In the TCC case of GSK Project Management Ltd. V QPR Holdings Ltd.  EWHC 2274 (TCC) Mr Justice Stuart-Smith was keen to point out that only exceptionally will it be appropriate or necessary to go through a party's costs budget with a fine tooth-comb, analysing the makeup of figures in detail; however, he considered this to be such an exceptional case as the claimant's proposed costs budget was “…so disproportionate to the sums at stake or the length and complexity of the case that something has clearly gone wrong.”
To put the Judge's comments into context, the claimant’s proposed costs budget of £825,000 not only exceeded the amount claimed exclusive of interest (£805,000) but the sums alleged to have already been incurred by the claimant (£312,000) amounted to nearly 40% of the sum at stake. By comparison, the defendant’s cost budget was in the total sum of £455,554 (even though their solicitors used substantially higher hourly rates).
Stuart-Smith J was of the opinion that it was “hard to imagine anything more sterile than arguing about a grossly excessive costs estimate" as "it does not go to the issues, it is wasteful of Court and the parties time, and it offends against the obligation to keep costs to the reasonable minimum (both in the fact of the estimate and the need to whittle it down.)” Nevertheless, he proceeded to carry out a detailed analysis of the amounts claimed by the claimant and set budget figures for each phase of the litigation (including those phases already undertaken) resulting in a total costs budget of £425,000 or 51% of the claimant's proposed cost budget.
The claimant was ordered to pay the additional costs caused by the costs budget dispute. Interestingly, Stuart-Smith J also ordered the claimant’s solicitor to notify their clients of the terms of the judgment within 14 days and notify the Court when this had been done.
The litigation process is often costly and lengthy, and Stuart-Smith J's judgment confirms yet again that cost management and proportionality is of paramount importance to the TCC. The judgment highlights the importance of preparing a costs budget which is properly substantiated and can be justified. Solicitors who fail to do so should be mindful that not only may their client's budgets be slashed and they may be ordered to pay the additional costs caused by such disputes but they also risk professional embarrassment if they are criticised by the court. The judgment is also a useful reminder that whilst a court cannot assess incurred costs when setting the costs budget, these costs can be taken into account when assessing what is reasonable and proportionate going forward.