Various Claimants v McAlpine & Ors

Costs budgeting requires the court to assess future costs globally and by phase. The court must first decide whether the proposed costs as a whole appear disproportionate. If they do, it must then consider whether the work in each phase is necessary and whether the proposed figure is reasonable. Proportionality is judged objectively. The relevant question is the lowest amount that could reasonably have been expected to achieve a proficient presentation of the case, having regard to all relevant circumstances. A party’s best interests do not justify recovery of expenditure beyond that level. Agreement between parties as to costs phases does not remove the court’s independent duty to allow only reasonable and proportionate costs.

The court conducted a costs management hearing in extensive group litigation concerning alleged construction-industry vetting and blacklisting. The claims involved approximately 570 claimants, numerous defendants and substantial common costs. The parties had prepared costs budgets under Precedent H following directions given by Master Gordon-Saker.

The principal issues were whether unchallenged parts of the budgets were agreed for the purposes of CPR 3.15(2)(a), how the court should review disputed future costs under Practice Direction 3E, and whether the proposed budgets were reasonable and proportionate.

1. Costs management order. The court made a costs management order under CPR 3.15(2) and approved or recorded the agreed and revised phase totals in the annexed schedule.
2. Agreement between the parties. The Claimants’ written objections stated that costs not challenged would be treated as agreed for the costs management exercise. Agreement for the purposes of CPR 3.15(2)(a) meant agreement to the total figure for each phase. Agreement as to every constituent element was therefore required. If any constituent element remained disputed, the phase was not agreed and the court could approve a revised total under CPR 3.15(2)(b).
3. Proportionality and necessity. Applying the two-stage approach in Home Office v Lownds [2002] EWCA Civ 365 and PD 3E, para 7.3, the court first assessed each party’s proposed budget globally. Despite the importance, complexity, value and public-interest features of the litigation, the proposed costs appeared disproportionate. The court therefore considered whether post-2 October 2015 work in each phase was necessary and whether the phase total was reasonable.
4. Objective assessment. The court applied the approach described in Simpsons Motor Sales (London) Ltd v Hendon BC [1965] 1 WLR 112 and Kazakhstan Kagazy plc v Zhunus [2015] EWHC 404 (Comm). Recoverable costs were to be judged objectively by reference to the lowest amount reasonably necessary for a proficient presentation, rather than the amount a party considered commercially desirable.
5. Incurred costs. The court could not approve costs incurred before the budget date, but under PD 3E, para 7.4 it could comment on them and take them into account when assessing the reasonableness and proportionality of later costs. The court considered the pre-2 October 2015 costs disproportionately high, subject to detailed assessment.