Joanna Lemos & Ors v Church Bay Trust Company & Ors

A costs management order records the extent to which budgeted costs are agreed. Where costs budgets have been filed and exchanged, the court must make such an order unless it has dispensed with costs budgeting. The court has no power under CPR 3.15(2)(b) to revise or disapprove agreed budgeted costs, although it may record comments about them for later assessment. Agreed budgets bind the detailed assessment, subject to good reason arguments for downward departures and the applicable restriction on upward departures. Incurred costs remain subject to ordinary assessment. Comments recorded under CPR 3.17 must be taken into account, but are not themselves binding.

The judgment concerned a preliminary issue in the detailed assessment of costs payable by the second and third claimants to the defendants in complex financial litigation. The parties had agreed the defendants’ budget at a costs management hearing on 11 October 2022. The order recorded that agreement provisionally and raised a further issue concerning reasonableness and proportionality.

Following a further hearing, an order dated 30 January 2023 recorded the agreed budget and comments that the parties’ costs were not then considered reasonable and proportionate. The central questions were the legal effect of the two costs management orders and the effect of the case-managing judge’s comments on the subsequent detailed assessment.

1. The court held that the order dated 11 October 2022 was a costs management order under CPR 3.15(2). Making such an order is discretionary, but where costs budgets have been filed and exchanged the court must make one unless it has expressly dispensed with costs budgeting. A costs management order may be made at more than one stage of the proceedings.

2. The order properly recorded the extent to which the defendants’ budgeted costs had been agreed. Although the order referred to a possible downward revision after determination of a further issue, CPR 3.15(2)(b) permits revision only of budgeted costs which are not agreed. The court therefore had no procedural power to disapprove or revise the defendants’ agreed budget. The decision in The Pan NOx Emissions Litigation [2024] EWHC 1728 (KB) affirmed that conclusion.

3. The further issue could operate only through the court’s power to record comments under CPR 3.15(4) and CPR 3.17(3)(b). The order dated 30 January 2023 was itself a costs management order. It reaffirmed the recording of the agreed budget and added comments concerning incurred costs and the reasonableness and proportionality of budgeted costs.

4. The defendants were bound by the agreed budgeted amounts for each phase. That did not guarantee recovery of every amount within budget. Good reason arguments for downward departures remained available if raised in the points of dispute, while upward departures required good reason.

5. The defendants’ incurred costs remained subject to ordinary detailed assessment. The assessing judge was required by CPR 3.18(3) to take into account comments recorded under CPR 3.17. Those comments were not binding, but they could not be disregarded. The January 2023 judgment could also be considered, since CPR 3.18 did not exclude consideration of judgments given during the litigation.

6. The preliminary issues were determined accordingly. Costs were reserved, and the detailed assessment was to resume on 25 February 2026.

The judgment was a first-instance determination of preliminary issues arising in the detailed assessment. It considered the effect of costs management orders made on 11 October 2022 and 30 January 2023.