Costs judges cannot treat costs as being reasonable or proportionate simply because they fall within an approved budget, the Court of Appeal has said.
In Troy Foods v Manton [2013] EWCA Civ 615, Lord Justice Moore-Bick heard an application for permission to appeal a costs management order on the basis it approved an overly generous budget.
Moore-Bick LJ has previously warned that an approved budget is not a licence to conduct litigation in “an unnecessarily expensive way” (Henry v News Group Newspapers [2013] EWCA Civ 19).
In Troy Foods he went on to say: “It follows that I do not accept that costs judges should or will treat the court’s approval of a budget as demonstrating, without further consideration, that the costs incurred by the receiving party are reasonable or proportionate simply because they fall within the scope of the approved budget.”
Janna Purdie, solicitor, LexisPSL said the decision was “on the face of it surprising”. “Having agreed a budget, it would perhaps not be unreasonable to take the view that the court must have considered the estimated costs to be reasonable and proportionate; otherwise why approve them?
“Instead, the costs judge would need to consider all the costs incurred, not just those where there has been an over spend. It remains to be seen how the courts will construe Moore-Bicks LJ comments. One would hope that they are confined to those instances where parties have failed to comply with CPR PD 3E, para 2.6 to adjust their approved budgets to reflect any major changes within the proceedings.
“In the meantime practitioners will need to work out how they seek to deal with the uncertainty this decision raises as to recovery of costs; especially explanations to clients as to costs recovery.”
The case settled out of court.
