A Queen’s Bench master was wrong in his approach to costs budgeting because he approved only the constituent parts of the estimated costs and not a final figure, the High Court has ruled.
Mr Justice Jacobs was told that Master Davison’s usual approach was to approve fee-earner hours, individual disbursements and counsel’s fees, but reserve the issue of hourly rates on estimated costs to the detailed assessment.
In the unreported case of Yirenki v Ministry of Justice – which was handed down earlier this month – the claimant appealed against Master Davison’s costs management order, and unusually the defendant agreed the appeal should be allowed.
However, the judge heard detailed submissions from the claimant’s counsel, Roger Mallalieu, because of the potential impact on future cases.
According to a note of the ruling by Sam Hayman, head of costs at the claimant’s solicitors Bolt Burdon Kemp, the judge said the master’s order was contrary to Practice Direction 3E.
Jacobs J said: “It is clear from [paragraph 7.3 of the PD] that the ultimate goal of costs budgeting is to provide a figure for each phase of proceedings, the constituent elements are part of that goal but are not an end in and of themselves and are not subject to the court’s approval.”
This was echoed by paragraph 7.10, and supported by the costs and funding supplement to the White Book and various quotes from Lord Justice Jackson.
The judge said the master was wrong to leave hourly rates to detailed assessment. Mr Hayman’s note recorded him saying: “It means there is no certainty as to what the approved budget is. The vice of the master is that the parties do not know where they stand.
“The rules do provide of course for a possibility of departure from an approved budget, so of course there is not absolute certainty, but under CPR 3.18(b) however that departure can only occur if there is good reason.
“So parties, where a costs management order is appropriately undertaken, do have a high level of certainty. Lord Justice Davis in Harrison made plain that the good reason test is not a lax exercise and is a high hurdle.”
The master’s approach, he added, removed the flexibility of parties in deciding how to spend their budgeted costs as the case developed.
“The final vice of the master is that the process of setting the budget and how it was set becomes something that is micromanagement by the courts, which is clearly something to be avoided. PD 7.3 indicates that the ultimate goal is to find a reasonable a proportionate cost for the whole and on a phase by phase basis.”
Jacobs J said this did not mean it was inappropriate for the master to have regard to the constituent parts of the budget, “but in so doing, he will still arrive at a final approved figure per phase using his experience and knowledge as to how the case should be run”.
Mr Hayman said: “The judgement is welcome guidance on the approach to costs budgeting. There is considerable inconsistency of approach across the county court and amongst the High Court masters.
“Oftentimes, rogue costs management orders are made which result in an inevitable detailed assessments where parties are unable to agree the impact and scope of the orders made. This appeal represents exactly such a circumstance.
“I hope this guidance is welcomed by the judiciary and parties can gain a much-needed level of consistency. Without that, it will be impossible to achieve one of the key aims of the reforms, which was to reduce amount of detailed assessments.”