Petursson v Hutchison 3G UK Ltd

A costs-capping order should normally be prospective and sought at an early stage, so that the parties can plan the litigation with knowledge of the recoverable-costs limit. A retrospective cap is permissible only in a wholly exceptional case, particularly where the defendant has complied with directions and incurred substantial costs. The court should consider whether there is a real and substantial risk that future costs will be disproportionate or unreasonable, whether that risk can be managed by conventional case management and detailed assessment, and whether making a cap is just. The court must also consider the parties’ conduct, the complexity and value of the claim, and the work reasonably required for trial.

The claimants pursued proceedings concerning telecommunications apparatus installed near their property. They initially claimed injunctive relief and damages exceeding £150,000, but later abandoned the compensation claims and sought only relocation of the apparatus under paragraph 17 of the Electronic Communications Code.

The defendant estimated its total costs at approximately £233,000 plus disbursements and VAT. The claimants applied for a pre-emptive cap of £20,000, later suggesting approximately £70,000. The application was made shortly before trial, after substantial preparation and expenditure. The central issues were whether a costs cap should be imposed retrospectively or prospectively.

1. Jurisdiction and governing approach. The court had jurisdiction to make a pre-emptive costs-capping order. The authorities also established that prospective costs budgeting and capping can promote the overriding objective by keeping costs proportionate.
2. Retrospective cap. A costs cap should normally operate prospectively. A party should know in advance that its recoverable costs are limited and should be able to tailor its case accordingly. It would generally be unfair to impose a cap after the court had required compliance with directions and the opposing party had incurred costs in preparation for trial. A retrospective cap would therefore require a wholly exceptional case. This was not such a case, particularly as the defendant had complied with directions and had incurred substantial costs, including costs attributable to the claimants’ delays and disclosure failures.
3. Prospective cap. The relevant question was whether there was a real and substantial risk that future costs would be disproportionately or unreasonably incurred, that the risk could not be managed by conventional case management and detailed assessment after trial, and that it was just to impose a cap. The timing of the application, the complexity and value of the claim, the work still required before trial, and the parties’ conduct all weighed against an order. The claimants had not analysed the defendant’s future costs sufficiently to establish that a cap was necessary.
4. The refusal to cap costs did not approve the defendant’s hourly rates, deployment of fee earners or estimates. Those matters remained for a costs judge at detailed assessment, including consideration of proportionality and reasonable incurrence.
5. The claimants’ application was dismissed.