I have found John M Hayes to be a very efficient, friendly and knowledgeable service and have been very satisfied with their services.
Fieldings Porter Solicitors
Costs management, which is designed to keep a tight rein on costs, is still in its infancy and as such there are very few reported cases on this important issue. Elvanite Full Circle Limited v AMEC Earth & Environmental (UK) Limited  EWHC 1643 (TCC) is one such case.
This case proceeded through the Costs Management Pilot Scheme which was one of the forerunners to the new costs management Rules which were introduced on 1 April 2013. Whilst the provisions of the Pilot Scheme are slightly different to those of the new Rules, they are sufficiently similar for it to be reasonable to assume that cases under the new Rules will be decided in a similar fashion.
Elvanite had claimed that AMEC had given them negligent planning advice about waste management. Prior to issuing proceedings Elvanite had taken out ATE insurance to cover the risk of having to meet AMEC’s costs, limited to £250,000 of cover. Once proceedings had commenced, costs management orders were made. Elvanite’s costs budget of £317,333 and AMEC’s costs budget of £264,708 were approved. Amec’s budget was subsequently slightly increased to £268,488 to cover the cost of daily transcripts of the trial.
One month before trial AMEC sent to their opponent and the Court a revised costs budget totalling £531,946, however, no application was made by AMEC to revise its budget. At the conclusion of the trial, AMEC sought costs of £497,593.
At trial, Coulson J dismissed the claim with AMEC succeeding on one small element of its counterclaim to the value of £3,500. AMEC sought and were awarded their costs of the action. A number of questions fell to be addressed by the Court.
One of the key issues before the Court was ‘what was the effect of the notified increase in budget where AMEC had not applied to the Court to increase their budget before the end of the case’.
Coulson J held that an amendment to a costs budget necessitated a formal application:
…if the Defendant wanted the Court to approve the significant changes to its costs budget, then it had formally to seek such approval. It was not enough simply to file the material at Court. As I have said, coming late to this case, I was entirely reliant on the parties to provide me with the information that I needed properly to manage the trial. I was wholly unaware of the fact that the Defendant’s estimate of costs had almost doubled in the weeks before trial. Had I known, I would have put the Defendant to its election at the outset of the trial.
The question of when should a party apply to increase its budget was also addressed, and it was held that the answer was:
Immediately it becomes apparent that the original budget costs have been exceeded by a more than minimal amount.
As to whether it was possible to apply to amend a budget after the trial had completed, Coulson J held:
…an application to amend an approved costs budget after judgment is a contradiction in terms. First it would mean that the exercise would no longer be a budgeting exercise, and would instead be based on the actual costs that have been incurred. Secondly it would encourage parties to ‘wait and see’; only applying to increase the budget if it was in their interests. Thirdly it would make a nonsense of the costs management regime if, at the end of the trial, a party could apply to double the amount of its costs budget. The certainty provided by the new rules would be lost entirely if the parties thought that, after the trial, the successful party could seek retrospective approval for costs incurred far beyond the level approved in the costs management order.
If I am wrong to conclude that an application to amend the costs management order should not be entertained after judgment, then I consider that, at the very least, the Defendant would need to demonstrate good reason why the application was made so late.
No good reason was found in this instance.
The judge was doubtful about the relevance of prejudice – emphasising what he said in relation to the role of prejudice in post-April 2013 applications in Murray & Stokes v Neil Dowlman Architecture Ltd  EWHC 872 (TCC) – but confirmed that Elvanite would have been prejudiced by going into the trial believing that its ATE insurance cover was essentially adequate only to learn that it was potentially £250,000 short.
The Court has the power to depart from the last approved budget if there is good reason to do so. Coulson also went on to consider whether such a good reason existed. It was concluded that the overrun in this case was largely down to experts’ and counsel’s fees and Coulson J found that this did not constitute a good reason, particularly because:
This was not a case which some how lurched off track after its commencement, or where the issues ended up being very different to those which had originally been canvassed in the pleadings. Everything went pretty much as it might have been expected to go. In those circumstances, it seems to me that the general scope for alleging in this case that there is good reason now to depart from the costs management order is relatively limited.
The Rules appear to provide that the costs budget is relevant only where costs are to be assessed on the standard basis. In obiter comments, the judgment addressed the impact of an award of indemnity basis costs on a costs management order, commenting that:
… as a matter of logical analysis, it seems to me that the costs management order should also be the starting point of an assessment of costs on an indemnity basis, even if the ‘good reasons’ to depart from it are likely to be more numerous and extensive if the indemnity basis is applied.
The key lessons from Elvanite appear to be as follows: