Court rules both sides’ costs budgets are disproportionate

This was a case to which the costs budgeting rules applied (here, because of the pilot scheme in the TCC, rather than the Jackson reforms in April). The case involves a professional negligence claim for GBP 1.1 million (although it was originally pleaded to be around GBP 1.6 million). At the original CMC, the claimant’s costs budget was around GBP 820,000 and the defendant’s was around GBP 615,000. Following a failed mediation, the parties submitted updated costs budgets of around GBP 890,000 and GBP 700,000.

Whilst recognising that costs budgeting is “a regime still very much in its infancy”, Coulson J said it was an important tool to control costs and “it is therefore important that all litigants and their solicitors get to grips with and comply with the new regime as soon as possible”.

In this case, it would cost significantly more to fight the case than the claimant will ever recover. Although professional negligence claims can involve costs (such as expert evidence) which are not required in other cases, and account should be taken of the “non-quantifiable, but potentially serious, damage to the defendant’s professional reputation”, Coulson J concluded that neither party’s costs budget was proportionate or reasonable.

Although the judge was only able to comment on costs which had already been incurred, he believed that an amount of more than GBP 100,000 for disclosure was disproportionate and unreasonable, especially since the underlying dispute concerned an alleged absence of documents.

Experts’ fees of GBP 100,000 were also disproportionate and unreasonable, the judge commenting that “Unhappily, my recent experience is that the amount of the experts’ fees in cases like this is often out of all proportion to the assistance provided”. It was also inappropriate to put a single lump sum for contingency costs, without any further explanation.

In an ideal world, Coulson J said he would have provided alternative figures for an approved costs budget and a costs management order could then be made. However, he did not have sufficient supporting material to do this. Accordingly, he declined to approve either party’s costs budget/make a costs management order. He stopped short of taking the view that an absence of an approved costs budget means that a party will recover no costs at all (“I do not believe that such a draconian approach is in accordance with the letter or the spirit of the new costs rules or 51G PD”). Instead, the parties should keep their budgets up to date and the judge’s adverse comments will become relevant at the end of the case (when it will be likely that the even the winning party will recover only some of its costs).