Bringing down budgets, but making them pay!

Bringing down budgets, but making them pay!

CategoryNews Author John Denis-Smith Date


John Denis-Smith was successful in this ‘double-whammy’ decision as The Technology and Construction Court (TCC) approved costs budgets advanced by parties to a construction claim, subject to certain alterations to individual items in the budgets which were unreasonable and disproportionate. This is an important case on Costs Management Orders. It shows that a party whose cost budget cannot be justified in terms of hours and disbursements proposed may find that it has to pay the costs of the party which challenges the budget, as well as incurring its own irrecoverable costs of the challenge.

The court was required to determine whether to approve costs budgets advanced by the parties to a construction claim.

The dispute related to alleged defects in the building of a leisure centre and had been listed for a six-day trial with about 10 factual witnesses and eight expert witnesses. While the first and second defendants’ costs budget in the sum of £195,000 was accepted by the other parties, they took issue with the costs budgets proposed by the claimants and the third defendant in the sums of around £392,000 and £322,000 respectively. The Court held that:

(1) On one view, the correct approach was to look at the parties’ overall budgets and decide whether they were reasonable and proportionate without any further investigation,  Yeo v Times Newspapers Ltd [2015] EWHC 209 (QB), [2015] 1 W.L.R. 3031 and  GSK Project Management Ltd (In Liquidation) v QPR Holdings Ltd [2015] EWHC 2274 (TCC), [2015] B.L.R. 715 considered. Considering proportionality,  CPR r.44.3(5)(a),  r.44.3(5)(c) and  r.44.3(5)(e) were relevant: the sums in issue were not large, particularly by TCC standards, the litigation was not complex but was typical of a defects claim, and there was a question of reputation involved. There was nothing to justify expenditure over and above what was the norm for a six-day trial of this type. However, the court had no indication of what a normal sum for such a trial would be. In those circumstances, it could not conclude simply by looking at the bottom-line figures that the claimants’ and third defendant’s budgets were unreasonable and disproportionate.

(2) Even if the overall budget figure is not unreasonable, the Court, however, can still consider the objections raised in relation to individual items claimed in those budgets. In this case, there were sums which had been budgeted for which appeared disproportionate and accordingly ought to be altered. In particular, sums claimed by the claimants in relation to counsel fees, expert reports and trial preparation were excessive. Disproportionate sums claimed by the third defendant included those in connection with the production of pleadings; solicitors’ time spent in connection with expert reports; the costs of expert reports; costs of counsel and solicitors attending the pre-trial review; costs of counsel and solicitors in preparing for trial; costs of solicitors attending trial, and costs associated with alternative dispute resolution and settlement.

The end result is that costs budgets which appeared overall not to be excessive could still be reduced in relation to given items. Further, the costs of challenge could be recovered by the party objecting to those items.

John represented the successful party and recovered costs of the proceedings.

To read the article in Litigation Futures, please click here.

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