Tactical budgeters beware


When the Civil Procedure Rules introduced cost budgeting requirements for all but the highest value claims in 2014, a certain amount of speculation arose as to whether parties might be able to use tactical figures in their own cost budgets to manoeuvre themselves into a more favourable costs position compared to their opponent.

The significance of cost budgets is that once the court has approved them, a successful party cannot normally recover more than is provided for in their budget from their opponent unless they have managed to get an increased budget approved before they have spent the excess.

The theory was that tactical budgeting might work particularly well for a Defendant. A Defendant might enter a ‘low-ball’ cost budget, so that comparatively the Claimant’s costs would look very high and the court might then cap them at a lower level than would otherwise have been the case, giving the Defendant increased adverse costs protection.

Needless to say, that is not how the cost budgeting regime was intended to operate.

The High Court has now shown it is live to this issue. In the recent decision of Findcharm Ltd v Churchill Group Ltd [2017] EWHC 1108 (TCC) the court noted that some parties “seem to treat cost budgeting as a form of game, in which they can seek to exploit the cost budgeting rules in the hope of obtaining a tactical advantage over the other side”.

In this case, the Defendant had put in a very low costs budget, including for example only £7,000 for the preparation of a High Court trial and allowing nothing at all for a category of expert evidence which they themselves had argued would be required.

The court considered that the Defendant’s budget was “completely unrealistic” and an abuse of the cost budgeting process. It was “designed to put as low a figure as possible on every stage of the process, without justification, in the hope that the court’s subsequent assessment will also be low”.

The court allowed the Claimant’s budget in full, which it considered to be both proportionate and reasonable, disregarding the Defendant’s budget for the purpose of assessing the Claimant’s.

The Defendant’s cost budget had already been agreed by the Claimant, so the court merely approved it rather than assessing it.

The Defendant’s plan had been thwarted – its low-ball budget had achieved no adverse costs protection and the Defendant would now have to keep its own cost expenditure within its unrealistically low budget.

The message from the courts is now clear: using cost budgets tactically is unlikely to achieve the desired outcome and will not be looked upon sympathetically by the courts.

The High Court also noted that this judgment should be made available immediately because of the “critical need to ensure that the [cost budgeting] process is carefully and properly adhered to”.

Tactical budgeters should consider themselves warned.

Victoria Prince, Associate, Fladgate LLP (vprince@fladgate.com)

View by date:

View by author:

Would you like to hear more?