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Costs should not be regarded as reasonable or proportionate simply because they fall within budget

The defendant appealed against a judge's costs management decision.


This was a breach of contract claim that fell under the Mercantile Court costs management pilot last year. The Claimant's budget was approved by HHJ Kaye QC in Leeds. The concern of the Defendant was that the Judge had proceeded on the basis that he would approve any figure for a particular element of the claim, provided it was not so unreasonable as to render it obviously excessive or 'grossly disproportionate'. The Court of Appeal took the opportunity to warn that Costs Judges should not treat costs as reasonable or proportionate when it comes to assessment simply because they fall within the court approved budget.

Granting permission, Moore-Bick LJ said...

"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."

"Although the court will not readily interfere with the judge's decision in a matter of this kind, which essentially involves an exercise of judgment, I think it is arguable that in this case the judge did not apply the correct principles and, as a result, approved an over-generous budget in respect of some elements of costs."

The judge went on to say that he gave permission so that the Court of Appeal could establish the correct principles upon which costs budgeting is to be carried out and also possibly the proper approach to be taken by costs judges on detailed assessment where there is a budget.

In the event, it is understood, the case has now settled. We will therefore have to wait a while longer for this guidance. However, the belief amongst some that detailed assessment hearings would become largely redundant as a result of the budgeting regime appears to have been quashed. See the full Litigation Futures article.

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