The High Court nearly halved a claimant’s £824,000 costs budget last month after finding that it was so disproportionate to the sums at stake and complexity of the case that “something has clearly gone wrong”.
Mr Justice Stuart-Smith said that “experience in the TCC has shown that most costs budgeting reviews can and should be carried out quickly and with the application of a fairly broad brush. Only exceptionally will it be appropriate or necessary to go through a Precedent H with a fine tooth-comb, analysing the makeup of figures in detail.
“For reasons that will become apparent, however, this is an exceptional case which justifies a more detailed approach. The justification lies in the fact that the aggregate sum being put forward for approval is so disproportionate to the sums at stake or the length and complexity of the case that something has clearly gone wrong.”
In GSK Project Management Ltd v QPR Holdings Ltd  EWHC 2274 (TCC) – an £805,000 dispute over works done at the football club’s training ground – the approach adopted by Coulson J in March in CIP Properties was adopted as a guide.
The claimant submitted a budget for nearly £824,000, including £313,000 of incurred costs. The defendant’s cost budget was £456,000, but the judge said a straight comparison was not appropriate because of the widely differing hourly rates charged.
Stuart-Smith J said his starting point was that a case would have to be “wholly exceptional” to render such a budget proportional to what was at stake. But this case was straightforward, he said, and his initial reaction was that “good reason would need to be shown to justify more than about half that figure on proportionality grounds”.
He rejected a submission that the correct approach was to take the other party’s costs budget as a starting point, “because different parties to litigation have different roles and responsibilities that are likely to distort one party’s costs when compared with those of another…
“However, I do accept that the court should have regard to the other party’s costs budget because it may provide useful indicators about necessary resourcing of the litigation. And I bear in mind Coulson J’s observation that in the TCC the defendant needs to be on top of all the relevant material just as much as the claimant.”
Going through the budget item by item, Stuart-Smith J reduced it to £425,000, 52% of what had been claimed.
He concluded that while the court may not approve costs already incurred, it may take them into account when considering the reasonableness and proportionality of all subsequent costs. But this rule did not make specific provision for the situation “where, as here, taking the incurred costs into account reveals a disproportionate level of expenditure with no consequential benefit being reflected in the estimate of future costs.
“I respectfully agree with Coulson J that there is no prohibition against saying what the court would have approved if presented with an estimate for future costs rather than the fait accompli of incurred costs.”
In a post-script, he rejected the claimant’s justification for its level of costs on the basis that the litigation was “combative”.
He added: “It is hard to imagine anything more sterile than arguing about a grossly excessive costs estimate. 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).”