Costs orders following budgeting – two recent cases

Worcester v Hopley [2024] EWHC 2181 (KB) (21 Aug 2024)

Jenkins v Thurrock Council [2024] EWHC 2248 (KB) (9 Sept 2024)

Two judgments recently handed down by Master Thornett illustrate the risk of adverse costs orders being made at Costs Management Conferences where parties fail to produce reasonable and proportionate costs budgets.

Worcester v Hopley

In this clinical negligence claim, where liability was being defended in full, a Costs Management Conference was listed to take place after a Case Management Conference, allowing parties to reflect upon updated directions and to negotiate cost budgets. At the Costs Management Conference, the Claimant’s budget was reduced by the Court by 53.35%, resulting in a budget just 3.58% above what the Defendant offered in negotiations.  

At the hearing concerning the costs order, Master Thornett accepted that it would not be appropriate for the court to regularly depart from an ‘in the case’ costs order following “ordinary” costs management, just because a party’s budget was reduced, even where the court may express some critical views of the budget [17]. Further, he was of the view that CPR 44.2 (including the factors for consideration at 44.2(4)) provides the court with a wide discretion on costs. The notion that this discretion “is not readily suited to justify a specific costs order” was not accepted. “The notion that because costs management is necessarily interwoven with the process of case management” and thereforeshould be enveloped in an ‘in the case’ approach “substantially overlooks” such discretion (at [12] and [18]).

Master Thornett stated at [19] that:

In short, a party that resolutely proceeds to a separately listed costs management hearing with an overly ambitious budget should not readily assume that the court will be willing to see both its time and resources and those of opposing parties’ engaged without any potential consequence in costs.

At [22], he explored a (non-exhaustive) list of particularly relevant factors concerning the proportionality of the budgeting process undertaken by the Claimant. This included delegation within fee earner times, usage of leading and junior counsel, and extent of drafting still required, which the Claimant submitted are ordinary arguments of reduction made at such hearings.  

Master Thornett opined that “it is appropriate both to look at the detail itself but also take a step back and consider the process as a whole” [25]. With this, he was “not at all persuaded that the process was, as the Claimant submits, entirely routine and not out of the ordinary because the issues in contention typically touched upon hourly rates being said to be too high, proposed time excessive and the use of two counsel in conjunction with work at partnerial level disproportionate. Whilst I agree that these considerations in themselves may well often be routine and ordinary in such hearings, the figures in question and the time and attention that had to be attended to them in this particular case marks a distinction” [26]. In short, “parties must be prepared to account for not just what work justifies their estimated costs but why the figure claimed is also proportionate” [29].

For these reasons, Master Thornett ordered the following:

  1. ‘No costs’ for the original costs hearing itself;
  2. The Claimant to pay the Defendant’s costs of the hearing before Master Thornett;
  3. The Claimant’s costs management costs (such as may come to be assessed) are to be reduced by 15%.

Jenkins v Thurrock Council

Within three weeks, Master Thornett handed down another judgment following another Costs Management Hearing where the Defendant sought an order other than ‘in the case’.

This claim was a quantum only matter, liability being admitted. Master Thornett took the view, with respect to the Claimant, that this case was towards the lower end of sophistry for cases and costs managed in the High Court, and entirely typical of claims managed in the District Registries. As such, this was a case that should have seen“a typical approach to budgeting” [4], and “the Claimant therefore had a reasonably high burden to explain and justify his position at the costs management hearing” [5].

The Defendant’s budget reflected directions through to trial of £383,417.20. The Claimant budgeted to trial in the amount of £1,195,754.26 (having already incurred £355,640.61 in costs to the date of the cost management hearing). The Costs Management Conference was, as in Worcester, listed as a separate hearing purely to deal with budgeting, allowing a period for parties to amend and reflect on budgets following the Case Management Conference (at which the court expressed that it “was entirely satisfied that the Claimant was maintaining an unrealistic and inappropriately ambitious budget”).

At [8], Master Thornett expressed that “there can be a variety of reasons why defendants’ budgets (especially in personal injury and clinical negligence claims) are frequently if not always lower, such that comparison with a claimant’s budget is not always an easy or even useful exercise, the feature of an opposing party’s budget still being about a third of another’s plainly calls for careful consideration”.

A warning is given at [11]: “under no circumstances can parties therefore assume that because a hearing has been listed, and because that hearing is interlinked with case management, that the order at the next hearing will be bound to be ‘in the case’. […] In short, a continuing realistic appraisal (as is required before any hearing) why the hearing is proceeding and whether, having regard to the Overriding Objective, a more costs efficient alternative approach is possible”.

Master Thornett concluded “that the Claimant had presented and maintained an unrealistic and disproportionate approach to his estimated costs in the context of the demands and requirements of this case. He continued to do so despite the opportunity to modify his position in response respectively to the Defendant’s first Precedent R, observations made at the Case Management Conference and then overtures made by the Defendant during an intervening period before the Costs Management Hearing” [18].

Furthermore, Master Thornett found that the Costs Management Hearing “could well have been avoided had a more reasonable modified approach been taken by the Claimant [and] I see no reason why the Claimant should be the beneficiary of a ‘costs in the case’ direction” [19].

Accordingly, Master Thornett ordered:

  1. The Claimant to pay the Defendant’s costs of and occasioned by the Costs Management Hearing;
  2. The Claimant’s costs of preparing several budgets ought to be capped;
  3. The costs of the Claimant’s costs management as assessed should be reduced by 35%.

Takeaway points

As Master Thornton mentions within Worcester, the making of a specific costs order against a party at a Costs Management Conference is not unknown, himself having been referred in submissions to such a decision by Master Brown in Reid v Wye Valley NHS Trust and another [2023] EWHC 2843 (KB). As such, these two judgments amount to further High Court support for such adverse costs orders following unrealistic costs budgeting.

Although the points made by Master Thornett will largely be familiar, these judgments provide the following key points as to adverse costs orders:

  1. CPR 44.2 allows the court discretion to order costs on a basis other than ‘in the case’ – this can include reductions on budgets once assessed, and requiring the party to pay their opposing number’s costs for that hearing outright;
  2. Although it is usual for arguments of reduction to be made concerning high hourly rates, excessive proposed fee earner time, or the use of two counsel in conjunction with work at partner level, the extent of figures/time and attention required to budget them can mark a case as ‘out of the ordinary’, so as to attract adverse costs orders;
  3. The fact of an earlier Case Management Conference being resolved as ‘costs in the case’ will not deter a judge from ordering otherwise for the Costs Management Conference.