A case on the consequences of submitting an unreasonable costs budget


Costs incurred before the date of a costs budget do not fall within the costs management regime.  However, under PD 3E para 2.4, they will be taken into account when the court considers the  reasonableness and proportionality of all subsequent costs. The high costs incurred here by  the claimant pre-budget were said to be  unjustifiable and contributed to the court’s finding that the costs budget was unreasonable and unjustified. The court then considered the various options open to it, namely:

  1. order the claimant to prepare a new budget. Coulson J rejected this option on the basis that  huge costs had already been incurred and a new budget wouldn’t change that;
  2. decline to approve the claimant’s budget. The judge held this option would merely postpone all  the unresolved issues to later in the litigation;
  3. endeavour to set costs budget figures looking primarily at the estimated, rather than actual  costs. By simply commenting on the costs already incurred, though, and budgeting for the  prospective costs, the overall figure would be unreasonable and disproportionate; or
  4. refuse to allow anything more in the budget beyond that which had already been spent. The judge  recognised, though, that the defendant could reduce the costs already incurred at a future  assessment, and thus the claimant might be doubly penalised.

Accordingly, the only workable option was said to be option (3) above (albeit with some modification).