Easteye Ltd v Malhotra Property Investments Ltd & Ors

In costs budgeting, the relevant question is whether it is reasonable and proportionate for a party to employ leading counsel. It is not whether junior counsel or a solicitor could adequately conduct the case. The court may consider the constituent elements of a proposed budget, but its approval ordinarily fixes the total for each phase rather than particular items of expenditure. An appellate court should not substitute its own assessment for that of the costs judge. Intervention requires an identifiable error, including reasons so inadequate that the losing party cannot understand why it lost. Brief reasons may suffice in costs decisions where the rationale is reasonably apparent. Costs budgeting necessarily sacrifices some retrospective precision in return for reasonable certainty before trial.

The claimant appealed against a costs management order made by Deputy District Judge Pescod on 3 May 2019. The order allowed £120,000 for the claimant’s trial phase and stated that instruction of leading counsel was not approved. The claimant’s budget was approximately £210,000 and included leading and junior counsel. The defendants argued that leading counsel was neither reasonable nor proportionate.

The appeal raised whether the Deputy District Judge had given adequate reasons, whether the correct test had been applied, and whether the decision not to approve leading counsel was wrong. Permission to appeal was granted.

1. Appeal dismissed. The Deputy District Judge’s order remained in force. The claimant could spend the approved total as it chose, including on leading counsel, but any departure from the budget at detailed assessment would require good reason.
2. The applicable question was whether the claimant acted reasonably in employing leading counsel. It was not whether experienced junior counsel or a senior solicitor could have conducted the case adequately. The same considerations applied in costs budgeting as in detailed assessment.
3. The court’s approval under Practice Direction 3E, paragraphs 7.3 and 7.10, related to the total budget for each phase. The court could have regard to constituent elements when fixing the total, but the order did not determine the recoverability of particular categories of expenditure.
4. On appellate review, the court had to identify an error in the lower court’s decision. It was not entitled simply to substitute its own assessment. Relevant errors could include failure to consider relevant matters, reliance on irrelevant matters, an impermissible conclusion, an error of principle, or reasons so inadequate as to cause unfairness.
5. The brief statement that leading counsel was not approved was sufficient in context. The parties’ submissions presented a stark choice, and the order made clear that the Deputy District Judge had not been persuaded that the case’s complexity, length, importance, heaviness and value justified leading counsel. Extensive reasons were unnecessary for this costs management decision.
6. The decision was one the Deputy District Judge could reasonably reach. Costs budgeting necessarily involves predicting the future and accepts less precision than retrospective assessment in exchange for reasonable pre-trial certainty.

• High Court (Chancery Division): permission granted and appeal dismissed. The costs management order dated 3 May 2019 was allowed to stand.