A recent judgment in a TCC costs management conference has warned parties against treating the cost budgeting process as a game through which to obtain a tactical advantage over the other side. The court has made clear that the practice of some parties in submitting unrealistically low cost budgets and Precedent R forms will not succeed in persuading the court to make a lower assessment of an opposing party’s cost budget.

Findcharm Limited v Churchill Group Limited

Findcharm brought proceedings against Churchill in relation to a claim for business interruption/loss of profit following a gas explosion at Churchill’s hotel which had affected Findcharm’s restaurant within the hotel. The parties attended a Case Management Conference (“CMC”) which considered the costs budgets put forward by the parties amongst other things.

Findcharm had revised its cost budget down prior to the CMC to £244,676.30. This was in contrast to Churchill’s cost budget of £79,371.23. Findcharm accepted the cost budget put forward by Churchill, but Churchill in its Precedent R had offered just under £90,000 as the acceptable costs budget for Findcharm, a reduction of approximately £155,000. The requirement for a Precedent R form was introduced in April last year and was intended to require each party to identify any disagreement with an opposing party’s cost budget and the reasons for that disagreement.

An unrealistic Precedent R

The court noted that ever more time is being spent by judges at CMCs dealing with cost budgeting disputes and that the introduction of Precedent R had led to time savings as it “obliged the parties to adopt a realistic attitude to the budget of the other side” and helps the court to identify what the real costs disputes are.

However, the court noted that some parties were treating cost budgeting as “a form of game…they seek to exploit the cost budgeting rules in the hope of obtaining a tactical advantage over the other side”.

The present case was an example of this type of tactical approach. Churchill’s cost budget and Precedent R were “completely unrealistic”, having as low a figure as possible for each stage of the litigation process. Mr Justice Coulson considered this was “an abuse of the cost budgeting process” in an attempt to persuade the court to assess Findcharm’s cost budget in a similarly low manner.

The court disregarded Churchill’s Precedent R and allowed Findcharm the entire amount claimed in its costs budget.

Conclusions and implications

This case demonstrates the importance that cost budgeting now has in the litigation process. It is unsurprising that judges are becoming frustrated at the amount of court time required to resolve costs budgeting disputes, and perhaps why in this case Mr Justice Coulson decided to warn against the abuse of the costs budgeting process.

As indicated by the court in this case, Precedent R is intended to be used to agree the costs budgets and propose realistic alternative figures. The court’s decision does not mean that a party cannot use Precedent R to suggest a lower number, or even a significantly lower number for another party’s costs budget. However, the court will not look favourably on any proposal that is without justification and is merely a tactic to encourage a lower assessment of the other party’s costs budget.

References: Findcharm Limited v Churchill Group Limited [2017] EWHC 1108 (TCC)