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MANAGEMENT TIME: A PRACTICAL VIEW FROM THE BAR



In his monthly column originally published by PLC, James Bickford Smith discusses the themes emerging from recent decisions concerning the case management powers and supervisory jurisdiction of the courts.

A central practical question raised by the Jackson reforms, was how case management would work under the new regime. It is a matter of record, and most likely regret, that the area where this question has most publicly played out has been the question of relief from sanctions. To most lawyers, Mr Mitchell will be more remembered for his costs budget than whatever was or was not said at the gates of Downing Street. After Denton, however, while few readers will not have experienced plenty of anxious phone calls and difficult discussions about the ambit of the relief jurisdiction, the focus of debate and practical experience seems gradually to be moving to other areas of case management.

This is an issue about which I have been considering writing a column for some time. I have been somewhat put off by the absence of decisions that clearly outline general principles, rather than ones that can be easily confined to their facts. Over time, however, it has become apparent both that one may wait in vain for such general discussions and that there are developments sufficiently worthy of discussion to merit columns, even if these are somewhat lighter on authority than usual. This column addresses possibly the most significant emerging theme, namely the courts' approach to costs budgeting. 

The nature of the budgeting exercise at CMC stage

The basic point that merits underlining is that the level of expertise and interest of judges hearing case and costs management applications varies significantly. So does their approach. Few practitioners will not have experienced either judges picking over individual lines in budgets, or judges apparently ill at ease with the costs management exercise. Further, as a matter of practice there is a tendency for a case management conference (CMC) to become overburdened with interlocutory applications going to matters other than costs. That can lead to far too little time being available to address budgets properly and/or to budgets leaving the CMC in the twilight zone of being neither approved or rejected.

It is also the case that in some instances, that of speedy trials being an obvious and important example, the usual case management regime is either dispensed with or of very dubious suitability. A question that has been hovering for some time is whether, in such circumstances, courts will leave matters as they stand (and to be resolved post-judgment), or whether they will seek to introduce an element of costs control if the occasion presents itself.

Impromptu budgeting

It is in this context that the decision in Hegglin v Person(s) Unknown (1) and Google Inc (2) [2014] EWHC 3793 (QB) (see Legal update,Guidance on costs capping and costs management, requests under Part 18 and further disclosure (High Court) (www.practicallaw.com/9-588-7645)) is of considerable interest. The case management background was that:
  • An injunction application had failed on 29 July 2014, with directions given instead for a speedy trial.
  • The trial was listed to commence on 24 November 2014.
  • Applications came before Edis J on 6 November 2014.
Some of these applications, being a flurry of last-minute requests for disclosure and answers to Part 18 requests, can fairly be described as going with the territory of speedy trials. A much more unusual application, however, was the claimant's application for a costs capping order. Sensibly, the claimant advanced in the alternative an application for a costs management order.

Both applications could fairly be described as audacious ones to issue less than a month before trial, and some judges might confidently have been expected to reject them in limine, on the grounds that costs issues should be reserved to the trial judge and/or detailed assessment. As against that, however, the claimant could fairly point to the high level of the defendant's budgeted costs relative to its own: whereas the claimant's budget came to £604,405, the defendant's came to £1,681,310.

Edis J decided that:
  • As this was "the first (and I hope only) pre-trial hearing after the close of pleadings and disclosure of documents and evidence", it was incumbent on him to put the case into order. This was clearly an approach to be commended.
  • The application for a costs capping order would be rejected.
  • He would make a costs management order.
  • The effect of that order would be to limit the defendant's brief fees to the level of those incurred by the claimant, reduce the solicitor's budgeted fees for the trial itself by over £100,000, and halve the amount budgeted for dealing with the claimant's expert report.
It followed that while the defendant successfully staved off the costs capping application, that was something of a pyrrhic victory. Not only were future budgeted costs dramatically reduced, but the judge also made a series of strong observations that would undoubtedly have fed through to any detailed assessment:

"I find the figures provided by the Second Defendant surprising. This is a 5 month period and a factually simple (although legally complex) case. It seems to me that the difference between the two budgets raises a concern about the proportionality of the Second Defendant's overall figure and that that figure itself, viewed in isolation, also suggests that it is not proportionate to the true nature of the dispute.

In some identifiable respects in my judgment it is possible to see where money may have been spent in a way which means that if any order for costs is ever made against the Claimant significant parts of the Second Defendant's costs should be disallowed…"

(Hegglin v Person(s) Unknown (1) and Google Inc (2) [2014] EWHC 3793 (QB) at paragraphs 13-14.)

