Legal Cost Specialists

Costs budgets and necessary costs

It has been suggested that in the case of Stocker v Stocker [2015] EWHC 1634 the most interesting observation by Mr Justice Warby was:

“I readily acknowledge the importance of ensuring that the costs budgeting process does not result in a party being unable to recover the costs necessary to assert their rights.”

I would entirely agree if it were not for the fact the judge has so clearly misdirected himself in relation to the post-Jackson approach to costs.

CPR 1.1(1):

“These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly and at proportionate cost.”

CPR 44.3(2)(a), relating to assessment on the standard basis:

“Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred”

The fact a case is subject to costs management does not mean that it is therefore immune to the new proportionality test. The same approach surely applies to both budgeting and assessment. To ensure proportionality, in both cases a figure may be allowed that is less than the “necessary” to conduct the case.

But, perhaps it is me that is wrong.

Perhaps a judge setting a budget is only concerned with fixing a figure that allows for all “necessary” work to be done. If that figure is ultimately found to be disproportionate for the facts of the case, it is then for the judge on assessment to reduce the costs below the approved budget on the basis that this amounts to a “good reason”. If that is so, it undermines two of the purported benefits of costs management: certainty for the parties as to the extent of the adverse costs they are likely to face and avoiding the need for detailed assessment.

Having said that, at this stage nothing would surprise me about the implementation process.


6 thoughts on “Costs budgets and necessary costs”

  1. Charles Wheatcroft

    What a depressing thought! Going through the budgeting process at considerable cost to the client only to have to inform them that the approved budget means nothing when they win.

    Surely an agreed budget is indicative of what is proportionate and that must hold some sway with an addressing judge?

  2. Surely, as per CPR 3.18, the Court must set a Budget which is considered proportionate, as the Court will not depart from approved Budget without good reason.
    Or are they going to just say that Proportionality is good reason, ever adding to the uncertainty of costs?!?!?!

  3. But the court considers proportionality when it sets the budget. Therefore the budget is surely the marker of what is proportionate to the all the facts of the claim and so if within budget surely to argue disproportionate at the backend is a 2nd bite of the cherry?

  4. But it exposes a tension in the Jackson reforms that was obvious from the start – certainly I went to lectures where it was foretold. What judge is going to hear argument about the costs which are necessary to bring the claim, decide what those costs are, and then budget for less? It makes no sense at all, and is certainly contrary to the ingrained sense of justice most judges under our tradition will have. Yet, as the blog says, this is what Jackson intended. So two of the main planks of his reforms are in direct opposition.

  5. My Justice Warby might be a fan of Neil Andrews’ research paper on proportionate costs.

    It is questionable whether ‘may’ under CPR 44.3(2)(a) is there to permit disallowance of necessary costs that are not ‘proportionate’ or whether it is there to give a discretion to allow or disallow costs that are not ‘proportionate’ but necessary.

    This question leads to another question as to whether costs generated by an opponents (mis)conduct are considered proportionate by virtue of the (mis)conduct and therefore escape CPR 44.2(2)(a) or whether they are disproportionate in amount but the judge has a discretion to allow or disallow them under CPR 44.2(2)(a).

    In any event, if the conclusion of the research paper is to be followed, the issue of proportionality can only be properly addressed at the conclusion of the proceedings. In which case, this is yet another reason why budgeting is pointless and a waste of court resources.

    The threat of not getting paid for good work is a sufficient stick to beat lawyers with. CPR 44.2(2)(a) does not need budgeting to work and it’s ironic because budgeting increases costs.

    I don’t agree that Mr Justice Warby’s approach defeats two of the main aims of costs management. Firstly, detailed assessment in inevitable in any case with a dispute as to incurred costs – therefore limited prospective budgeting is self-defeating. Secondly, the approved budget is effectively a cap, so it does provide some certainty as to the maximum level of exposure (subject to the arguments about conduct).

  6. Following on from Robert’s post, CPR 44.3(2) is internally inconsistent in the sense that it provides not only that “… the court _will_ only allow costs that are disproportionate …” [emphasis added] but also that “costs which are disproportionate in amount _may_ be disallowed …” [emphasis added].

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