Ras Al Khaimah Investment Authority v Farhad Azima

In costs budgeting, the court assesses whether disputed future costs fall within a reasonable and proportionate range. The exercise is prospective and is not a detailed assessment in advance. In unusually large and complex litigation, the court may be unable to assess the overall cost of the case precisely, but must still make broad evaluative judgments on disputed budgeted items.

Incurred costs may be commented upon and taken into account, but that power should be used sparingly. The court may approve costs supported by the circumstances of the litigation even where limited detail can be provided about confidential investigations. Costs should be adjusted where duplication, excessive solicitor involvement or excessive counsel fees make the proposed budget unreasonable or disproportionate.

The claimant and counterclaimant were engaged in substantial litigation involving the claimant and several additional defendants. At a costs and case management conference, the court had already disposed by consent of security for costs and directions to trial. The outstanding issue was the parties’ costs budgeting for an eight-to-ten-week trial.

The court considered disputed future costs in three categories of the counterclaimant’s budget—disclosure, trial preparation and trial—and two categories in an additional defendant’s budget—further pleadings and trial. The central issue was whether the proposed amounts were reasonable and proportionate under the applicable costs-management provisions.

1. Costs budgets. The court approved the disputed budgets with revisions. It reduced the counterclaimant’s estimated solicitor costs for trial preparation to £500,000, reduced counsel’s brief fees to £4.4 million, and approved revised trial-preparation costs of £5,034,500. It reduced estimated trial costs by £300,000 to £2,205,410. The additional defendant’s budgets for further pleadings and trial were allowed in full.
2. Applicable exercise. Under Civil Procedure Rules 1998, r 3.15(2), the court was required to assess the reasonableness and proportionality of the disputed future costs. The assessment did not extend to incurred costs, although the court could comment on them under r 3.15(4) and take those comments into account under r 3.17(3)(b). The court was not conducting a detailed assessment in advance, but considering whether the budgeted costs fell within the reasonable and proportionate range under para 12 of CPR PD 3D.
3. Evaluation of the items. The unusual allegations and complexity of the litigation justified substantial disclosure expenditure, including investigation and third-party costs. The limited detail available did not prevent approval where the court could judge the amounts reasonable and proportionate. By contrast, the proposed solicitor involvement and counsel fees for trial preparation involved excessive expenditure and required reduction. Larger teams and more senior counsel were not inherently unreasonable, but the corresponding solicitor work and overall fees had to be assessed coherently.
4. The court invited the parties to agree an order reflecting those findings.

Not stated in the judgment.