Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr. Justice Coulson |
| Judgment Date | 14 June 2013 |
| Neutral Citation | [2012] EWHC 1643 (TCC),[2013] EWHC 1643 (TCC) |
| Docket Number | Case No: HT-11-284 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 14 June 2013 |
[2013] EWHC 1643 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr. Justice Coulson
Case No: HT-11-284
Peter Susman QC (instructed by Birkett Long LLP) for the Claimant
Anneliese Day QC (instructed by Weightmans LLP) for the Defendant
Hearing date: 3 June 2013
Judgment No. 2 (COSTS)
INTRODUCTION
By a judgment handed down on 24 May 2013 ( [2013] EWHC 1191 (TCC)), I dismissed the claimant's claim in these proceedings, and allowed one element of the defendant's counterclaim in the sum of £3,500 plus VAT. Together with interest, that gives an agreed total due to the defendant of £4,630.62.
The claimant accepts that, in consequence, it is liable to pay the defendant's costs of the action. There are, however, disputes as to the basis of assessment of those costs and, perhaps more importantly, the interaction between the existing costs management order (which approved the defendant's budget costs of £264,708) and the total costs now sought by the defendant, in the sum of £497,593.66.
A BRIEF PROCEDURAL HISTORY
On 10 May 2011, the claimant took out ATE Insurance against the risk of having to pay the defendant's costs. The cover was up to £250,000. These proceedings were commenced on 25 July 2011, and the following day, the claimant notified the defendant of both the funding and the limit of the cover.
At the CMC on 29 March 2012, Edwards-Stuart J ordered that the defendant file and serve its costs budget in accordance with CPR PD 51G, the Costs Management in Mercantile Courts and Technology and Construction Courts — Pilot Scheme. On 31 May 2012, having considered the costs budgets submitted by both parties, Edwards-Stuart J made Costs Management Orders approving the claimant's costs budget of £317,333.25 (being £212,533.25 in respect of costs and £104,800 for the ATE Insurance premiums), and the defendant's costs budget of £264,708.
At the Pre-Trial Review on 18 January 2013, Ramsey J enlarged the cost management orders to cover the costs of daily transcripts at the forthcoming trial. This had the agreed effect of increasing the defendant's approved costs budget to £268,488. Apart from that, at no time before or at the trial (which started before me on 4 March 2013) did either side apply to increase or revise the costs budgets which were the subject of the costs management orders.
This was despite the fact that, on 7 February 2013, just a month before trial, the defendant sent the claimant and the court a revised costs budget, which doubled the previous estimate to £531,946.18. On 22 February, the claimant's solicitors objected to the revised budget, but at the same time notified the defendant's solicitors of a much smaller increase in their own budget figure to £372,179.53.
Although these exchanges were sent to the court, they were not included in the trial bundles, which were the only papers in this case that I ever saw: accordingly, I was wholly unaware that the defendant's estimated costs were now twice the amount approved in the costs management order. I was, however, aware (because I was told this expressly at paragraph 9.1 of Mr Susman's written opening) that:
"The defendant has not yet made any application for further enlargement of the Costs Management Order made on 31 May 2012, but any such application if made will be strongly resisted by the claimant."
No such application was made and the matter proceeded to trial and judgment.
Also in the run-up to trial, there were a number of offers. On 19 February, the defendant's solicitors wrote a letter, marked 'without prejudice save as to costs', offering the sum of £150,000 in full and final settlement of the claimant's claim, inclusive of interest and costs. On 20 February, that offer was expressly rejected by the claimant's solicitors, who instead indicted that the claimant would accept the sum of £550,000 plus costs. The parties having been unable to reach agreement, the matter then proceeded to trial. Of course, it is now apparent that the claimant would have been considerably better off had it accepted the defendant's offer of 19 February.
The issues which now arise are these:
(a) Is the defendant entitled to its costs on an indemnity basis?
(b) If so, what is the relevance (if any) of the existing costs management order?
(c) If not (so that the costs are assessed on the standard basis), can the defendant recover more than £268,488 either by seeking to amend the costs budget after judgment, or by asserting good reasons to depart from the existing costs budget?
