Life in Mars?

Has the introducing of costs budgeting upset the accepted practice on payments on account? And could this spell the end of detailed assessment? Francis Kendall investigates

It may be pushing things to describe costs budgeting as sexy but Costs Lawyers such as myself were certainly titillated by a ruling delivered last year in the case of Thomas Pink Limited v Victoria’s Secret UK Limited [2014] EWHC 3258 (Ch), dealing with consequential matters arising from the main judgment. Not in relation to the parties involved, of course, but by a significant decision on payments on account.

The main case saw the claimant bring a successful action for trade mark infringement against the latter over its use of the brand ‘Pink’ for a new clothing range that moves beyond lingerie. Issues in the subsequent hearing included the precise drafting of the injunction to be granted, publication, the provision of information required to elect on an enquiry as to damages, and costs.

I make no comment on the issues other than the costs which were awarded in what was one of the first occasions that Mr Justice Birss was required to get into the detail relating to the impact of costs budgeting on costs orders to be made following trial.

The case originated in the Patents County Court (where costs are capped) but the case was transferred, as a result of an October 2013 application by the defendant, to the High Court. In December 2013 costs budgets were agreed between the parties. As the receiving party following the order made, the claimant’s agreed budget was just under £630,000 including incurred and estimated costs to trial.

At the time of the original budgets, no case management order was made. Not only was this deemed to be immaterial, but it was also ordered that rule 3.18 should apply, meaning there was to be both regard to the budget and that it should not be departed from unless there was good reason to do so.

The claimant’s budget rose to just under £680,000 as a result of a delay in trial and the consequentials hearing, and this increase was considered by the court. It was approved, not least by virtue of the fact that the defendant’s last agreed budget was for £660,000, but also that the delay and further hearing justified such increases.

The effect of rule 3.18 was deemed to be that the irreducible minimum which could be fairly identified as the correct payment on account should generally be the approved figure in the costs budget.

The claimant applied for a payment on account in the sum of £644,829, being the actual costs incurred to the date of its submissions. The defendant sought to rely on Mars v Teknowledge [2000] FSR 138 in seeking to reduce the award of a payment on account to just over 50% of the costs claimed, a sum of £350,000. The court acknowledged that this was a sum that would ordinarily have been awarded for a case of this nature had it not been subject to costs budgeting.

Recognising the need to strive not to overpay, and to apply a sum which was an irreducible minimum, the court determined that the impact of costs budgeting on the determination of a payment on account is very significant, although not so significant as to simply award the budgeted amount. The amount awarded was 90% of £644,829 to be rounded up to the nearest thousand.

Needless to say that the award of £581,000 on costs of £680,000 has not, as far as I am aware, resulted in a swift instruction to a Costs Lawyer to prepare the costs claim. Indeed the margins would be slight enough for both parties that the costs associated with detailed assessment, and probably even the preparation of the costs claim itself, could quickly become disproportionate in themselves.

There is currently no short form or abridged version of a bill of costs for a budgeted case. The preparation of a bill of costs in a budgeted case is arguably more complex with the need to be in a position to plead on the categories of costs incurred if the determining officer is to be able to have regard to the budget on assessment (a position that in itself is yet to be mandatory within the CPR).

Any general reluctance towards costs budgeting should be given serious consideration in light of this judgment. It is arguable that a judgment of this nature, if widely applied, could indeed begin to spell the demise of detailed assessment. It is arguable that it may be the paying party, in a case with similar facts, which may have more interest in pushing for an assessment of the costs. However, in my view, there remains the need for “good reason” on assessment to seek to reduce costs from a budgeted position.

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08 Jun 2016

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