Ramsden v Revenue And Customs (Costs)

When costs are subject to detailed assessment, the court should order a payment on account of a reasonable sum unless there is good reason not to do so. The assessment is provisional and does not require identification of an irreducible minimum. An approved costs budget ordinarily provides a reliable starting point, but the calculation must be undertaken by phase. Estimated costs and incurred costs may require different percentages, particularly where incurred costs were not budgeted. The court should also account for costs payable in the opposite direction and for criticisms already made of those costs. The calculation must be principled and sufficiently precise, rather than based on a broad or rough deduction.

Following a trial of preliminary issues, the claim was dismissed and the claimant was ordered to pay the defendant’s costs, subject to detailed assessment. The defendant sought a payment on account. Its actual costs were £167,094.50, substantially below its approved budget of £322,031.68, but disclosure costs exceeded the approved estimate. The claimant also had an outstanding costs order arising from an unsuccessful strike-out application, with costs claimed at £79,215. The issue was the reasonable sum to be paid on account after allowing for the budget, overspend, incurred costs and the cross-costs order.

1. The court ordered the claimant to pay £65,069.75 on account of costs under Civil Procedure Rules 1998, rule 44.2(8). The rule requires a reasonable sum unless there is good reason not to order one. The exercise does not require determination of an irreducible minimum; the amount depends on the circumstances.
2. An approved costs budget is ordinarily the starting point. Where costs remain within the budget, a high proportion may be appropriate because the court will not ordinarily depart from an approved or agreed budget without good reason. The assessment must nevertheless be undertaken by phase, so an underspend in one phase does not automatically justify an overspend in another.
3. Estimated costs and incurred costs require separate treatment. The judgment applied a 90 per cent figure to estimated costs after removing disclosure expenditure above budget, but allowed only 70 per cent of the incurred costs which had not been subject to approval. The approach in Cleveland Bridge UK Ltd v Sarens (UK) Ltd [2018] EWHC 827 (TCC) was material to that distinction.
4. The defendant’s proposed broad deduction was rejected as too rough and ready. The principled calculation was to remove the disclosure overspend, treat incurred costs separately, apply the 10 per cent deduction to the remaining estimated costs, and deduct the claimant’s recoverable costs in the opposite direction after allowing only two thirds of the £79,215 claimed. The latter reduction reflected the reservations previously expressed by Master Thornett that the claim was grossly disproportionate and markedly unrepresentative of the real issues.
5. The resulting reasonable sum was £65,069.75, and an order for payment on account was made in that amount.