13 December 2023
You can’t just tear up costs budgets, says Mr Justice Constable
The High Court has refused to order assessment of costs on the standard basis without reference to the successful party’s costs budget, saying it was a “backdoor” route to seeking indemnity costs.
Mr Justice Constable also cast doubt on whether he had the power to make such an order anyway.
Hope Capital Ltd & Anor v Alexander Reece Thomson LLP (Re Consequential Matters) (Rev1)  EWHC 3157 (KB) followed his decision that, notwithstanding the admitted (during trial) negligence of the defendant property valuer, the claimants had suffered no actionable loss. As a result, the claim was dismissed and costs awarded to the defendant.
He rejected the defendant’s bid for indemnity costs, finding that the claim “was not, itself, in any way weak, or speculative” and that the claimants did not act unreasonably in continuing with the litigation after receiving each of two part 36 offers.
Its alternative argument was that costs should be on a standard basis, but the court should order that they be assessed without reference to its costs budget.
Constable J said: “A key feature of awarding indemnity costs is freeing the receiving party from its costs budget and the presumption of proportionality therein. Whilst it also reverses the burden of proof in relation to reasonableness which otherwise applies when assessment takes place on the standard basis, reasonableness is separate to proportionality.
“It is likely in many cases that removal of the requirement for proportionality has a greater effect on the additional costs recoverable on an indemnity basis than the reversal of the burden of proof.”
Having decided that indemnity costs were not justified, he continued, the court should not go on “to remove the important requirement for proportionality by the backdoor by ordering that costs should be assessed free from the constraints of the costs budget, even if the court had power to make such an order, which I doubt”.
The judge noted that the only specific power to depart from an approved or agreed budget was in CPR 3.18, and this was to be exercised by the costs judge. “It may be that some of the matters raised as ‘conduct’ issues in the context of an indemnity costs application are matters which, in due course, amount to good reasons for such a departure but that is not a matter for determination by me at this stage.”
The defendant then invited the court to make comments – “having heard the various conduct related arguments” – which the costs judge might take into account but Constable J again refused.
He said: “I note, first, that such comments would not be of the type envisaged either by rule 3.15(4) or 3.17(3), which appear to be (pursuant to CPR 3.18(c)) the only type of comments which, when also recorded on the face of an order, the cost judge is to take into account.
“I doubt therefore whether I have the power to make comments of the type I have been invited to. However, even if I had the power to pursuant to general case management provisions such as CPR 3.1(m) or otherwise, I would not do so in the present case.
“I have determined that the appropriate basis of assessment is a standard basis. It is now for the costs to be assessed, if not agreed, on that basis and it is for the parties to make any submissions they consider appropriate to the costs judge at the relevant time.”
Roger Stewart KC and Andrew Nicol (instructed by Penningtons Manches Cooper) for the claimants. Tom Asquith (instructed by Kennedys) for the defendant.