The Civil Procedure Rule Committee (CPRC) has received a recommendation that there needs to be a change to the costs budgeting rules in the wake of the Court of Appeal’s ruling earlier this year in SARPD Oil International Limited v Addax Energy SA and another  EWCA Civ 120.
In this, Lord Justice Sales indicated that parties that wanted to take issue with the incurred element of a costs budget should do so at the first case management conference and not wait for the detailed assessment.
In a paper to this month’s meeting of the CPRC, Master Richard Roberts, chair of its SARPD sub-committee, wrote: “The judgement is widely interpreted as preventing a paying party from challenging the costs incurred if they have agreed a budget at the case management stage.
“Further, it is seen as an incentive to challenge all parts of the costs incurred at the case management stage. Whether or not this interpretation is correct, the effect of the decision has been to undermine the efforts of the CPRC to simplify costs management, to promote agreement and to thus reduce hearing time.”
He said the case showed an inherent tension in the rules: “At present, the court limits its costs management function to approval or management of the costs to be incurred. However, the court’s approval relates to each phase of the budget which is an amalgam of the incurred costs and the budgeted future costs.
“As SARPD highlights, the approval of a phase of the budget may be seen to indicate approval of both the incurred costs and future costs and thus deprive a party of raising points relating to the incurred costs on a later assessment of costs.
“Such an interpretation would create significant issues beyond costs management. The assessment of costs requires the judge to take into account the factors outlined at CPR 44.4. It can be seen that many of these factors will not be known at the case management conference (e.g. the conduct of the parties and the efforts made to settle the case.) Thus, there is a question as to how an assessing judge can properly take into account these factors if the judge simply ‘rubber stamps’ the decision made at case management stage.
“Some of the sub-committee understand the effect of CPR 3.18(b) to be an exception to CPR 44.4 whereby an approved budget is binding on the parties in absence of good reason (which may be provided by factors unknown to the judge at the time of costs budgeting). To this extent, the inclusion of 44.3(h) has caused some misunderstanding.”
The sub-committee recommended a series of changes to rules 3.15, 3.18, 44.1 and practice direction 3E with the aim of:
– Decoupling the costs incurred from the budgeted costs, making it clear that the court’s budgeting will only relate to the costs to be incurred;
– Ensuring that the court on detailed assessment can properly apply CPR 44.4;
– Retaining the power of the court to comment on the incurred costs so as to provide clarity as to the interrelationship between the budgeted costs and the costs to be incurred and provide a steer which may promote agreement of the costs incurred; and
– Retaining the power of the parties to agree the incurred costs and the budgeted costs.
The sub-committee decided that the changes did not require consultation. “The professions and judiciary proceeded on the basis that an assessing court could assess the incurred element of the budget. To this extent we are merely restoring the status quo ante,” said Master Roberts.
It is not yet known whether the CPRC approved these changes.
The sub-committee also raised the issue of extent to which, if at all, the costs budgeting regime under part 3 fetters the powers and discretion of the costs judge at a detailed assessment.
“On the one hand, there is a view (which is that of the Judicial College) that, if costs are claimed at or below the figure approved or agreed for that phase of the budget, then they should be assessed as claimed without further consideration. The budget fixes the amount of costs recoverable and the costs can only be reduced if the defendant paying party satisfies an evidential burden that there is good reason to depart from the figure in the budget.
“There is a contrary view that the cost judge’s powers and discretion are not fettered by the budgeted figure for that phase and the budget is but one factor to be considered in determining reasonable proportionate costs on assessment of costs under CPR part 47. This view was accepted by Lumb DJ in Merrix v Heart of England NHS Foundation Trust  EWHC B28 (QB).
“We have flagged up this important issue but have not sought to resolve it. Firstly, it was not within our remit. Secondly, there is a strong argument that an issue of such fundamental importance should be the subject of public consultation. Thirdly, we could not reach a unanimous decision.”
The CPRC was also asked to make a minor amendment to reflect the Court of Appeal’s recent ruling in Qader & Ors v Esure Services Ltd & Ors  EWCA Civ 1109, where it ruled that cases which exited the RTA and EL/PL protocols and then proceeded on the multi-track were not subject to fixed recoverable costs.
Lord Justice Briggs (pictured) essentially rewrote the CPR to correct what he considered to be an oversight in the drafting of part 45.29B by the CPRC, and it was that change that was before this month’s meeting. This would see the addition to parts 45.29B and D, after the reference to 45.29J, of the words “and for so long as the claim is not allocated to the multi-track”.
Also, in tables 6B, 6C and 6D, the part A, column 3 heading would be changed to read “More than £10,000”, removing the additional words “and not more than £25,000”.
It is not known at the moment if this change was approved either.
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