The Court of Appeal recently dealt with an application for a costs capping order and considered the meaning of “substantial risk” under CPR3.19.
The Claimant brought an application for a costs capping order after the Defendant proposed to be represented by both Leading and Junior Counsel, arguing that the costs of Leading Counsel would be disproportionate. The Claimant sought to cap the costs of the services of Leading Counsel under CPR 3.19.
Under CPR 3.19(5) the Court may make a costs capping order, if:
(a) It is in the interests of justice to do so;
(b) There is a substantial risk that without such an order costs will be disproportionately incurred; and
(c) It is not satisfied that the risk in (b) can be adequately controlled by:
(i) Case management directions or orders; and
(ii) Detailed assessment of costs.
The Court considered the application of CPR3.19(5) and in particular the circumstances where costs can be controlled by detailed assessment of costs. The Court held that if the services of Leading Counsel turned out to be a “luxury” it could be stripped out at detailed assessment and accordingly no costs capping order was made. The Court held that a mechanism may constitute adequate control if it neutralises or satisfactorily manages the risk. It held that risk is not required to be eliminated, but to be managed. Otherwise, the Court held, there would be no place for a detailed assessment of costs. It was decided that there was a policy decision that the Court should not be troubled by satellite litigation, involving costs capping, if the long standing system of assessing costs would provide an adequate mechanism of control.
However, the Court also held that in another case it may be appropriate to make a costs capping order where a costs judge could not adequately distinguish between costs reasonably incurred and costs unreasonably incurred in a detailed litigation matter.
This case appears to suggest that it will be difficult to obtain a costs capping order, especially in circumstances where costs can be controlled through the detailed assessment process. In particular, it is apparent that the Courts are concerned with not creating unnecessary satellite litigation where the longstanding detailed assessment procedure can be used. The Court has made it clear that risk does not have to be eliminated, but managed.
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