BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Strand, London, WC2A 2LL
B e f o r e :
|CLEVELAND BRIDGE UK LIMITED||Claimant|
|- and -|
|SARENS (UK) LIMITED||Defendant|
Ms Bodnar (instructed by Freeths LLP) for the Defendants
Hearing date: 10 April 2018
Crown Copyright ©
Deputy Judge Miss Joanna Smith QC:
Is CBUK entitled to a 90% payment on account of its costs?
"25…In my view, the first defendant's approved costs budget is the appropriate starting point for the calculation of any interim payment on account of costs. CPR 3.18 makes plain that, where there is an approved or agreed costs budget, when costs are assessed on a standard basis at the end of the case, "the court will…not depart from such approved or agreed budget unless satisfied that there is good reason to do so". The significance of this rule cannot be understated. It means that, when costs are assessed, the costs judge will start with the figure in the approved costs budget. If there is no good reason to depart from that figure, he or she is likely to conclude the assessment at the same figure: see Silvia Henry v News Group Newspapers Ltd  EWCA Civ 19.
26. One of the main benefits to be gained from the increased work for the parties (and the court) in undertaking the detailed costs management exercise at the outset of the case is the fact that, at its conclusion, there will be a large amount of certainty as to what the likely costs recovery will be. One consequence is that, for the purposes of calculating the interim payment on account of costs, the starting point will almost always be the payee's approved costs budget. Another consequence is that the court assessing the interim payment can ignore the fact that, as here, there may have been significant expenditure on costs by the payee above the budget figure: any increase is a matter for the costs judge and the relatively onerous burden of recovering more than the budget figure is on the payee: see Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd (No 2)  EWHC 1643 (TCC).
27. So when making an interim payment on account of costs in a case with an approved costs budget, the days of the educated guesswork identified by Jacob J in Mars UK Limited v TeKnowledge Limited  2 Costs LR 44 are now gone. Instead the court can be confident that there is a figure for costs which, because it has already been approved, is both reasonable and proportionate."
"…in the context of considering an interim payment on account of costs, Coulson J in terms said that the significance of CPR r. 3.18 "cannot be understated" and meant that, where costs are assessed, the costs judge "will start with the figure in the approved costs budget". He roundly rejected the argument of the paying party that detailed assessment will "start from scratch". I agree with those observations of Coulson J".
"46. …On the contrary the focus of a judge making a CMO is on estimating the costs reasonably and proportionately to be incurred in the future: as the opening words of CPR r 3.15(1) make clear. In undertaking this exercise the court may have regard to costs stated already to have been incurred: and that may in turn impact on its assessment of what may be reasonable or proportionate for the future. But paragraph 7.4 of Practice Direction 3E is quite specific: as part of the costs management process the court may not approve costs incurred before the date of the budget costs management conference. What it can do is record in the CMO its comments (if any) on such costs: which are then to be taken into account when considering reasonableness and proportionality: a direction now enshrined in the amended CPR r 3.15(4) and CPR r 3.18(c) with effect from 1 April 2017.
47. It follows in my view, that incurred costs are not as such within the ambit of CPR r 3.18 (in its unamended form) at all. Accordingly, such incurred costs are to be the subject of detailed assessment in the usual way, without any added requirement of "good reason" for departure from the approved budget".
"In cases where the court has made a costs management order under r. 3.15, the receiving party's budget, insofar as it has been agreed between the parties or approved by the court, may be a sensible starting position for determining the 'reasonable sum' to be paid on account under r. 44.2(8). That is because, on detailed assessment, the court will not depart from an agreed or approved budget unless satisfied that there is good reason to do so (r.3.18(b))(see Thomas Pink Ltd v Victoria's Secret UK Ltd  EWHC 3258 (Ch), 31 July 2014, unrep. (Birss J), where payment on account ordered in sum amounting to 90 per cent of the claimant's approved budget)".
The Consequence of my Decision
Costs On Account in relation to Estimated Costs in the Agreed budget
Costs on Account in relation to Incurred Costs and the Costs of the December Applications
The Order for Payment on Account and the Costs of the Hearing