Stakeholder Event: Costs Budgeting in the Commercial Courts

The second consultation meeting examining the issue of the qualified exemption to the mandatory costs budgeting for litigation claims in excess of £2m as per CPR 3.12 took place on 16 July 2013 and LexisNexis were delighted to be invited as guests.

The CPR sub-committee comprised Mr Justice Coulson (chairman), Mr Justice Sales and barrister Edward Pepperall QC. Mr Justice Hemblen was also present representing the commercial and mercantile courts.

The consultation meeting was very well attended and included representatives from all courts functioning in the Rolls Building, the majority of whom shared the view that the obligation to produce costs budgets should not apply to all specialist courts.

There was a general feeling of concern that the case for this exemption was being re-visited by the committee. Many of those present had either submitted to the sub-committee, or were intending to submit, written papers setting out their reasons why they considered a re-visit was inappropriate.

In short, making costs budgeting mandatory was considered to be inconsistent with Lord Justice Jackson’s Final Report and would result in a number of unintended consequences including:

Costs budgeting and disadvantaging recovery of costs would mean international corporations and litigants would be less likely to use domestic courts which would potentially have a devastating effect on TCC practice. In addition, arbitration and the possibility of recovering up to 80% of costs would become an even more attractive option for clients.

Practitioners could not understand why specialist solicitors practicing in the centre of excellence that is the Rolls Building should be put into ‘straight jackets’, arguing that the high levels of costs incurred in commercial courts were usually proportionate to what tended to be at stake in proceedings.

Further grumbles were heard in respect of the new Precedent H and the requirement on parties to file and exchange this nine page spread sheet within 28 days of the date specified in the court notice, or no later than seven days before the case management conference (CPR 3.13). Getting the Form H ‘spot on’ (now a requirement judging from recent case law) was described as expensive and time consuming and breaking down the costs into each stage of litigation was, in a number of cases, difficult and impractical.

The Admiralty Court reported that a (yet to be published) review into these expenses had showed that costs budgeting would increase the cost of litigation by 3% and concluded that excluding litigants in person from this procedural and financial burden would encourage more people to represent themselves.

Others wondered how courts would apply the new ‘global basis’ proportionality test and whether its application at the end of the process would make all other prior detailed assessment hearings and costs budgeting effectively pointless.

Not everyone thought the commercial courts put forward their cases convincingly enough, however, and we are very interested to hear your thoughts on this matter.

Filed Under: Costs & Funding

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