Tribe v Southdown Gliding Club Ltd – reliance on inaccurate estimate at allocation results in limit on recoverable costs [2007] EWHC 90080 (Costs)

The court limited the amount of costs which could be recovered from the other side where the estimate given at allocation was only a fifth of the costs finally incurred. The claimant had reasonably relied on the estimate given – he would have obtained additional insurance cover had he known that his costs exposure would be so much greater – and the reasons given by the defendants to explain the difference between the estimate and the costs claimed did not fully account for the discrepancy. The estimate did not act as a cap on recoverable costs but it was appropriate to limit the sum recovered in accordance with sections 6.5A and 6.6 of PD 43.

Comment: the figures in question here were as follows:

Defendants’ estimate at allocation: £50,000

Defendant’s actual costs: £244,509.72 (£150,640 profit costs)

Judge’s estimate of defendants’ appropriate costs: £100,000 - £150,000

Claimant’s ATE insurance for both sides’ costs: £100,000

Defendants’ recoverable costs: £70,000

This decision highlights the three requirements which must be met before a cap can be ordered:

  • There is a difference of 20% or more between the base costs claimed and the costs shown in the receiving party’s estimate.
  • The difference is not adequately explained by the receiving party.
  • The paying party has relied on the estimate.

Reliance was easy to prove in this case because the defendants were aware that the claimant had purchased ATE insurance from the Notice of Funding and were therefore aware of the importance of the estimate. In other cases, this may be more difficult.