The defendant costs specialists

Inaccurate costs estimates

By on Feb 17, 2015 | 1 comment

The move from costs estimates to costs budgets has left rather a mess in the rules due to the absence of transitional provisions.

Nevertheless, under the old rules, and to the extent to which the old costs estimate rules continue to apply, the response of receiving parties to objections concerning inaccurate estimates is invariably, in my experience, misplaced.

Receiving parties almost always rely on the guidance given at paragraph 29 of Leigh v Michelin Tyre Plc [2003] EWCA Civ 1766:

“In our view, para 6.6 of the practice direction gives the court the power to take matters such as these into account in deciding whether, and if so how far, to reflect them in determining what costs it is reasonable to order the paying party to pay on an assessment. We do not, however, consider that it would be a correct use of the power conferred by para 6.6 to hold a party to his estimate simply in order to penalise him for providing an inadequate estimate. Thus, if (a) the paying party did not rely on the estimate in any way, (b) the court concludes that, even if the estimate had been close to the figure ultimately claimed, its case management directions would not have been affected, and (c) the costs claimed are otherwise reasonable and proportionate, then in our view it would be wrong to reduce the costs claimed simply because they exceed the amount of the estimate. That would be tantamount to treating a costs estimate as a costs cap, in circumstances where the estimate does not purport to be a cap.”

However, the guidance given in that case concerned an earlier version of CPD 6.6:

“On an assessment of the costs of a party the court may have regard to any estimate previously filed by that party, or by any other party in the same proceedings. Such an estimate may be taken into account as a factor among others, when assessing the reasonableness of any costs claimed.”

The Leigh judgment gave guidance as to how this should be applied in circumstances where the CPD was silent as to the approach to adopt.

Following Leigh, CPD 6.6 was significantly amended:

“(1) On an assessment of the costs of a party, the court may have regard to any estimate previously filed by that party, or by any other party in the same proceedings. Such an estimate may be taken into account as a factor among others, when assessing the reasonableness and proportionality of any costs claimed.

(2) In particular, where –

(a) there is a difference of 20% or more between the base costs claimed by a receiving party and the costs shown in an estimate of costs filed by that party; and

(b) it appears to the court that –

(i) the receiving party has not provided a satisfactory explanation for that difference; or

(ii) the paying party reasonably relied on the estimate of costs;

the court may regard the difference between the costs claimed and the costs shown in the estimate as evidence that the costs claimed are unreasonable or disproportionate.”

The amended CPD did not simply mirror the guidance in Leigh. It went further and produced a more robust test. Although the CPD was, no doubt, amended as a consequence of the Leigh decision, it was not an amendment designed to simply codify the Leigh guidance. Indeed, it is difficult to see that the guidance in Leigh was (or is) of much, if any, relevance, to detailed assessments undertaken after the CPD was amended.

    1 Comment

  1. I find most drafting firms drawing budgets, tend to have “specialists” do them, but then have the subsequent bill drawn by someone totally different. In most cases the bill bears no relation to the budget, because the “draftsman” is a muppet throwing everything humanly possible into the bill. Concerningly, often the firms involved do not even admit to or know about the budget (convenient) and then ignore any reference to the difference

    Anonymous

    27th February 2015

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