sum which Gascoigne Halman is seeking is very substantial, especially for a domestic start-up company. 

“It is noticeable that Moginie James [the defendant in a similar case that is to be tried along with this one], in connection with its independent application for security for costs, took the trouble to complete a detailed costs budget following Precedent H, to which a summary schedule of revisions was recently produced. 

“By contrast, the one-page schedule served for Gascoigne Halman gives no indication of hourly rates used and time allocated between different fee-earners, although Quinn Emanuel no doubt had this information to produce the schedule of figures.

“In response to repeated, specific requests from the claimant’s solicitors raising these points, Quinn Emanuel wrote on 24 August to say simply that the rates used for partners varied between £520 and £590 and that the ‘associate rate’ was £395. As Mr Harris [counsel for the defendant] accepted in response to my question, clearly more junior solicitors at a lower rate and paralegals or trainees will also be involved in this work.

“In support of its application for security for costs a defendant is, of course, not obliged to present a costs budget in the precise form of Precedent H, but it can be expected, especially in view of the size of the sum being asked for here, to prepare a full schedule showing how the sub-totals under the various specified heads were arrived at, including the rates being charged and hours estimated.”

The judge went on to find that, “for a case of this nature, having regard to the issues involved, with a trial over nine court days and a single expert, I consider total costs of £2.8m to be seriously disproportionate and I have little doubt that they would be significantly reduced on standard assessment”.

While he said that it was not appropriate to go into all aspects of the budget, “I note with some surprise that the figure for disclosure is over £340,000”. This was due to the greater burden of disclosure falling on the claimant, which has budgeted costs of disclosure at £117,000.

Roth J said: “I observe in that regard that the claimant is also represented by a City of London firm where the rate for a senior associate, £385, is very close to that of an equivalent at Quinn Emanuel, albeit that it is clear from the claimant’s detailed schedule that the greater part of the time devoted to disclosure is, unsurprisingly, expended by more junior personnel.

“Even if the number of hours estimated by the claimant in its schedule devoted to disclosure, i.e. 365 hours, is seriously under-estimated, as Mr Harris submitted, and as much as double that time (i.e. 730 hours) is reasonably required for disclosure, on the figure in the Gascoigne Halman schedule, the average rate of work on disclosure would amount to around £465 per hour, which is a striking figure, especially if, as I was told in the course of argument, much of the work on disclosure is in that firm also being carried out by more junior personnel.”

He also branded the £123,000 budgeting for the pre-trial review as unreasonable and disproportionate, noting that Moginie James’ budget was under £13,000 and the claimant’s budget for the PTR covering both actions was under £27,000.

The judge then looked at the claimant’s costs budget, which came to £1.86m and added: “Mr Harris submitted that many of the figures in that schedule are much too low and that a claimant facing an application for security for costs has an incentive to understate its own costs estimate. However, the claimant’s costs budget dated 25 August 2016 is signed by a partner in Eversheds attesting to it being a fair and accurate statement of incurred and estimated costs. 

“Nothing in the rates being charged suggests to me that Eversheds are conducting this case for their commercial client on a reduced or concessionary rate and Mr Maclean QC confirmed that my supposition is correct.

“Moreover, their budget was not prepared simply for the purpose of resisting Gascoigne Halman’s security for costs application. It was also adduced in support of the claimant’s own application for costs management, which has also been disposed of today. So if that budget were under-estimated, the claimant would face a serious risk that the costs it can recover, if successful, would be insufficient. 

“I accordingly reject the criticisms levelled at the claimant’s costs budget or its relevance. Indeed, a somewhat remarkable feature of the argument on this application is that so much time was devoted to scrutiny of the claimant’s costs budget and not the Gascoigne Halman costs schedule setting out the costs for which security is being sought.”

This and other factors led the judge to conclude that on a “rough and ready basis”, it was fair to proceed on the assumption that Gascoigne Halman’s costs, on a standard basis, would be a little more than the claimant’s budget, leading him to adopt a figure of £1.9m.

Roth J concluded that ordering 70% of this figure as security was fair – meaning £1.33m and the claimant paying an extra £830,000.

This post was posted in ACL e-Bulletin

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Costs News
Published date
14 Oct 2016

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