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The Court’s power to order budgets under CPR 3.12(1)(a)-(e)

CIP Properties v Galliford Try [2014] 6 Costs LR 1037 Coulson J.

Even in a claim to which costs budgeting does not automatically apply because the claim is over   £10 m (CPR 3.12(1)(a)), the court has a complete discretion to decide whether costs budgets should be filed and exchanged.

Napp Pharmaceutical Holdings Ltd v Dr Reddy’s Laboratories (UK) Ltd [2017] EWHC 1433 (Pat)

Birss J

In proceedings claiming sums exceeding £10 million, which, accordingly, fell outside the letter of CPR Rule 3.12, the discretion of the court to order costs budgeting was nonetheless unfettered. CIP v Galliford followed. In deciding whether to order the exchange of costs budgets, the real question was whether requiring the parties to produce estimates was a sufficient safeguard  or whether the court should go further and direct that the matter actually be budgeted in accordance with CPR 3.12.

Experience had shown that estimates given before trial could operate as a practical constraint on a payment on account of costs  (see Unwired Planet v Huawei [2017] EWHC 1304 (Pat) paras 40 , 58 – 59). It was quite likely that the case would be able to carry on to trial without a significant overspend on costs and  the need to impose the extra cost of budgeting. Accordingly, costs budgeting would not be imposed, albeit that the matter could be reviewed again at the Case Management Conference.

Sharp v Blank [2015] EWHC 2685 Nugee J

High value litigation, worth between £215 and £280 million, to which the costs budgeting regime did not apply due to the amount in issue. “ There is, as far as I can see, no guidance (or at any rate, I have not been referred to any guidance) from any of the higher courts…. as to the appropriate exercise of discretion in a case where the amounts involved  exceed £10 million. … Here, however, the amount at stake is, as I have already referred to, between £250 million £280 million so the concerns of proportionality are likely to be much less to the fore….. It seems to me that the real advantage of budgeting in this case .. is the ability of the claimants to know what their exposure was for the defendants’ costs. That would enable them to form a view as to whether the ATE insurance, if obtained, is sufficient or not, something which [counsel] said would ultimately be to the benefit of the defendants, as well as to the benefit of the claimants themselves . I accept that that is a real and tangible benefit….. The cons are obvious. There is evidence inevitably a cost involvement in drawing up budgets, particularly as budgets have to be drawn up in accordance with the rules …. I also accept that the requiring of a  budget is not necessarily going to be the end of the process and that, if a costs management order is in due course made, that means that the budget will have to be revised and agreed or approved at every stage at which there are developments in the litigation…. It does not seem to me that the various factors point strongly one way or the other but I have decided that the appropriate thing to do in this case is to require budgets to be exchanged.”

Simpkin v Berkeley Group Holdings PLC [2016] EWHC 1619 (QB) and to be reported at [2017]  1 Costs LO 13  Foskett J

“What the defendant chooses to pay its lawyers is, of course, a matter entirely for it to decide. Those lawyers will not be restricted to recovering from their client sums well in excess of anything that may be permitted by the court by way of costs budgeting . However, the advantages of costs budgeting from the claimant’s point of view is that he, or those who may in due course fund him all know  the potential downside of losing the case. They will know that it would have been assessed by the court is reasonable in advance of proceeding further, rather than simply awaiting the outcome of an assessment in due course…. It [costs budgeting] will help to even the playing field between the parties and keep everyone focused on what they are spending on this litigation.”

Various Claimants v Ministry of Defence (the Iraqi Civilian Litigation) [2016] 3 Costs LO 477 Master Fontaine

Application by the MOD for the budgeting of the claimants‘ costs at the direction of Leggatt J refused. There would have to be a detailed assessment in any event because of the extent of the incurred costs (£4,711,588.66) and it was simply not proportionate to proceed to a costs budget in circumstances where the parties had transparency in respect of incurred and estimated costs in considerable detail – (see also [2016] 3 Costs LO 471).

Red and White Services v Phil Anslow Ltd [2018] 4 Costs LO 425

Birss J decided that the budgets at £1.5m each for the claimant (incurred £100,000)  and third party (Incurred £348,000)were not only high but also disproportionate. D’s budget was £288,000 (incurred £103,000). The court should have in mind what was at stake, both in terms of quantum and wider issues, and court’s own experience of high-value, commercial litigation and the defendant’s budget. Having regard to these factors, the appropriate sums to allow in respect of each of the claimant’s and third party’s budgets was £800,000 each. For the third party’s incurred costs, £190,000 was a proportionate figure but that “was a matter of detail”.

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