High Court ruling on costs budgeting in group litigation

This article was co-authored by Clarisse Patel, Paralegal. 

In a reminder of the scrutiny which the courts will use when reviewing costs budgets, the High Court has rejected an application by group litigation claimants to retrospectively revise a previously approved costs budget and reduced a future budget by more than half.

Background

Over 300 claimants who suffered occupational diseases following exposure to dust and fumes at work are party to a Group Litigation Order, ‘The British Steel Coke Oven Workers Litigation’ which was approved by the High Court in 2016.

The litigation is subject to a costs budgeting regime which is divided into phases.

On 20 March 2020, the parties attended a Costs Case Management Conference (CCMC) before The Hon. Mr Justice Turner who considered:

1. The claimants’ application to retrospectively amend their phase 1 budget to increase the sums allowed
2. The claimants’ request for increased costs for items within the forthcoming phase 2 budget.

3. Retrospective application to amend approved phase 1 budget

The claimants’ application was founded upon Practice Direction 3E para 7.6 of the Civil Procedure Rules which permits a party to increase or decrease its costs budget if “significant developments in the litigation warrant such revisions”.

The claimants sought to increase their phase 1 costs budget by over £375,000 in respect of costs incurred relating to case management conferences and group co-ordination costs on the basis that the defendant had made an unsuccessful application to have the question of limitation tried as a preliminary issue, resulting in the prolongation of the procedural timetable by approximately one year. The claimants argued that this gave rise to unforeseen additional costs.

The court noted that although the defendant’s limitation application was unforeseen it did not consider that the consequences were significant, noting that the claimants had already been awarded their costs of defending the application and therefore the "developments" relied upon related to the collateral impact of the delay. Further, group-co-ordination costs were already covered by budgeted costs and any additional costs consequential upon the delay were likely to be modest.

Mr Justice Turner reminded the parties of the court’s case management powers which provide that "In any case where a costs management order has been made, when assessing costs on the standard basis, the court will:

• Have regard to the receiving party's last approved or agreed budgeted costs for each phase of the proceedings;
• Not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so;…"

In reaching his decision, Mr Justice Turner had regard to the fact that the costs in respect of which the variation was sought were very considerable indeed. He also considered it less easy to justify the variation of a budget in respect of a phase which had been entirely concluded and for which all costs had already been incurred. He concluded that the assessment stage was the appropriate stage for the claimants’ to demonstrate “good reason” for seeking costs which exceeded the sums already budgeted for.

2. Application to increase future phase 2 costs budget

Mr Justice Turner reduced the claimants’ future phase 2 costs budget from approximately £3.79m to just £1.6m. In particular, significant reductions made were in respect of group co-ordination costs.

By the end of phase 1, the claimants had already incurred costs relating to group co-ordination totalling £1,586,621 and expected to spend a further £437,493 in phase 2, i.e. a total expenditure of over £2m, which Mr Justice Turner remarked was “redolent of a degree of financial incontinence”. He set the budgeted figure for phase 2 at just £200,000, allowing an amount which he deemed to be reasonable and proportionate, having regard to the substantial sums already incurred.

Comment

This judgment is a reminder that costs budgeting will be subject to intense scrutiny by the court and that a vigorous assessment will be made as to the reasonableness and proportionality of the costs claimed. In respect of phased costs budgeting for group litigation, the court will have significant regard to costs already incurred in earlier phases when considering budgets for future phases.

It is also clear that there is very is little room for manoeuvre in respect of any proposed amendment to a previously approved costs budgets. Parties will need to have very good reason to persuade the court to amend an approved budget. In this case, prolongation of the procedural timetable was not a good enough reason. Further, it demonstrates that the court will not entertain an application to amend a budget where the actual consequential costs arising from the “significant development” transpire to be modest in value.