Judgement was handed down on 12 May 2017 in Findcharm Limited v Churchill Group Limited [2017] EWHC 1108 (TCC) (available here). Parties making a tactically low Precedent R costs budget response in the hopes that the court will perform its own assessment to their advantage may instead find the court agreeing to the other party’s costs budget in full.

PRECEDENT R

Under the new Precedent R each party is required to comment on the costs budget of the other. This is designed to oblige each party to a dispute to adopt a realistic approach to the budget of the other and to help identify the real dispute between the parties as to costs.

THE FACTS

This judgment, handed down by Mr Justice Coulson, related to the costs arising out of a dispute following a gas explosion at the defendant’s hotel premises. The claimant claimed damage to its restaurant business, chiefly in the form of lost profits.

The claimant’s cost budget was £244,676.30 and was based on assumptions that the Judge found to be reasonable given, amongst other things, the need for expert evidence from a forensic accountant. However, the fees agreed to by the defendant as set out in the Budget Discussion Report (Precedent R) were merely £46,900.

THE ISSUE

The Judge commented that while the introduction of a more regulated costs discussion in the form of Precedent R often achieves its objectives, the system is open to exploitation. If one party agrees to only a very small amount of the other side’s costs budget, the court may be tempted to make its own costs assessment and pick a compromise figure. This provides an incentive to agree to as little of the other party’s costs as possible in order to drive down this compromise.

The present case was an example of one party, namely the defendant, adopting such a tactic.

The Judge found that fees agreed to by the defendant were so low as to be “completely unrealistic”. As a result, the Precedent R form was “of no utility”. For example, the claimant had budgeted £28,648 for the preparation of a joint expert’s report. The defendant agreed to only £16,000 – a figure chosen without reference to any quote from a proposed expert. In Mr Justice Coulson’s view the fees agreed to by the defendant for each stage of the proceedings were deliberately as low as possible.

THE RESULT – A BAD DAY FOR THE DEFENDANT

The defendant’s response to the claimant’s budget was held to be an abuse of the costs budgeting process. The Judge disregarded the defendant’s figures in the Precedent R form altogether, and rather than making his own assessment allowed the claimant’s costs budget in its entirety. The Judge described the “critical need” to ensure that the Precedent R process is carefully and properly adhered to.