Joanna Lemos & Ors v Church Bay Trust Company Limited & Ors

Costs budgets must be justified by reference to both reasonableness and proportionality. The court assesses the total figures for each budgeted phase, having regard to the work required by the nature and value of the case. The sum in issue and the importance of the outcome are relevant, but they do not by themselves justify substantial budgets. Parties must explain the anticipated time, fee-earner grades, documents, evidence, preparation and disbursements. A significant document review, historic evidence, privilege issues or the instruction of leading counsel does not remove that requirement. Where the available information does not justify the figures, the court may record that conclusion for use in later assessment proceedings, while avoiding unnecessary hearings and further costs.

The judgment arose from a costs management hearing in a claim under section 423 of the Insolvency Act 1986. The claim concerned alleged transfers of beneficial interests in residential property to trustees, said to have been made to prejudice persons who might make claims against the transferor. The estimated costs budgets were approximately £893,455 for the claimants and £850,355 for the defendants after provisional assessment and agreement of the defendants’ budget.

The court considered whether the information supplied justified those figures as reasonable and proportionate, taking account of the value and complexity of the claim, the anticipated disclosure, historic evidence, witness statements, trial preparation and counsel’s fees.

1. The court provisionally assessed the claimants’ estimated costs budget at £893,455 and noted the defendants’ agreed budget of £850,355. It concluded that neither budget was justified on the information then available in terms of reasonableness and proportionality.

2. Costs management furthers the overriding objective by ensuring that costs are reasonable and proportionate. The assessment must be made by applying CPR Rules 44.3(5) and 44.4(3) to the total figures presented for each budgeted phase. The court must consider not only the sum in issue and the importance of the outcome, but also the nature of the case and what is reasonably required to present it at trial.

3. Parties must provide substantive justification for anticipated hours, days, grades, document review, witness statements, trial preparation and disbursements. Numerical descriptions of work, without explaining why the proposed time is required, are insufficient. Large document collections do not establish proportionality where the relationship between the documents initially identified and those ultimately considered relevant is unexplained.

4. Historic events and memory difficulties may reduce the available oral evidence. Hearsay evidence from office-holders, privilege issues, bundles and alternative dispute resolution may affect costs, but those matters do not of themselves justify exceptionally high budgets.

5. The instruction of leading counsel is permissible, but its reasonableness and proportionality must be assessed against the nature of the claim and the work reasonably required. The court considered that the material supplied did not justify the proposed counsel disbursements or the extensive attendance and preparation allocations.

6. The parties accepted an order recording the court’s conclusions without further oral argument. The judgment could be referred to in any subsequent assessment proceedings, with a further hearing available if required.