Leon Zavorotnii v Lucasz Malinowski

A costs management hearing is not automatically subject to a costs in the case order. The court may exercise its discretion under Civil Procedure Rules 1998, rule 44.2, having regard to all the circumstances, including the parties’ conduct, the reasonableness or exaggeration of the budget, the extent of success and the proportionate use of court resources. An ambitious budget alone does not justify a costs sanction. A sanction may be appropriate where a party persists with an unreasonable or unrealistic budget despite opportunities to narrow the dispute, particularly where the approved budget is substantially below that claimed or only marginally above the opponent’s offer.

The claimant succeeded in a substantial personal injury claim arising from a road accident. The court had entered judgment on liability and was managing the claimant’s complex claim for damages. At a further hearing, the court budgeted costs for disclosure, witness statements and expert evidence at £308,909.30, compared with £511,125.30 sought by the claimant and £261,374.30 offered by the defendant.

The defendant sought an order that the claimant pay the costs of that costs management hearing, relying on recent decisions concerning sanctions for unrealistic costs budgets. The issue was whether the usual order of costs in the case should be made or whether the claimant’s conduct and the reductions to the budget justified a different order.

1. The defendant’s application for the claimant to pay the costs of the costs management hearing was refused. The appropriate order was costs in the case.

2. Costs management forms part of the court’s duty to deal with cases justly and at proportionate cost under Civil Procedure Rules 1998, rules 1.1 and 1.3. The usual order at a costs and case management conference is costs in the case, but that practice does not remove the court’s discretion.

3. Under rule 44.2, the court has a wide discretion as to whether costs are payable, by whom, in what amount and when. It may consider the conduct of the parties, partial success, reasonableness and exaggeration. Those considerations apply to a separate costs management hearing as well as to other hearings.

4. The reduction of a costs budget does not, without more, justify a costs penalty. The court should assess the circumstances in the round, including the complexity and importance of the case, the amount involved, the parties’ attempts to narrow issues and the relationship between the sum claimed, the sum offered and the sum approved.

5. The claimant’s budget was overly ambitious and came close to being unrealistic. Nevertheless, the claimant obtained approval for 60 per cent of the sum sought and for a budget 18.2 per cent above the defendant’s offer. It could not therefore be characterised as entirely unrealistic. The court warned that a different order may be made in future where an approved budget is significantly below that claimed or only marginally above the opponent’s offer, particularly after a party has failed to narrow the dispute.