Group Seven Ltd v Nasir & Ors

Where costs budgets have been filed and exchanged, the court will generally make a costs management order unless satisfied that the litigation can be conducted justly and at proportionate cost without one. Approval concerns future costs and should address the total for each phase, rather than amounting to a detailed assessment in advance. Proportionality requires consideration of the relationship between costs and the sums in issue, complexity, additional work generated by the opposing party, wider factors, and the circumstances identified in the costs rules. Allegations of fraud are not a free-standing reason to disregard proportionality. Costs already incurred may be commented on and taken into account, but should not be adjusted through a future-costs deduction unless a reliable figure can be identified.

Two related actions concerning alleged fraud, dishonest assistance, unconscionable receipt, negligence and vicarious liability were case-managed together for a proposed 40-day trial. The judgment concerned a costs management conference at which all active parties had prepared costs budgets and no part of those budgets had been agreed.

The court considered whether a costs management order was required, how proportionality should be assessed, whether the two aligned claimants should prepare a single budget, appropriate solicitors’ and counsel’s fees, contingencies, and the treatment of incurred costs.

1. Costs management order. Because budgets had been filed and exchanged and the court was not satisfied that the litigation could be conducted justly and at proportionate cost without costs management, a costs management order had to be made under CPR rule 3.15. The court was required to approve or revise budgets or parts of budgets.
2. Scope of approval. Approval related to future costs and to the total figure for each phase. The exercise was not a detailed assessment in advance. Costs incurred before the budget date were not approved, although the court could comment on them and take them into account when considering the reasonableness and proportionality of later costs.
3. Proportionality. The court applied the guidance in CPR rules 44.3(5) and 44.4(3). The rules did not prescribe a mathematical relationship between costs and the sums in issue. The court considered the sums claimed, the essentially factual and non-complex nature of the litigation, the work generated by opposing parties, reputational considerations, skill and responsibility, and the extent of each party’s involvement. Allegations of fraud were already reflected in those considerations and were not an independent factor.
4. Representation and budgeting. Group Seven and ETS had aligned interests and their future work was capable of being handled by one firm of solicitors and one QC with one senior junior. A single future budget would ordinarily be appropriate, although separate budgets were not wrong in principle if they provided greater certainty.
5. Fees and contingencies. The proposed solicitors’ rates and counsel’s fees for Group Seven, ETS and the Swiss Bank were reduced as unreasonable or disproportionate. The parties were directed to reconsider their contingency figures and revise their future budgets accordingly.
6. Incurred costs. The court declined to make an order deducting any later excess in assessed incurred costs from future budgeted costs because the material did not permit a confident and accurate figure to be identified. Revised budgets were to be submitted within 14 days for final review.