The recent judgment of Deputy Master McCloud, sitting as a Deputy Costs Judge in the SCCO, has sought to clarify the position regarding how costs relating to costs management should be presented, arising out of a tension between Practice Direction 3E and the MOJ Precedent H guidance note.
The Practice Direction, at 3E B(6)(d) states that “Parties must follow the Precedent H Guidance Note in all respects”.
The Guidance Note itself outlines the items of work which fall within each of the phases of the budget. This information is given in a table which “identifies where within the budget form the various items of work, in so far as they are required by the circumstances of your case, should be included.”
In respect of the CMC phase, it is stated that the following work must be included within the costs budget:
- Reviewing opponent’s budget
- Correspondence with opponent to agree………budgets, where possible
The table further states the following must be excluded from the CMC phase:
- Preparation of costs budgets for the CMC
Confusion arises when considering PD 47.6, 5.8 (8), which states that:
‘Where a costs management order has been made and the receiving party’s budget has been agreed by the paying party or approved by the court, (a) the costs of initially completing Precedent H and (b) the other costs of the budgeting and costs management process must be set out in separate parts [of the bill of costs].’
This was further confirmed by Master Gordon Saker in BP v Cardiff & Vale University Local Health Board  EWHC B13 (Costs):
‘On a detailed assessment it will be necessary to identify (a) the costs of initially completing Precedent H and (b) all other costs of the budgeting and costs management process. ……….it will be both necessary and convenient that the bill be divided so as to identify the costs of initially completing Precedent H and the other costs of the budgeting and costs management process’
Applying strict reading of the guidance note, it can be seen that a Costs Lawyer should correctly claim the preparation of the costs budget outside the budget, and then claim work identified in the note (such as reviewing opponent’s budget) within the costs budget.
In Woodburn v Thomas (Costs budgeting)  EWHC B16 (Costs) (11 August 2017), Master McCloud was faced with an assessment of a phased bill of costs where the entirety of costs of the costs management process (preparing the budget, negotiating budgets, updating etc) had been claimed within a part of the bill entitled ‘non-phased costs’, despite the costs budget having been prepared in line with the guidance note and including some costs management time within the budget and some outside the budget. This had the effect of lowering the costs claimed under the CMC phase (which had been already exceeded).
The Paying Party’s submission was that the original budget had included costs budgeting work under the CMC phase, and that they should, in line with the guidance note, remain under the CMC phase. The Receiving Party submitted that they were correct in separating out the ‘costs of costs budgeting’, in line with Master Gordon Saker’s comments in BP v Cardiff & Vale University Local Health Board .
In the course of reaching a decision, Master McCloud commented that the assumptions upon which a budget had been approved was the best guide as to how costs of the costs management process should be treated in the bill of costs.
In the present case, the Master directed that costs which had been included within the non-phased part of the bill, but had formed part of the CMC phase assumptions, were to be treated as if they had been claimed within the CMC phase of the bill.
Despite the decision, Master McCloud was careful to point out that the approach she had taken was not ideal and suggested that it would be helpful for the Rules Committee to consider the position.