Interaction between costs budgets and indemnity costs

[TimothyP]

We already have conflicting dicta over the interaction between costs budgets and indemnity costs.

Elvanite Full Circle Limited v AMEC Earth & Environmental (UK) Limited
http://www.bailii.org/ew/cases/EWHC/TCC/2013/1643.htm
14 June 2013
Paragraph 28: "Prima facie, whether under PD 51G paragraph 8, or CPR 3.18, the costs management order (with its approval of the costs budget) is expressed to be relevant only to an assessment of costs on a standard basis. However, as a matter of logical analysis, it seems to me that the costs management order should also be the starting point of an assessment of costs on an indemnity basis, even if the 'good reasons' to depart from it are likely to be more numerous and extensive if the indemnity basis is applied."

(1) SLICK SEATING SYSTEMS
(2) GL EVENTS SA Claimants/Respondents
v
(1) LEA MARK ADAMS
(2) LEAMARK LIMITED
(3) LA STRUCTURES
(4) JOHN JONES
http://www.bailii.org/ew/cases/EWHC/Mer ... 13/B8.html
13th May 2013
Paragraph 11: "… indemnity costs are applicable. This means that the costs budgeting, even if the claimants had exceeded their budget would not have come into play as far as this is concerned because it would be upon the defendant to show that the costs they had incurred, whether within or above the budget were unreasonable."

Tim
http://www.twitter.com/TPcosts

[dls]

Fascinating - I will add them to the (lengthening) queue of cases to analyse.

[TimothyP]

We now have more obiter dicta at first instance over the interaction between costs budgets and indemnity costs - this time from His Honour Judge Keyser QC sitting as a Judge of the High Court.

(1) PETER KELLIE
(2) KELLY KELLIE
v
WHEATLEY & LLOYD ARCHITECTS LIMITED
http://www.bailii.org/ew/cases/EWHC/TCC/2014/2886.html
27 August 2014
Paragraph 17 shows that the judge considered that the costs management order (CMO) should not be the starting point for an assessment of indemnity costs.

Greg Cox of Coleman CTTS Solicitors writes (in the response to the article at this link http://www.litigationfutures.com/news/j ... nity-costs)

This point was addressed, obiter, in Denton (http://www.bailii.org/ew/cases/EWCA/Civ/2014/906.html) – the sanctions/Mitchell case – by the Master of the Rolls and Vos LJ at paragraph 43 – “If the offending party ultimately loses, then its conduct may be a good reason to order it to pay indemnity costs. Such an order would free the winning party from the operation of CPR rule 3.18 in relation to its costs budget”.

[TimothyP]

In a multi-track case commenced on or after 1 April 2013, costs management applies (CPR 3.12), all parties must file and exchange budgets (CPR 3.13) and the court may make a costs management order (CPR 3.15).

If the court has made a costs management order, the court will, on an assessment of costs, have regard to the receiving party’s budget - if the assessment is on the standard basis (CPR 3.18 says so).

If, on the other hand, the court has not made a costs management order, CPR 44 Practice Direction 3 applies (CPR 44 Practice Direction 3.1 says so) and the court may, on an assessment of costs, have regard to any budget previously filed by the receiving party (that is neither approved nor agreed) and take it into account when assessing the reasonableness of the costs claimed. CPR 44 Practice Direction 3.4 says so but does not say that it is limited to assessment on the standard basis; I infer that it applies to an assessment on either the standard or the indemnity basis.

In summary:

1. When the court assesses costs on the standard basis:

(a) If the court has not made a costs management order it may take into account any budget previously filed by the receiving party (that is neither approved nor agreed); and

(b) If the court has made a costs management order the court will have regard to the receiving party’s budget.

2. When the court assesses costs on the indemnity basis:

(a) If the court has not made a costs management order it may take into account any budget previously filed by the receiving party (that is neither approved nor agreed); but

(b) if the court has made a costs management order the CPR and Practice Directions are silent and the courts have (it appears from my previous posts in this thread) different opinions about the relevance (if any) of costs budgeting.

[dls]

Many thanks

[TimothyP]

Paragraph 11.3 of the Senior Courts Costs Office Guide is inadequate. It says:

(a) When assessing the costs in a case in which a costs management order has been made under CPR 3.15 the court will:
(i) have regard to the receiving party's last approved or agreed budget for each phase of the proceedings; and
(ii) not depart from such approved or agreed budget unless satisfied that there is good reason to do so.

It fails to specify that this rule applies (by virtue of CPR 3.18) when the court assesses costs on the standard basis.

[atticus]

Thanks. Are you aware of any moves to rectify this?

[TimothyP]

No I am not.

[miner]

Thanks for posting this.

The changes which were implemented to the CPR in April 2013 are very significant in other costs matters too, and it seems that many lawyers are blissfully unaware of them and their effect - as are some judges.

For those involved in these matters, it is worth checking out the changes.

[TimothyP]

His Honour Judge Simon Brown QC (sitting as a judge of the High Court) confirms the position is as set out above - in his judgement on costs orders in:

Excelerate Technology Ltd
- v -
Lindsay Cumberbatch
and
Red Foot Technologies Ltd
and
David Osmond
http://www.bailii.org/ew/cases/EWHC/QB/2015/204.html
16 January 2015
Paragraph 31:

Where costs are ordered to be assessed on a standard basis, such assessment will not depart from an agreed or approved budget 'unless satisfied that there is good reason to do so' (CPR 3.18.). Where, as here, the Claimant's costs will be assessed on an indemnity basis, the Claimant will not be so limited by the rules to the agreed costs budget but it may, in practical terms be a starting point or guide for the costs judge on any detailed assessment: see the conflicting fist instance cases of Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd [2013] 4 Costs LR 612 and Peter Kellie v. Wheatley and Lloyd Architects Ltd . [2014] EWHC 2886 (TCC).