Budget discussion report deemed an abuse of the cost budgeting process
09 June 2017
A Defendant’s budget discussion report (Precedent R) was disregarded by the court due to the “lack of reality” of the offered costs.
Parties are now required to file a budget discussion report which shows the costs claimed, the amount offered towards those costs by the other party and whether the costs have been agreed. The court criticised a Defendant’s low offers in a budget discussion report in the case of Findcharm Limited v Churchill Group Limited.
The Claimant operated a restaurant in the Defendant’s hotel. The Claimant claimed approximately £280,000 for, inter alia, loss of profits and business interruption, from the Defendant following a gas fire which led to the restaurant being closed for four months.
Prior to the Case Management Conference (“CMC”), the Claimant and Defendant filed and served costs budgets. Following discussion, the Claimant reduced its budget to £244,676.30. The Defendant maintained that this figure was unreasonable and in the budget discussion report offered less than £90,000, only £46,900 of which was offered in relation to estimated future costs (including trial).
The Defendant’s costs budget totalled a mere £79,371.21 and was agreed by the Claimant.
At the CMC, the court considered the Defendant’s costs budget to be unrealistic and submitted tactically in the hope that the court’s assessment of the Claimant’s costs would be low. Unimpressed by this approach, the court disregarded the Defendant’s budget discussion report and approved the Claimant’s costs budget in full.
This decision is a cautionary reminder that the court will take a dim view on tactical manoeuvres when costs budgeting and that costs claimed should be realistic and justifiable. Obtaining estimates from third parties whose costs are included in the budget, such as experts and Counsel, is likely to assist.
Care should be taken if submitting low cost estimates in more complex cases as there is a risk that, as here, the Court will approve the low figures. This can leave the party in question with the difficult task of operating within the unrealistically low estimate, attempting, at a later date, to get approval from the court to increase its budget or having to explain to the client why it will not recover any costs over budget from the other side.