Kirstie Goulder

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Costs Budgeting: A Refresher

Disputes / 29 October 2019

Costs budgeting is now a familiar part of the litigation landscape for most claims in the multi-track which covers cases that are not straightforward and where the value of the claim is more than £25,000.

Costs budgeting can be best described as the project management of costs throughout the litigation process.  It facilitates one of the ideologies of the Civil Procedure Rules that parties involved in civil litigation should conduct themselves with a greater emphasis on proportionality and justification. Over half a decade since its implementation, the main benefits of costs budgeting are clear.

-An approved costs budget will give you a good steer as to what will happen in relation to the assessment of costs and the level of costs which could be recoverable;

-Parties to proceedings have some certainty in respect of future costs and can prepare and budget for that. Similarly, your legal representatives can allocate team resource appropriately; and

-From an early stage, it focusses the parties’ minds on the potential level of costs involved, both in respect of their own costs and the level of their opponent’s costs they could be ordered to pay if they lose the case. This may facilitate settlement in some cases.

Another benefit: conditional costs order

The recent High Court case of Orexim Trading Ltd v Mahavir Port And Terminal Private Ltd (Costs) [2019] highlighted an additional potential benefit of costs budgeting, in the value of having an approved costs budget when seeking an interim payment on account of costs.

Here, Christopher Hancock QC, sitting as a High Court judge, made an unless order against the defendant, with judgment ultimately being entered against the defendant for failure to comply. The Judge also said that the claimant would “clearly” be entitled to its costs in the event that the defendant failed to comply with the unless order. The claimant also sought an order for the defendant to pay monies on account of his costs.

In quantifying the sum of monies to be paid on account, Christopher Hancock QC followed the approach of Mr Justice Coulson in McInnes v Gross [2017], in which he said that ‘the approved costs budget was the appropriate starting point for the calculation of any interim payment on account of costs’. Applying a slight reduction of 10% from the approved costs, Mr Hancock QC extended his unless order further, stating that, in circumstances where the defendant failed to comply with the unless order, it must also make an interim payment of a specified sum on account of costs within 28 days.

This was a novel order as the costs consequences of the defendant failing to comply with the unless order were assessed before any breach of the order had even occurred and serves to highlight another potential benefit of having an approved costs budget. It is anticipated that more requests for conditional orders for interim payments on account of costs will be made in appropriate circumstances going forward.

We have strong expertise in the costs budgeting process. From the outset, we spend time with our clients to understand their objectives and to explain the costs involved in the litigation process, thereby giving our clients the ability to make informed decisions about how to progress and deal with disputes and court proceedings.

If you have any queries relating to costs budgeting or a potential claim, please get in touch with me or a member of our team. 

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