Abdoulie Jallow v Ministry of Defence [2018] EWHC B7 (Costs) (24 April 2018)
A costs judge has rejected an argument that the settlement of a claim for a sum much less than that claimed and a reduction in hourly rates for incurred costs constituted a “good reason” to depart from the budgeted costs.
The background to this case was a claim by a soldier over non-cold freezing injuries he suffered to his hands and feet that led him to leave the Army. Liability was agreed on a 75/25 basis before proceedings began, but it continued over the issue of quantum.
The budget was set by a Costs Management Order in this case.
There was some disagreement about the value of the claim. While the Defendant said the budget was set on the basis of the claim being worth £300,000.00, the Claimant submitted that the quantum of the claim was put on two bases depending upon what findings of fact the judge made in the final hearing in relation to the employment of the Claimant with the Defendant. There were therefore two different sums claimed in the alternative in the schedule of loss. They were £185,000.00 or £312,000.00.
Four weeks before the assessment of damages hearing, the Claimant settled an action against the Defendant for £90,000.00.
Following the acceptance of the Defendant’s offer the Claimant commenced detailed assessment proceedings and served a Bill of costs. On the detailed assessment some of the hourly rates in respect of the incurred costs were reduced.
The Defendant argued that the reduction of hourly rates was a good reason to depart from the budget. In addition to that, the Defendant also pointed to the sums claimed in the particulars of claim of £300,000.00 compared with the settlement figure of £90,000.00 and argued that the reduction in the damages was also a good reason to depart from the budget.
Master Rowley rejected the Defendant’s argument that settlement at £90,000.00 was a “good reason” to depart from the budget.
He said: “The essence of the point is whether it was reasonable for the Claimant to believe that his case was worth the sum that he claimed. It is only if he could not reasonably have had that belief, because his claim was exaggerated in some way, that the budget might be considered to have been set on a false premise and as such should be departed from on assessment.” However, that was not the case here, he continued. “In my judgment, the Claimant did not exaggerate his claim. He put forward alternative cases as to quantum which demonstrates that he was alive to the issues surrounding the potential level of damages to be recovered. Therefore, the ultimate settlement of this claim did not falsify in any way the premise of Master Leslie’s setting of a budget in a case where the sums in issue were £300,000. Consequently, I reject the Defendant’s argument that the valuation of the case is a good reason to depart from the budget.”
Master Rowley also rejected an argument that the reduction in hourly rates on the incurred parts of the Bill was a “good reason” for challenging the budgeted costs.
Master Rowley has referred to the case of Hazlett v Sefton Metropolitan Borough Council [2001] 1 Costs LR 89 where it has been held “that a party who instructs a solicitor is liable to pay the costs of that solicitor. If the paying party wishes to challenge that position it needs to demonstrate that a “genuine issue” exists. Consequently, the solicitor’s certificate to the receiving party’s Bill of costs that the receiving party is obliged to pay the solicitor’s costs is normally conclusive.” The Master continued: “It seems to me that a similar test to the “genuine issue” test is intended by the “good reason to depart” terminology in CPR 3.18. In place of the solicitor’s certificate is the approval of the budget by the Court. In either situation, the judge at the detailed assessment is not going to entertain a challenge unless something is raised which is specific to the case before the Court.”
Master Rowley ruled that “The court has to accept that the budgeted figures for taking the case to trial (as recorded in the CMO) are reasonable and proportionate. Therefore, if the sums subsequently claimed in the bill are within that budget they are, on the face of it, also reasonable and proportionate. Where… it can be assumed that much, if not all, of the work had been done within the various phases and the costs were still within budget, the presumption is all the stronger in my view that the costs incurred are reasonable and proportionate.”
In addition he said that “once the phase total has been approved the underlying figures are no longer relevant” and concluded that “It is for the party and his or her solicitor to determine who exactly does the work that needs to be done. Where the costs overall are within the budget that has been set, there can be no legitimate criticism in using a senior or a junior solicitor, leading or junior counsel to carry out the work… If it comes within the budget that has been set, it will turn individually “unreasonable” items into a reasonable and proportionate sum overall.”
The outcome of this case is significant in that the judgment provides some clarity on the question of a “good reason” to depart from the budget and emphasises the fact that once a budget is set, it is at the party’s election as to how the phase total is spent.
Tanya Bland