Willis v MRJ Rundell & Associates Ltd & Anor

Costs budgets must be proportionate and reasonable in relation to the value and complexity of the dispute. The assessment may allow for necessary expert evidence and reputational damage, but those considerations do not justify budgets substantially exceeding the sums at stake. Incurred costs must be separated from estimated costs. Contingency and settlement allowances should be broken down and explained. Where the court lacks a proper evidential basis for substituting alternative figures, it should not impose figures without notice. The absence of an approved costs budget does not automatically prevent recovery of costs at the end of the proceedings.

The claimant pursued professional negligence claims against the first defendant arising from building works at her property. The claim, originally valued at approximately £1.6 million, had been reduced to a maximum of about £1.1 million. The parties’ updated costs budgets were approximately £897,000 and £703,000 respectively.

The court conducted a costs management hearing under Practice Direction 51G after earlier procedural delay and adjournment of the trial. The central issues were whether the budgets were proportionate and reasonable, whether particular budget items were adequately explained, and whether the court could approve revised figures or make a costs management order.

1. Costs management. Under Civil Procedure Rules 1998 Practice Direction 51G, the court may not approve costs incurred before the first costs management order, although it may comment on those costs and take them into account when considering the reasonableness and proportionality of later costs. Costs management is intended to control litigation costs in accordance with the overriding objective.
2. Proportionality. The budgets were disproportionate and unreasonable. Their combined value substantially exceeded the maximum value of the claim. The court allowed for the need for expert evidence in a professional negligence claim and for possible reputational damage, but the disputes were sufficiently limited that the anticipated expert and trial work did not justify the figures.
3. Budget presentation. Incurred and estimated costs must be separately identified. Large unparticularised contingency sums are unacceptable. Contingencies should identify their purpose and calculation, and additional work should be recorded under the relevant budget line. Settlement costs also required a breakdown by component.
4. Alternative figures and outcome. The court lacked sufficient material to devise reliable alternative figures and should not impose them without notice or supporting evidence. It therefore declined to approve either budget and made no costs management order. The parties were required to keep their budgets up to date and provide them at the pre-trial review.
5. Recovery of costs. The judge observed that failure to obtain an approved budget did not necessarily mean that no costs could be recovered. The eventual recoverable amount would remain subject to agreement or assessment, and the court’s criticisms of the budgets could affect that assessment.