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What to do about Incurred costs to which Section II of CPR Part 3 PD 3 paragraph 7.3 applies:-

(Incurred costs are not subject to court approval before the date of any budget, but the court may record its comments and “will take those costs into account when considering the reasonableness and proportionality of all subsequent costs).

Yeo v NGN [2015] 2 Costs LO 243 Warby J

“The court may reduce a budget for reasons which apply equally to incurred costs, or for reasons which have a bearing on what should be recoverable in that respect, for instance, that so much had been spent before the action began that the budgeted costs of preparing witness statements is excessive…….. In a case that goes to trial, the successful party’s costs incurred before approval of the budget will normally need detailed assessment”

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

Overspend pre-budget and you knock off £1 for £1 the excess amount from the budgeted costs at the detailed assessment.

“In relation to the pre-action costs…. These should not exceed £680,000. I take that figure into account when assessing each element of the prospective/estimated costs… To the extent that the claimant recovers more than £680,000 on assessment under this head, it would mean that more work had been legitimately done in the early stages of the case than I thought, which would in turn mean that less remained to be done in the future. … The estimated costs fall to be reduced £ for £ to the extent that the amounts actually recovered on assessment in respect of costs incurred are higher than the figures which I have indicated”

Redfern v Corby Borough Council [2015] 5 Costs LO 583 HHJ Seymour

“… The only way in which one can take into account excessive costs already incurred in determining the reasonableness and proportionality of subsequent costs is to limit the approved subsequent costs at figures below what they might otherwise have been approved at, but for the excessive sums which have already been expended”

Group Seven v Nasir [2016] 2 Costs LO 303 Morgan J

Approach in Galliford not followed for incurred costs because “I do not feel able to say that if a costs judge later allowed a higher figure, that it would be necessarily be appropriate to deduct the difference between the budgeted figure and the cost judge’s higher figure from some other figure for future costs which I am otherwise prepared to approve as the reasonable and proportionate”

Various Claimants v Sir Robert McAlpine [2015] 6 Costs LR 1085 Supperstone J

“When considering reasonable and proportionate costs post 2 October 2015 [date of costs directions order], we have taken into account the costs that have been incurred before that date, and have proceeded on the assumption that of such incurred cost, only those which are reasonable and proportionate will be allowed on detailed assessment”

Sarpd Oil v Addax Energy SA [2016] 2 Costs LO 227. Longmore, Sales LJJ, Baker J

“…if a court has commented that incurred costs in a costs budget appear to be reasonable and proportionate, it would usually require good reason to be shown why such costs should not be included in an award of costs on the standard basis at the end of trial. The parties coming to the first CMC to debate their respective costs budgets therefore know that that is the appropriate occasion on which to contest the costs items in those budgets, both in relation to the incurred costs element in their respective budgets [emphasis added] and in relation to the estimated costs elements…”

Note: there was a practice direction change (88th Update) on 6 April 2017 which was intended  to square the potential conflict between Sarpd Oil and CPR 3 PD 3E paragraph 7.3. As an authority, it is no longer good law (if it ever was) – see Harrison v University Hospitals Coventry and Warwickshire NHS Trust [2017] 3 Costs LR 425 at paragraph 53 –“ I therefore think, with all respect, that those particular obiter comments of Sales LJ in Sarpd Oil may have gone too far ..etc” Davis LJ


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