Bloomberg LP v Sandberg (a firm) & Ors

Costs budgeting is a prospective case-management exercise rather than a detailed assessment in advance. The court should use a broad, impressionistic approach and decide whether proposed costs fall within a range of reasonable and proportionate costs.

Proportionality depends on the circumstances, including the value and complexity of the claim, the hours and rates claimed, the level of fee-earner used, and the total sum sought for each phase. Incurred costs are not approved through budgeting, but the court may comment on them and take excessive expenditure into account when setting subsequent budgeted costs. Recoverable costs are judged objectively by reference to the lowest amount reasonably necessary for proficient conduct of the litigation.

The claimant brought negligence and breach of warranty claims concerning defective stone-cladding works at commercial premises. The claim exceeded £2 million and involved technical issues, causation, quantum and limitation. Trial was listed for 12 days.

The parties agreed the defendants’ costs budgets but could not agree the claimant’s Precedent H budget. The application concerned the proper approach to reviewing the claimant’s incurred and estimated costs, including the significance of proportionality, fee-earner grades, counsel’s involvement and the competing budget.

1. Application of costs-management principles. The court reviewed the claimant’s budget phase by phase under Part 3 and Practice Direction 3E. The exercise was not a detailed assessment in advance. The court considered whether each figure fell within a range of reasonable and proportionate costs, while having regard to relevant constituent elements.
2. Relevant considerations. Proportionality required consideration of the claim’s value and complexity, the hours and rates claimed, the level of fee-earner undertaking the work, and the total sum sought for each phase. The other party’s budget could provide a useful indication of necessary resources, but differences in commercial arrangements between solicitors limited the value of comparing rates and hours.
3. Incurred costs. Incurred costs were not subject to approval through the budgeting process. However, the court could record comments on them and take them into account when considering the reasonableness and proportionality of later costs. Excessive expenditure already incurred could justify limiting subsequent approved costs.
4. Objective recoverability. A party’s commercial decision to incur substantial expenditure did not determine what was recoverable. The relevant question was the lowest amount which could reasonably have been expected to secure proficient conduct and presentation of the case, having regard to all relevant circumstances.
5. Disposition. The claimant’s proposed total of £2,288,286.59 was reduced to an approved costs budget of £1,162,000. The agreed budgets of the first and second defendants and the third defendant remained agreed. Detailed assessment of incurred costs was left to the costs judge, who was to take account of the court’s observations.

The judgment concerned a first-instance Costs and Case Management Conference. Fraser J had directed the claimant to make an application if costs budgets could not be agreed; no appeal from an earlier merits decision is stated.