The Civil Procedure Rule Committee may need to look at resolving a significant issue for Costs Lawyers over the costs of costs budgeting, a High Court master has suggested.
Master McCloud, sitting as a deputy costs judge, identified the “tension” between the Precedent H Guidance – under which some costs of the costs management process are put in the CMC and PTR phases of Precedent H and are, therefore, budgeted – and the “very sensible guidance” of the Senior Costs Judge, Master Gordon-Saker, in BP v Cardiff and Vale University Local Health Board  EWHC B13 (Costs)) that bills of costs should clearly set out costs claimed within the 1% and 2% caps on budgeting costs under paragraph 7.2 of PD 3E.
She said it “may be helpful” for the rules committee to consider whether the Guidance for Precedent H should stipulate a “simple solution” to the problem, namely that “any costs referable to costs budgeting and costs management are not to be included in the Precedent H other than for the purposes of the 1% and 2% caps on budgeting costs”.
Master McCloud explained: “Taking that approach would mean that CMC budgets would be as their name suggests, budgets for case management conferences and case management, and not the costs management aspects of the case, which (consistently with the Senior Costs Judge’s guidance in BP v Cardiff and Vale University Local Health Board) could helpfully be spelled out in one clear part of the bill to which the relevant percentage cap can easily be applied.”
In Woodburn v Thomas  EWHC B16 (Costs), the Costs Lawyer drafting the bill proceeded on the footing that Master Gordon-Saker’s guidance should be followed and the costs of budgeting and costs management should be separated out.
Master McCloud said: “The difficulty which this caused was that it was difficult for the parties and the court initially to get to the bottom of what the correct approach to assessing the relevant parts should be, and for what items in the bill, and whether to treat some or all of the ‘non phase’ costs as being subject to the 2% cap or (alternatively or perhaps in addition) also subject to the budget limit for the CMC phase itself.”
Noting the “relative shortage of decisions of courts which relate to the practicalities of detailed assessment in cases which have been subject to the new costs budgeting regime”, she said it was “perhaps unsurprising that the point arising here required attention”. She said her approach was:
The assumptions in the Precedent H are the starting point. Those evidence the basis on which the judge has made his or her budgeting decision or on which the parties agreed the budget. Here the assumptions included in the CMC phase (and PTR phase) included some costs referable to budgeting and costs management, which is as the guidance requires;
- The Costs Lawyer drafting the Precedent H must, unless the guidance changes, follow the guidance as to which costs of costs budgeting he or she includes in the CMC (and PTR) phases and which he or she includes in the non-phase elements as being the ‘other’ costs of costs budgeting;
- “In my judgment (whether or not the guidance has been followed, albeit it was in this case), where a budget is approved or agreed, then the assumptions on which it was approved or agreed are the best guide as to how the relevant budgeting costs should be treated in the bill, so as to avoid the difficulty of argument over the extent to which those budgeting costs may be subject to the CMC phase’s budget limit (thereby requiring ‘good reason’ if in excess of budget) as opposed to or as well as the “2%” cap imposed by PD 3E 7.2(b)”;
- Ensuring that the bill phases include (wholly and exclusively) the costs which were budgeted in the corresponding identical Precedent H phases “could avoid the confusion as to ‘what goes where and how to treat it’ which was encountered here and took some time in court to resolve item by item in the ‘non phase’ part of the bill”;
- “I therefore directed that the items in the ‘non phase’ part of the bill which fell within the CMC phase assumptions of the approved Precedent H (and guidance) should be treated as if they had been pleaded in the CMC phase of the bill, and that all other costs of costs budgeting and costs management should remain in the non-phase part of the bill and be subject to the 2% (and 1%, as appropriate) caps;
- “In the result, the costs claimed in the CMC phase exceeded the budget for that phase by a somewhat greater amount than they already did in any event.”
The parties settled the remaining issues in the bill.
Master McCloud accepted that her approach was “not ideal”. She explained: “While it ensures that the CMC budget phase matches exactly the bill CMC phase, it has the undesirable effect of dividing the costs budgeting costs into two parts (those subsumed into the CMC budgeted phase and those in the ‘non phase’, non-budgeted part of the bill).
“Separating those in that way then arguably causes difficulties in application of the 2% cap on budgeting costs, and in this judgment I was not asked to rule on the question as to whether the costs budgeting costs in the CMC phase were subject to the budget for that phase only, or whether they were subject to both the phase budget and the 2% cap.”