CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd (Costs NO. 2)

In costs management, the court must take incurred costs into account when fixing future costs so that the overall recoverable costs remain reasonable and proportionate. Where a party’s budget is unreliable and its incurred costs are excessive, the court may make a tailored costs management order. It may cap recoverable incurred costs on assessment, approve reduced future phase costs, and require a pound-for-pound reduction of those future costs if the assessed incurred costs exceed the stated cap.

Proportionality requires attention to the statutory factors, particularly the complexity and value of the litigation. A substantial monetary claim does not by itself justify costs which are disproportionate to the work required to litigate it.

The claimant brought a construction-defects claim against the contractor concerning a Birmingham development. The contractor had commenced related claims against specialist subcontractors and the architects.

At a costs-management hearing, the claimant’s asserted incurred and future costs exceeded £8.9 million. The other parties contended that its budget was unreliable, disproportionate and unreasonable. The court considered whether to require a new budget, decline to approve it, fix future figures only, or allow no further costs beyond those incurred.

The central issue was how to make a just and workable costs management order where the claimant’s stated incurred costs already approached the proportionate cost of the case as a whole.

1. A modified costs management order was made. The claimant’s budget was unreliable. Its large and unexplained increases in incurred and estimated costs, extensive assumptions and contingencies, and later corrections showed that it had not provided a dependable basis for ordinary costs management.

2. The claimant’s total asserted costs were disproportionate and unreasonable. Applying the factors in CPR r 44.3(5), the court held that this was a relatively standard defects claim in which expert evidence, rather than extensive factual material, would be decisive. Complexity was more significant than the claimed value. The claimant’s costs were more than twice the defendant’s, although the defendant bore the additional burden of defending the claim and pursuing the additional parties.

3. The court rejected an order for a new budget because it would generate further cost without a realistic prospect of reliable information. It also rejected declining to approve the budget, since that would leave the disputes unresolved. A nil prospective budget was potentially unfair because the claimant’s incurred costs could later be reduced on assessment without any corresponding allowance for future work.

4. The court therefore set recoverability figures for incurred phases and approved future phase figures. If the claimant recovered more than the stated incurred-cost cap on assessment for pre-action costs, statements of case, CMCs, disclosure, or experts, its approved future costs would reduce pound for pound. The resulting total recoverable cost allowance was £4.28 million.

5. The defendant’s budget was reduced to £4,226,446.41. The additional parties’ budgets were approved in full.

High Court (TCC): This second costs judgment followed a CMC in the same proceedings. At that CMC, the court rejected the claimant’s argument that the value of the claim prevented any costs management order: [2014] EWHC 3546 (TCC).