Legal Cost Specialists

Costs budget “slashed”

The recent costs management case of CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd & Ors (Costs No. 2) [2015] EWHC 481 (TCC) has been widely reported as an example of the court “slashing” the claimant’s excessive costs budget.

By way of example, the claimant’s estimate sought a budget of £324,880 for drafting witness statements, being 880 hours at a Grade A rate of £370 per hour.

As to hourly rates the judge had commented:

“Although the claimant’s solicitors are based in Birmingham, they are claiming for a partner at a Grade A rate of £370 per hour. This is to be contrasted with the guideline Grade A rate for Birmingham of £217 per hour. I consider the £370 to be unreasonable.”

The judge does not appear to have fixed an appropriate hourly rate when fixing the budgets but clearly considered this excessive. (Note the judge considered guideline rates to be an appropriate reference point for a claim being pursued for £18 million odd.)

The judge further commented:

“In addition, the claimant’s costs budget identifies vast swathes of hours worked/estimated to be done by the lead Grade A partner, with much less work being performed by junior lawyers. Having considered the written submissions on this issue, I consider that this is a specific cause of the unreasonable level of the claimant’s costs. The hourly rate is too high but more importantly, the claimant is using the Grade A partner for work which is inappropriate and could be done more cheaply by lower grade assistants.”

As to the nature of the witness statements that would be required:

“It appears that it is envisaged that the claimant will prepare witness statements from three people who dealt with the claimant’s acquisition of the property, a topic which is likely to be entirely uncontroversial. The budget also envisages multiple witness statements dealing with the remedial scheme. Those statements too are likely to be peripheral at best because the principal issues are going to be what defects emerged and whether the remedial scheme to deal with them was reasonable (which are matters for the experts), not what actually happened.”

At this stage it is worth remembering the views of HH Judge Simon Brown QC that when it comes to costs budgeting he is always dubious about costs budgets that contain significant time for drafting witness statements on the basis that these are documents that are meant to be in witnesses’ own words.

At this stage I’m going to stick my neck out and suggest that those responsible for acquiring the multi-million pound building subject to this dispute and those responsible for the multi-million pound remedial works are probably vaguely literate and could be expected to draft much of their statements with minimal assistance from lawyers.

Taking all into account, the judge “slashed” the claimant’s budget for preparing witness statements to £150,000.

Adjusting the hourly rates to something closer to guideline rates and at a level appropriate for the task (say a combination of Grade B/C) would allow something very close to the original 880 hours estimated or 780 hours at guideline Grade B rates or 691 hours at guideline Grade A rates. This for a case where witness statements were going to be uncontroversial or peripheral.

Thank God for the new costs budgeting regime. Costs being incurred and approved by the courts at silly levels has now become a thing of the past.

You couldn’t make it up.

8 thoughts on “Costs budget “slashed””

  1. Northern Monkey

    What a farce. The Judge criticises both the rates and the estimated time, but at the end of the day more or less allows the same estimated time at reduced rates?

  2. if you read beyond the headlines and figures, you might well find, that the Judge was more intent on having an unmitigated attack, at the Claimants disdain for the whole budget process, and their decision to put in a made up budget which couldn’t be explained, even by an improper allegation against the Defendants. The figures allowed, were in line with the previous budget and expectation, and are relatively irrelevant to the thrust of the judgement

    But then, I never did just look at figures in budgets…….

  3. The Cost Crusader

    Let me see, the costs of the projected statements are £300k, the judge (probably siding with the Defendants) states they are unreasonable and not worth doing (i.e. £0.00) comes up with a budget of £150k, effectively splitting the difference. Sounds like the usual sort of judgment to me.

    To be fair to the judge Simon, what else did he permit? I have to confess that I haven’t read the case but in the headline figures didn’t the judge ‘slash’ the budget from £9.6m to £4.28m and the Claimant had already incurred £4.22m (according to their dubious budget as a year previous they had only incurred £1.47m and projected costs of £3.4m – a good year’s work). He basically told them no more spending for you! The Judge couldn’t attack the £4.22m already incurred.. yet.

  4. Master Gordon-Saker

    This is actually quite an important decision on how the court should treat disproportionate incurred costs when approving/amending the budget (see paras 83 ff).

  5. Robert Pettitt

    I read this judgment end of last week and have to agree with much of what Simon is saying.

    This case reveals the worst of budgeting and the worse of proportionality. And possibly the downside of a specialist court dealing with costs issues.

    I can only imagine that the judge sees the sort of costs that are usually thrown around in matters such as this and is of the view that the permitted figures fall nearer to the norm than those claimed by the claimant.

    The approved costs are insane (whilst remaining ‘proportionate’). The court acknowledges that there is little requirement for factual evidence but allows £150k for 3 witnesses (and, presumably, considering D’s witness evidence). Am I wrong to think a reasonable allowance would be a fraction of this sum?

    Further, the pre-amble reveals how much this silly budgeting exercise distracts from the litigation and simply brings detailed assessment forward. It makes a possibility (detailed assessment in the absence of agreement) a necessity (mandatory budgeting) and doesn’t even avoid the possibility of a detailed assesment taking place in any event (particularly given that option 2 – which I agree was the only ‘workable option’ – basically gives D the nod that incurred costs are definitely worth a challenge on detailed assessment).

    That 4.3 million is proportionate again shows to me that everyone is still too focussed on the value of the claim as the key factor for proportionality and not the surrounding circumstances. And, conversely, that reasonableness is taking a back seat to proportionality on big money cases.

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