Cleveland Bridge UK Ltd v Sarens (UK) Ltd

When costs are subject to detailed assessment, the court must order a reasonable sum on account unless there is good reason not to do so. For approved or agreed estimated costs, the budget is the appropriate starting point and a deduction of up to 10% will ordinarily provide an adequate margin. Incurred costs are not approved by a costs management order. They remain subject to detailed assessment in the usual way, so the court must estimate likely recovery and allow an appropriate margin for uncertainty. Costs incurred outside the approved budget require a separate assessment of the reasonable sum payable on account.

Following judgment in favour of Cleveland Bridge UK Ltd, Sarens (UK) Ltd accepted liability for the claimant’s costs. The remaining issue was the amount payable on account under CPR 44.2(8).

The claimant sought 90% of an adjusted figure based principally on its agreed costs budget. The defendant contended that the payment should be lower because the budget included incurred costs, excessive hourly rates and potentially irrecoverable pre-action costs. The court considered the distinction between estimated costs approved through costs management and costs already incurred, including the effect of MacInnes v Gross and Harrison v University Hospitals Coventry & Warwickshire NHS Trust.

1. Payment on account. CPR 44.2(8) required Sarens to pay a reasonable sum on account of Cleveland Bridge’s costs.
2. Estimated or budgeted costs. The agreed costs budget was the proper starting point for estimated costs. Applying MacInnes v Gross, the court ordered 90% of the claimant’s estimated costs. The court did not engage in a provisional detailed assessment of hourly rates. The issue whether excessive rates could constitute good reason to depart from a budget was left undecided.
3. Incurred costs. The reasoning in Harrison v University Hospitals Coventry & Warwickshire NHS Trust established that incurred costs are not approved by a costs management order and fall outside CPR 3.18. They must be assessed in the usual way. For an interim payment, the court should estimate likely recovery and apply a margin for error reflecting the uncertainty of detailed assessment.
4. Costs outside the budget. The costs of two December applications were not part of the estimated costs in the agreed budget. The court therefore assessed a reasonable sum for them together with the incurred costs, applying a 30% reduction.
5. Order. The court ordered payment on account of £98,000. Neither party was the outright winner on the application, so each party was ordered to bear its own costs of the consequentials hearing.

First-instance decision. The judgment records that it followed an earlier judgment in the same action, but gives no citation for that decision.