GSK Project Management Ltd v QPR Holdings Ltd

Costs budgets should ordinarily be reviewed quickly and with a broad brush. Detailed examination is justified where the aggregate estimate is plainly disproportionate to the value, duration or complexity of the proceedings.

Incurred costs cannot be approved through costs management, but they must inform the assessment of reasonable and proportionate future costs. The court may state what level of incurred costs would have been reasonable and may set appropriate figures for each prospective phase.

The opposing party’s budget is not the starting point because the parties may have different responsibilities. It may nevertheless indicate the resources reasonably required. Parties must conduct litigation economically and keep proportionality at the forefront throughout.

The claimant, a company in liquidation, sought £805,675 for construction works at a football ground. The defendant disputed the final account and counterclaimed for allegedly defective work. The parties anticipated a four-day trial involving a limited number of witnesses and no novel or unusually difficult legal issues.

At the first case management conference, the claimant submitted a costs budget of £824,038, including more than £310,000 in incurred costs. The defendant’s unopposed budget was £455,554, although the parties’ hourly rates differed substantially.

The court had to determine what costs were reasonable and proportionate, how incurred expenditure should affect the prospective budget, and which costs-management response should be adopted.

1. The claimant’s costs budget was reduced to £425,000. The proposed £824,038 was grossly disproportionate to a straightforward claim for £805,675 which was expected to require a four-day trial. A budget approaching the amount in dispute would require a wholly exceptional case, and this litigation was not exceptional.

2. Most costs-budgeting reviews should be conducted quickly and with a broad brush. Exceptionally, a detailed phase-by-phase examination is justified where the aggregate estimate is so disproportionate that something has plainly gone wrong. Such examination enables the court to identify an approvable figure and reinforces the moderating purpose of costs management.

3. The other party’s budget is not the starting point for assessing a party’s costs. Parties may have different burdens and responsibilities. The comparison may nevertheless provide useful evidence about the resources needed, particularly when adjusted for materially different charging rates.

4. Under paragraph 7.4 of Practice Direction 3E, incurred costs cannot be approved, but the court must take them into account when assessing the reasonableness and proportionality of future expenditure. Following the approach in CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd [2015] EWHC 481 (TCC), the court could indicate what level of incurred expenditure would have been approved and set appropriate prospective figures. It adopted the modified budget-setting option because simply deducting incurred costs could impose a double penalty if those costs were later reduced on assessment.

5. The court fixed or indicated appropriate sums for each phase. These included £13,500 for pre-action costs, £115,000 for statements of case, £29,522 for disclosure, £25,100 for witness statements, £85,000 for expert reports, £37,500 for trial preparation, £65,000 for trial and £25,000 for settlement, ADR and mediation.

6. Approval of a budget does not prevent a costs judge from disallowing unreasonable costs. Conversely, significant developments may justify budget revision, and the court may depart from an approved or agreed budget for good reason under rule 3.18.

7. The claimant was ordered to pay £1,000 for the defendant’s costs of addressing the exorbitant estimate. The claimant’s solicitors were also directed to bring the judgment to the attention of any paying client who retained them in the action.

not stated in the judgment.