Many lawyers are no doubt wondering how the new costs rules, particularly those as to costs budgets, will affect litigation in the future. The recent decision of Mr Justice Coulson in the Willis v MRJ Rundell & Associates Ltd & Anor [2013] EWHC 2923 (TCC) provides some helpful pointers.
The case, which was run under the costs management pilot in the TCC, involved a £1.1m professional negligence claim against a firm of construction professionals. At a costs management hearing in September 2013, both parties submitted costs budgets - £897,369 for the claimant and £703,130 for the defendant. The judge refused to approve either party’s ‘disproportionate’ costs budgets.
The judge had some interesting comments to make on costs budgets and the issue of proportionality. He stated that costs-budgeting was an important tool by which the courts endeavoured to control the costs of civil litigation. In the instant case he considered that the costs budgets were disproportionate and unreasonable because it would ‘cost significantly more to fight this case than the claimant [would] ever recover.’
On professional negligence claims, the judge had the following comments to make. He recognised that they would be more costly than other commercial disputes because they required expert evidence. He also recognised the fact that the courts, when considering proportionality, needed to make due allowance for the ‘for the non-quantifiable, but potentially serious, damage to the defendant’s professional reputation’ that might be caused by claims of this type.
Finally the judge articulated the test of proportionality in the following way:
‘It seems to me that one test of proportionality is whether the trial is likely to be an end in itself, or merely a lesser part of the process which the parties will use in order to put themselves in the strongest position to argue that, subsequently, the other side should pay all or most of their costs. When the costs on each side are much higher than the amount claimed/recovered, the latter is almost inevitable.’
Fortunately for the parties, the judge explained that the absence of an approved costs budget did not mean the successful party would recover no costs at all. He stated as follows:
‘However, I should add that, although I am aware that some have taken the view that the absence of an approved costs budget means that that party will recover no costs at all, I do not believe that such a draconian approach is in accordance with the letter or the spirit of the new costs rules or 51G PD.’
This case illustrates the need, as the judge explained, for ‘all litigants and their solicitors [to] get to grips with and comply with the new regime as soon as possible.