This approach highlights themes that will be familiar from practice:
  • While costs management is on its face prospective, the fact is that judges are passing comment on incurred costs and are not infrequently feeding their view of the level of these into their orders about future conduct of the case.
  • It follows that CMCs can often become a forum for the type of costs arguments most commonly seen after trial.
  • The difficulty, however, is that the nature of the budgeting exercise is not the same as the nature of the assessment exercise, either in context or in form. It may be the former point that deserves particular emphasis. A judge making a summary assessment at trial, or ruling on an indemnity costs application, will be far more immersed in the detail of the case than a judge at a CMC (all the more so in the majority of courts, where no docketing applies). The result can be unfortunate. If one takes the classic example of a case where much energy is expended on attempting to secure disclosure, a trial judge will be much better placed to see whether those efforts were proportionate and justified than a judge at CMC stage.
Accordingly, one sees that one of the inherent risks of CMCs under the new regime is that of de facto costs capping orders being made on a thin evidential basis. By the same token, however, if one is a party facing an opponent spending what one considers disproportionate amounts on the claim, then the CMC does offer an opportunity to try and put a brake on matters. Anecdotal evidence suggests that when
this is done a disproportionate number of matters settle (as, in fact, Hegglin v Google has done). That may well be one of the tacit objectives of the new regime, and it is certainly a phenomenon to be aware of.

The difficulty highlighted by Hegglin v Google, however, is that the approach taken by Edis J is something of a rarity. It is much more common for budgets in speedy trials to be left on one side. It is not altogether clear that this is a bad thing, at least unless and until speedy trials are either docketed or dealt with by specialist judges. Leaving that specific category of cases to one side, however, the question prompted by Hegglin v Google is one of consistency. The question is not whether the judges who are keen to engage in active budgeting are better or worse judges than those who consider budgeting a distraction from resolution of the case on its merits. The question is whether the new system can succeed if judges are taking radically different approaches in a discretionary area axiomatically difficult to appeal.

Can one avoid budgeting altogether?

The exemptions from costs budgeting have always been controversial, both among practitioners and judges. Among the latter, it might be said that some consider them to create havens of relative tranquillity in a world of procedural guerrilla warfare and discussions (which they would consider nit-picking) about how many hours solicitors should be budgeting for a disclosure exercise. Others consider them an
invitation to disproportionate expenditure of legal fees by undisciplined lawyers unable to project manage litigation.

There has never been much doubt about which camp Coulson J falls into. Accordingly, the decision in CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd and others [2014] EWHC 3546 (TCC) (see Legal update, TCC "imposes" costs budgets in £18 million claim (www.practicallaw.com/7-586-5507)) will not come as a surprise. It holds that:
  • Even where a case, by its quantum, falls outside the default costs management regime, the court has a discretion to order costs budgeting.
  • When a party applies for such a budget to be ordered, the burden as to whether it should be ordered is neutral.
  • Further, such an applicant does not bear the burden of showing that there is a reason for the disapplication of an alleged default rule that there should be no budget.
The second and third points, while seemingly fine, may prove important. This is a question that has troubled commercial practitioners, as it was never clear whether courts would be receptive to such applications in cases over the threshold (at times by virtue, simply, of fanciful declarations of value). The perception that the Commercial Court itself would not be much interested in costs budgeting may explain a
spike in the issue of what would normally seem ordinary Queen's Bench Division claims in that court, although an alternative explanation would lie in the attraction of docketing. The position is likely to become clearer now that CIP Properties appears to have opened the door for such budgeting applications.

The current position and how to manage it

The real questions for most practitioners lie in what to expect when they attend a hearing at which budgeting is meant to be discussed, and what to tell their clients about such hearings:
  • At present, the only satisfactory answer to those questions is that this is an area in which there are very significant variations from court to court and judge to judge.
  • For that reason, many readers will doubtless have heard of, or devised, many work-arounds based on the basic adage of "know your judge". 
  • While I take that adage as read, and am always surprised by those who do not, one must equally be alert to the fact that basing a CMC strategy around the identity of a judge is perilous. The simple reason for that lies in the vagaries of listing, with cases allocated late and subject to change on the day. Matters will, of course, be different if docketing applies, if one is in the TCC, or if one is at a regional centre where a common approach has been firmly encouraged.
  • The default position must be to have prepared a budget with cogent assumptions and free of mathematical errors.
  • The surest ways to prepare a bad budget are to leave it to the last minute and to fail to involve the full legal team, including counsel and experts.
  • The tactical value of budgets is underestimated. A low budget can expose the other side's budget to acute scrutiny. A high one, if accepted, is a powerful force for settlement. Any decision to steer in either direction must, however, be very carefully discussed with the client in advance, for obvious reasons.
  • The tendency to err on the side of "caution" by including very high cost estimates is one that can excite judicial displeasure; equally that may be felt a risk easier to live with than underestimating costs and facing an uphill struggle to recover them.
  • It remains unclear what will justify amendment to the budget. Accordingly, it is best to err on the side of caution and prepare a thorough budget on the first occasion, even if it is one with a large number of assumptions and contingent items.
  • Costs spent preparing the budget, and on the CMC, are difficult to recover in practice, save in very substantial cases. Given the downside risks, however, preparation time is only likely to increase as the Jackson reforms continue to bed in.
The issues considered above are, in a sense, less easy to summarise than those arising from Mitchell, but it would seem likely that they will be issues of ever-increasing importance both to clients and litigators.
Posted: 05.12.2014 at 15:16
Tags:  Comments  Employment Law  Articles
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