“Reasonable and proportionate costs” do not mean lowest amount possible

The “touchstone” of reasonable or proportionate costs need not mean that a judge approving a budget must allow the lowest amount which a party could reasonably be expected to spend, a deputy High Court judge has said.

In Discovery Land Company LLC & Ors v Axis Specialty Europe SE [2021] EWHC 2146 (Comm), Peter MacDonald Eggers QC was referred to the oft-cited 2015 decision of Mr Justice Leggatt in Kazakhstan Kagazy plc v Zhunus [2015] EWHC 404 (Comm).

Leggatt J said : “What is reasonable and proportionate [to recover from the other party] must be judged objectively. The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances.

“Expenditure over and above this level should be for a party’s own account and not recoverable from the other party.”

Mr MacDonald Eggers said his only reservation in following this was why the touchstone of reasonable or proportionate costs “must” be the lowest amount which a party could reasonably have been expected to spend.

He explained: “Certainly in the context of costs management, the court should allow some flexibility to the parties to ensure that their conduct of the action is not unnecessarily and potentially unfairly hampered by an unrealistically low assessment or by only the lowest assessment of what would constitute reasonable and proportionate expenditure.

“Expenditure which is within a reasonable and proportionate range is still reasonable and proportionate even if it is not at the lower end.”

The ruling, which covered a range of budgeting issues, came after the judge had to adjourn the costs part of the case and costs management conference “because decisions taken during the case management conference led to a change in the assumptions which underpinned the costs budgeting to be considered”.

He conducted the adjourned costs management conference six weeks later but in the end had to direct that the parties provide further submissions in writing.

Mr MacDonald Eggers said: “I regret that this process has taken the path it has, but it has proved to be unavoidable. In this respect, I make no criticism of the parties, but it points to possible difficulties with costs budgeting as the same time as the case management conference, where decisions taken in case management can influence the outcome of a proposed costs budget.

“The obvious solution is for those preparing the proposed costs budgets to allow for an alteration in the assumptions underlying the proposed costs budget, insofar as that is possible.”

William Flenley QC (instructed by Davis Woolfe) for the claimants. Helen Evans (instructed by CMS Cameron McKenna Nabarro Olswang) for the defendant.

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Costs News
Published date
11 Aug 2021

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