In the recent case of Yirenki v Ministry of Defence  11 WLUK 53 the Claimant Appealed against a Costs Management Order of Master Davison and succeeded.
Following a Costs Case Management Conference, Master Davison made an Order approving the Claimant’s Costs Budget in the total sum of £206,670.00, and the Defendant’s Cost Budget in the total sum of £100,639.00; “…save that the Parties reserved their positions as to incurred costs and as to hourly rates [and] it remains open to them to dispute those matters (and to that extent the figure for each phase) at a detailed assessment.”
The Master approved a number of hours and individual disbursements to be incurred in each phase of the Proceedings, rather than providing total figures for each phase of the proceedings, and the Order specifically reserved the issue of Hourly Rates on estimated costs to be dealt with at Detailed Assessment.
The Claimant Appealed on the basis that the Master’s approach had been wrong as a matter of principle, and was inconsistent with CPR PD 3E para.7.3 which provides that:
“The Court’s approval will relate only to the total figures for budgeted costs of each phase of the proceedings”
It was the Claimant’s case that the Order was defective for a number of reasons, including the fact that the Order removed the necessary certainty from the Costs Management Order (as per the decision in Harrison –v- University Hospitals Coventry  EWCA Civ 792), which is one of the essential aims of Costs Management.
It was also the Claimant’s position that the Order removed flexibility from the Claimant’s approach to the litigation, restricting the Claimant to the figures for time and fees Master Davison had set rather than allowing the Claimant to decide how to spend their budget for each phase as the case develops.
Finally, and perhaps most significantly, the Claimant contended the Order was defective as it failed to achieve another of the primary aims of Costs Budgeting; to reduce the scope of Detailed Assessment. The master’s approach undermined the reliance that could be placed on the budget by leaving open the assessment of hourly rates.
The Appeal was allowed. Mr Justice Jacobs QC commented that the reason Master Davison was wrong, was that the Order was contrary to the Practice Direction 3E. By way of background, CPR Rule 3.15(2)(b) is the starting point:
…by a Costs Management Order the Court will in respect of budget costs which are not agreed, record its approval after making appropriate revisions.
That suggests that a figure to be approved will be a final figure rather than a provisional figure which is up for grabs later. That this is clearly the correct approach is made clear by PD 3E 7.3 and 7.10…. The ultimate aim of the Cost Budgeting exercise is to let parties know where they stand. This has a knock on advantage in that it increases the possibility that Detailed Assessment will be avoided.”
This Appeal makes clear that, when reviewing budgeted costs, the Court is not undertaking a Detailed Assessment in advance, but rather considering whether the budgeted costs fall within the range of reasonable and proportionate costs.
Mr Justice Jacobs QC highlighted that Master Davison’s approach significantly undermined the reliance that could be placed on the Budget by leaving open the Assessment of hourly rates. The consideration of hours and rates all fed into a ‘reasonable and proportionate figure’, without approving specific hours and disbursements which would remove flexibility.
This case is not only useful in respect of case management orders, given the increasing trend of Defendants attempting to write clauses into costs management orders, but lends support for the developing case law on the issue of whether Hourly Rates are a “good reason” to depart from the approved.
We are certainly finding that in matters where Costs Management Orders have been made, Defendants are attempting to argue this, which, as evidenced by the above, undermines the making of a Costs Management Order, the main aim of which is to reduce the need for Detailed Assessment.
This is a very good result, and one that we at MRN will be relying on in negotiations!