Incurred costs do not need to be contested at first CMC, rule committee says

Arguments over incurred costs can wait

Arguments over incurred costs can wait

The cost budgeting rules are to be amended to make it clear that the case management hearing is not the forum to debate incurred costs.

The Civil Procedure Rule Committee (CPRC) agreed the change at its meeting this month in the wake of uncertainty caused by the Court of Appeal’s ruling earlier this year in SARPD Oil International Limited v Addax Energy SA and another [2016] EWCA Civ 120.

In this, Lord Justice Sales said that the first case management conference was the time to contest incurred costs, as well as estimated future costs.

In a paper to this month’s meeting of the CPRC, Master Richard Roberts, chair of its SARPD sub-committee, wrote: “The judgment is widely interpreted as preventing a paying party from challenging the costs incurred if they have agreed a budget at the case management stage.

“Further, it is seen as an incentive to challenge all parts of the costs incurred at the case management stage. Whether or not this interpretation is correct, the effect of the decision has been to undermine the efforts of the CPRC to simplify costs management, to promote agreement and to thus reduce hearing time.”

He said the case showed an inherent tension in the rules: “At present the court limits its costs management function to approval or management of the costs to be incurred. However, the court’s approval relates to each phase of the budget which is an amalgam of the incurred costs and the budgeted future costs.

“As SARPD highlights, the approval of a phase of the budget may be seen to indicate approval of both the incurred costs and future costs and thus deprive a party of raising points relating to the incurred costs on a later assessment of costs.

“Such an interpretation would create significant issues beyond costs management. The assessment of costs requires the judge to take into account the factors outlined at CPR 44.4. It can be seen that many of these factors will not be known at the case management conference (e.g. the conduct of the parties and the efforts made to settle the case).

“Thus there is a question as to how an assessing judge can properly take into account these factors if the judge simply ‘rubber stamps’ the decision made at case management stage.”

The CPRC accepted a series of changes to rules 3.15, 3.18, 44.1 and practice direction 3E with the aim of:

  • Decoupling the costs incurred from the budgeted costs, making it clear that the court’s budgeting will only relate to the costs to be incurred;
  • Ensuring that the court on detailed assessment can properly apply CPR 44.4;
  • Retaining the power of the court to comment on the incurred costs so as to provide clarity as to the interrelationship between the budgeted costs and the costs to be incurred and provide a steer which may promote agreement of the costs incurred; and
  • Retaining the power of the parties to agree the incurred costs and the budgeted costs.

The sub-committee decided that no consultation was needed. “The professions and judiciary proceeded on the basis that an assessing court could assess the incurred element of the budget. To this extent we are merely restoring the status quo ante,” said Master Roberts.

The CPRC was agreed to make a minor amendment to reflect the Court of Appeal’s recent decision in Qader, where it ruled that cases which exited the RTA and EL/PL protocols and then proceeded on the multi-track were not subject to fixed recoverable costs.

Lord Justice Briggs essentially rewrote the CPR to correct what he considered to be an oversight in the drafting of part 45.29B by the CPRC, and the committee agreed with this. As a result, in parts 45.29B and D, after the reference to 45.29J, the words “and for so long as the claim is not allocated to the multi-track” are to be added.

The timing of the amendments is not yet known.

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