Costs budgeting was introduced into the Civil Procedure Rules (CPR) to allow the courts to further the overriding objective of dealing with cases justly and at proportionate cost by managing the steps taken and the costs incurred by the parties in any proceedings. Its objective was that of transparency regarding costs and, thereby, certainty about parties’ costs liability.
A LIP is not required to file a costs budget unless ordered by the court (CPR 3.13(1)). In this case, the court had to consider whether it was appropriate to make such an order.
The claimant was a LIP but was assisted by direct access counsel at particular points in the litigation, and was to be assisted throughout the trial.
The defendant bank argued that this was not a “typical” LIP case, and made an application seeking a direction requiring the claimant to file a costs budget.
The defendant contended that, in the circumstances of this case, it was appropriate for the court to exercise its discretion and direct the claimant to file a costs budget. It argued that:
- This was not a typical case where a LIP will be unrepresented for all or most of the process, as the claimant was to be represented for significant parts of the process including the trial.
- The costs incurred or to be incurred by the use of direct access counsel would be significant. The defendant pointed out that the cost of the claimant’s direct access counsel used for an earlier application was £87,000, which was substantially in excess of the defendant’s own costs of the application.
- There was advantage in having a costs budget, as it would provide visibility as to the likely costs to be incurred and for which the defendant might have exposure as part of a settlement process.
The claimant argued that the relationship between a direct access barrister and a LIP is very different from a normal solicitor and client relationship. The direct access barrister would “dip in and out” of the case from time to time, thereby making it difficult to predict costs. There was no obligation for a direct access barrister to maintain continuity, resulting in other barristers becoming involved from time to time and thereby increasing the costs. In consequence, a budget would understate the amount of costs as they would be unpredictable and this could result in applications to the court to vary the budget, thereby generating costs and taking up the court’s time.
While the claimant accepted a costs budget would add visibility to the costs for the purposes of settlement, it was argued that the benefits to be obtained were outweighed by the lack of predictability in relation to costs, and that the overall costs that would be incurred were likely to be much lower than the defendant, who was legally represented throughout.
The judge (HHJ Pelling QC) posed the question: “What then is the correct way to resolve this issue?”
He accepted that the added visibility concerning costs would assist in ultimate settlement; however, this point was of relatively little weight, as the defendant could obtain a costs estimate from the claimant prior to any mediation.
He also accepted that the significant costs likely to be incurred in a case such as this was something that would point towards cost budgeting being appropriate. However, this was outweighed by the point that there is less predictability about the costs that would be incurred by a LIP assisted by direct counsel. This could lead to applications to vary and an increase in costs.
The judge came to the conclusion that:
“In reality the answer to this issue lies in deciding whether in all the circumstances there is a significant benefit to be obtained so far as the defendant is concerned from the filing of a costs budget by a claimant in the circumstances of these claimants, when weighed against the very real difficulties that would be faced by the Litigant in Person in seeking to estimate the costs necessary to be inserted into the budget and the consequential impact on costs arising from unforeseen errors of estimation.”
Ultimately, the judge dismissed the defendant’s application, on the basis that it was inappropriate to order the claimant to file a costs budget, as the defendant was able to estimate the likely costs of preparation of the trial and the trial itself. As regards estimates for assistance in relation to disclosure and witness statements, these would be so unpredictable as not to be worth the effort. Regarding mediation, the judge found it was open to the defendant to request a costs estimate at that stage from the claimant.
This judgment makes clear that, before ordering a LIP to file a costs budget, a court will undertake a balancing exercise and only make such an order if the benefit to be obtained in filing a costs budget outweighs the difficulties faced by a LIP in estimating the costs.
Ultimately, the mere fact a LIP has previously used direct access counsel and has indicated it may do so in the future is, without more, unlikely to be a sufficient basis for the court to order a costs budget. In future, a party faced with a LIP, who has instructed direct access counsel, would be advised to ascertain the likely extent the LIP will use counsel. In light of the fact many direct access counsel are also authorised to “litigate”, the mere fact the LIP does not have a solicitor on the record may be academic in terms of costs. In these circumstances, it would be hoped the court would exercise its power under CPR 3.13(1) and order the LIP to file a costs budget.