Costs News

18 February 2016
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Excessive items within reasonable budget “will be cut”

The fact that a costs budget looks acceptable overall does not mean that the court will ignore individual items that appear excessive, a barrister has warned. 

John Denis-Smith (pictured) of 39 Essex Chambers also cautioned about the risk of costs orders against a party whose budget is reduced, saying that “it is not a risk-free venture to inflate the budget”.

Mr Denis-Smith was acting in the so-far unreported Technology and Construction Court ruling on the budgets in King & Anor v Thipthorp & Ors, a construction dispute. The budgets were approved subject to alterations to individual items which were deemed unreasonable and disproportionate.

“This is an important case on costs management orders,” said Mr Denis-Smith. “It shows that a party whose cost budget cannot be justified in terms of hours and disbursements proposed may find that it has to pay the costs of the party which challenges the budget, as well as incurring its own irrecoverable costs of the challenge.” 

The dispute related to alleged defects in the building of a leisure centre and had been listed for a six-day trial with approximately 10 factual witnesses and eight expert witnesses. While the first and second defendants’ costs budget of £195,000 was accepted by the other parties, they took issue with the costs budgets proposed by the claimants and the third defendant of around £392,000 and £322,000 respectively.

Mr Denis-Smith reported that the court held:

(1) On one view, the correct approach was to look at the parties’ overall budgets and decide whether they were reasonable and proportionate without any further investigation, Yeo v Times Newspapers Ltd [2015] EWHC 209 (QB) and GSK Project Management Ltd (In Liquidation) v QPR Holdings Ltd [2015] EWHC 2274 (TCC) considered. Considering proportionality, CPR rules 44.3(5)(a), (c) and (e) were relevant: the sums in issue were not large, particularly by TCC standards, and the litigation was not complex but it was typical of a defects claim and there was a question of reputation involved.

There was nothing to justify expenditure over and above what was the norm for a six-day trial of this type. However, the court had no indication of what a normal sum for such a trial would be. In those circumstances, it could not conclude simply by looking at the bottom-line figures that the claimants’ and third defendant’s budgets were unreasonable and disproportionate.

(2) Even if the overall budget figure was not unreasonable, the court could, however, still consider the objections raised in relation to individual items claimed in those budgets. In this case, there were sums which had been budgeted for which appeared disproportionate and accordingly ought to be altered. 

In particular, sums claimed by the claimants in relation to counsel fees, expert reports and trial preparation were excessive. Disproportionate sums claimed by the third defendant included those in connection with the production of pleadings; solicitors’ time spent in connection with expert reports; the costs of expert reports; costs of counsel and solicitors attending the pre-trial review; costs of counsel and solicitors in preparing for trial; costs of solicitors attending trial, and costs associated with alternative dispute resolution and settlement. 

Mr Denis-Smith, who represented the successful party, said: “The end result was that costs budgets which appeared overall not to be excessive could still be reduced in relation to given items. Further, the costs of challenge could be recovered by the party objecting to those items.”

As advice to others challenging budgets, he added: “The party which objects is more likely to succeed if it is moderate. It should identify what the reasonable and proportionate sum should be. Comparisons with the costs of other parties for the same item can be helpful.”

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