THE LAW
Costs Management Orders
This case is governed by the pilot scheme and therefore PD 51G. The relevant parts are as follows:
" Modifications of Relevant Practice Directions
2…
Estimates of Costs to be set out in detailed costs budgets
(3) Section 6 of the Costs Practice Direction is modified by substituting for paragraph 6.5 the following —
6.5 In proceedings within the scope of the Costs Management in Mercantile Courts and Technology and Construction Courts — Pilot Scheme provided for in Practice Direction 51G, the estimate of costs must be presented as a detailed budget setting out the estimated costs for the entire proceedings in a standard template form, which substantially follows the precedent described as Precedent HB and annexed to that Practice Direction.
Filing of Costs Budgets
3.2 Each party should include separately in its costs budget reasonable allowances for –
(1) intended activities: e.g., disclosure (if appropriate, showing comparative electronic and paper methodology), preparation of witness statements, obtaining experts' reports, mediation or any other steps which are deemed appropriate to the particular case;
(2) identifiable contingencies, e.g., specific disclosure application or resisting applications made or threatened by an opponent; and
(3) disbursements, in particular court fees, counsel's fees and any mediator or expert fees.
Purpose of Costs Management
4.1 The court will seek to manage the costs of the litigation, as well as the case itself.
4.2 The objective of costs management is to control the costs of litigation in accordance with the overriding objective. (See rule 1.1.)
…
4.4 If the court decides to make a costs management order it will, after making any appropriate revisions, record its approval of a party's budget and may order attendance at a subsequent costs management hearing (by telephone if appropriate) in order to monitor expenditure.
…
Revision of Approved Budget
6. In a case where a costs management order has been made, at least seven days before any subsequent costs management hearing, case management conference or pre-trial review, and before trial, a party whose costs budget is no longer accurate must file and serve a budget revision showing what, if any, departures have occurred from that party's last approved budget, and the reasons for any increased budget. The court may approve or disapprove such departures from the previous budget.
…
Effect on Subsequent Assessment of Costs
8. When assessing costs on the standard basis, the court –
(1) will have regard to the receiving party's last approved budget; and
(2) will not depart from such approved budget unless satisfied that there is good reason to do so."
It should be noted that many of these provisions have now become part of the CPR (see in particular r.3.15 and r.3.18 and paragraphs 2.2 and 2.6 of 3E PD).
The approach to be adopted towards budget costs, which have been approved as part of a costs management order, was set out by Moore-Bick LJ in Silvia Henry v News Group Newspapers Ltd [2013] EWCA Civ 19 at paragraph 28 where he said:
"[Pursuant to the new Rules] although the court will still have the power to depart from the approved or agreed budget if it is satisfied that there is good reason to do so, and may for that purpose take into consideration all the circumstances of the case, I should expect it to place particular emphasis on the function of the budget as imposing a limit on recoverable costs. The primary function of the budget is to ensure that the costs incurred are not only reasonable but proportionate to what is at stake in the proceedings. If, as is the intention of the rule, budgets are approved by the court and revised at regular intervals, the receiving party is unlikely to persuade the court that costs incurred in excess of the budget are reasonable and proportionate to what is at stake."
The particular issue which arose in Henry concerned the Defamation Pilot Scheme and in particular paragraph 5.6 of that scheme, which is very similar to paragraph 8 of the TCC Pilot Scheme (paragraph 10 above), which states that, when assessing costs on the standard basis, the court "will not depart from such approved budget unless satisfied that there is good reason to do so." The costs judge held that the appellant's solicitors had failed to comply with the Defamation Pilot Scheme (because they did not keep the defendant or the court informed of the fact that the budget was being exceeded by a very significant amount), and felt constrained to hold that the failure prevented the parties from being on an equal footing (one of the express provisions in the Defamation Pilot Scheme which is absent from the Pilot Scheme in the present case). This in turn meant that there was no good reason to depart from the approved budget.
As a result of what the Court of Appeal described as "the rather unusual circumstances of the case", they overturned the decision of the costs judge, concluding that he had misunderstood the reference to the parties being on an equal footing and...
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