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SARPD Oil reversed

Posted by Toby Moreton on Feb 16 - 2017

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The amended rules related to costs budgeting come into force on 6 April 2017 as part of The Civil Procedure (Amendment) Rules 2017. The effect of these amendments is to reverse the decision in SARPD Oil International Ltd v Addax Energy SA & Anor [2016] EWCA Civ 120.

This was a case in which the Court of Appeal held that the first CMC was the appropriate occasion on which issues regarding the quantum of costs shown in the parties' respective costs budgets should be debated and that it would be an inappropriate use of resources (in that case, on an application for security for costs) to re-visit an issue already dealt with by the Court. Crucially the Court held:

"...parties must appreciate that if they wish to take issue with another's costs budget they should do so at the first CMC, when there is to be debate about the costs budgets. In this case the first CMC, and the process leading up to it, afforded each party a fair opportunity to make any submissions they might wish on each other's costs budgets."

This decision attracted some criticism not least because of the additional time likely to be required at the first CMC to fully debate the issue of incurred costs so as to preserve the right to challenge the same at a later date. The rule committee agreed and has stepped in with the following amendments to CPR 3.15 and 3.18:

 3.15

(1) In addition to exercising its other powers, the court may manage the costs to be incurred (the budgeted costs) by any party in any proceedings.

(2) The court may at any time make a ‘costs management order’. Where costs budgets have been filed and exchanged the court will make a costs management order unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made. By a costs management order the court will—

(a) record the extent to which the budgeted costs are agreed between the parties;

(b) in respect of the budgeted costs which are not agreed, record the court’s approval after making appropriate revisions;

(c) record the extent (if any) to which incurred costs are agreed”; and

(3) If a costs management order has been made, the court will thereafter control the parties’ budgets in respect of recoverable costs.

(4) Whether or not the court makes a costs management order, it may record on the face of any case management order any comments it has about the incurred costs which are to be taken into account in any subsequent assessment proceedings. 

3.18

In any case where a costs management order has been made, when assessing costs on the standard basis, the court will –

(a) have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings;

(b) not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so; and

(c) take into account any comments made pursuant to rule 3.15(4) or paragraph 7.4 of Practice Direction 3E and recorded on the face of the order.

The effect of these amendments is to revert to the pre SARPD position where the court simply records any views on whether the incurred costs appear reasonable or proportionate.

The full statutory instrument - which also gives statutory effect to the decision in Qader & Others v Esure Ltd & Khan v McGee [2016] EWCA Civ 1109 by providing that fixed costs do not apply in multi-track cases even if they started life in the RTA portal - can be found here.

 

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