LPI (Hotels) Ltd v Technical & General Guarantee Company SA

The court may determine, when making or giving effect to a costs order, whether particular expenditure should be recoverable. In deciding whether expert costs should be allowed, it should consider their relevance, necessity, desirability, reasonableness and proportionality. Permission for expert evidence, especially when granted by consent, does not establish that the evidence was reasonably or necessarily incurred. Costs may therefore be allowed for only part of the period during which the expert was engaged, where later developments made further use unnecessary.

The parties had settled the substantive litigation on the basis that the claimant had succeeded and that the defendant would pay costs on the standard basis. They sought a binding direction for the costs judge on whether the claimant’s forensic accounting expert costs were recoverable.

The expert evidence concerned the contractor’s solvency and ability to trade. The court had initially permitted the evidence by consent, but later developments indicated that it was tangential to the principal factual issue and that the experts’ work was no longer required. The issue was the period, if any, for which the claimant’s accounting expert costs were reasonably recoverable.

1. Power to determine recoverability. Under Civil Procedure Rules 1998 Part 44.3 and the overriding objective, the trial or case-managing judge may direct that particular categories or elements of costs are, or are not, payable by the paying party. This may save the parties and the costs judge from revisiting issues already considered during the proceedings.
2. Relevant approach. The court must consider the general principles governing costs, including proportionality. The observations in Home Office v Lownds [2002] EWCA Civ 365 were relevant even though the present exercise was not a detailed assessment. It was legitimate to consider whether the expert evidence was necessary, desirable and reasonable, while avoiding hindsight and adopting a sensible standard of necessity.
3. Effect of permission. Expert evidence is restricted by Part 35 to evidence reasonably required to resolve the proceedings, and permission is required before expert evidence may be adduced. A consent order permitting expert evidence, endorsed without detailed analysis, does not establish that the evidence was reasonable or necessary for costs purposes.
4. Application. The accounting evidence was tangential because the primary issue concerned what was said at a particular meeting. Much of the expert material could have been addressed by cross-examination. Nevertheless, it was reasonable for the claimant to retain and use its expert between 18 March 2010, when both parties agreed that such evidence might assist, and 1 June 2010, when the parties should have recognised that further expert work would not materially advance the case.
5. Order. The claimant was entitled to recover its forensic accounting expert costs only for work done between 18 March and 1 June 2010 inclusive. Costs incurred outside that period were not payable as part of its costs entitlement.