Foods v Manton

Approval of a costs budget controls prospective expenditure, but it does not establish that costs later incurred within the approved scope are reasonable or proportionate. On detailed assessment, reasonableness and proportionality require further consideration. Budget approval is not permission to conduct litigation unnecessarily expensively. A costs judge should not approve an item merely because it is not obviously excessive or grossly disproportionate. Although appellate courts will respect the evaluative nature of costs budgeting, permission to appeal is appropriate where it is arguable that incorrect principles produced an over-generous budget, particularly while the costs-management regime is developing.

Troy Foods and Manton disputed pricing under a contract for the supply of liquid egg products. After proceedings for breach of contract were issued, both parties prepared costs budgets under Practice Direction 51G. His Honour Judge Kaye QC approved Manton’s budget and only parts of Troy Foods’ budget, including provisions for witness statements and counsel’s fees. Troy Foods renewed its application for permission to appeal after a single Lord Justice refused permission on paper. The central issue was whether the costs judge had adopted an impermissibly generous approach to budget approval and whether approval would affect later detailed assessment.

The Court of Appeal granted the renewed application for permission to appeal.

1. An approved costs budget is not a licence to conduct litigation in an unnecessarily expensive manner. Approval, whether of the whole budget or of a particular element, does not by itself establish that costs incurred within the approved scope are reasonable or proportionate on detailed assessment. The costs judge must consider those matters afresh.
2. The court’s conclusion was consistent with Henry v News Group Newspapers [2013] EWCA Civ 19, where the same judge had stated that budget approval should not be treated as authorising unnecessary expenditure.
3. Judge Kaye appeared to have proceeded on the basis that an item could be approved unless it was so unreasonable as to be obviously excessive or grossly disproportionate. It was arguable that this was the wrong approach and that it resulted in an over-generous allowance for witness-statement preparation and counsel’s hourly rates. The Court of Appeal did not finally determine the correct figures or conduct the detailed assessment.
4. Costs budgeting is intended to control expenditure. The appellate court will not readily interfere with an evaluative budgeting decision, but permission was justified because the regime was relatively new, further guidance on the correct principles was desirable, and proportionality had assumed greater importance for later claims.

• Court of Appeal (Civil Division) — On a renewed application for permission to appeal, the court granted permission: [2013] EWCA Civ 615.
• Court of Appeal (single Lord Justice) — Permission to appeal was refused on paper.
• Leeds District Registry, Leeds Mercantile Court — His Honour Judge Kaye QC made a costs management order under Practice Direction 51G, approving Manton’s budget and only parts of Troy Foods’ budget.