Costs Management has (by way of Precedent H’s and Costs Management Hearings) been around for over a decade now, and it is something that most Litigation claims fee earners are now familiar with. It is a regular element of the multi track claim process, and is one that should, by now, be routine in its nature. It is meant to be a process that is structured and straightforward and devoid of uncertainty and confusion.
However, the spotlight is on costs budgeting yet again; people are concerned and confused, and not just about the new Pilot Precedent forms that have recently been released.
The reason for such industry wide confusion and concern is due to a build up of recent reported Judgments following one key theme - unreasonable costs budgets, resulting in heavy costs penalties being applied by the Courts.
The Cases:
Four key reported cases (most flagged by a party on making arguments of “excessive” or “unreasonable” costs budgets) are:
Reid v Wye Valley NHS Trust & Anor [2023] EWHC 2843 (KB), which saw a reduction of the Claimant’s recoverable costs of budgeting by 25% to reflect the “unrealistic nature” of the Claimant’s budget.
Worcester v Hopley [2024] EWHC 2181 (KB), which saw the Claimant face “no order as to costs” of the costs management hearing and also a reduction to the Claimant’s Costs Management Costs overall (such as may come to be assessed) by 15%. This was due to Master Thornett determining that the Claimant’s budget included unrealistic figures which should lead to such penalty.
Jenkins v Thurrock Council [2024] EWHC 2248 (KB), is another of Master Thornett’s determinations, which saw the Claimant sanctioned for their "unrealistic and inappropriately ambitious" budget that had been "considerably reduced" at the Costs Management Hearing. Master Thornett ordered a 35% reduction to the Claimant's costs of Costs management (to the extent that they were ultimately recoverable) and that the Claimant pay the Defendant's Costs of the Costs Management Hearing its self.
GS Woodland Court GP1 Ltd & Anor v RGM Ltd & Ors [2025] EHC 285 (TCC) is the one of the most recent reported decisions on the topic, and it found that, because of the nature of the budget that the Claimant’s had presented, the Claimants’ were ordered to pay the costs of the budgeting process. The Judge held that the way the budget was presented was “on the wrong side of the line”
Do you need to start reducing your costs budgets?
If you include large generic sums which are without thought (and unsupported) in your costs budgets, as opposed to considering the specific claim detail, then the answer is “yes, quite possibly”.
However, we know that such behaviour is a rarity, so we say “No. Don’t knee jerk on the back of these decisions.”
You are specialist in your field, and you know the intricacies of a claim and what evidence is needed to get it to conclusion. You are on the front line, and you do the day to day work, so trust in that and support that knowledge. If you can support what work is needed then (with the assistance of a good costs specialist) you should come away with a Costs Management Order that reflects that and that is workable. You should never purposely underestimate, because to do so undervalues your work and can hinder/ take away access to justice.
The cases mentioned above are not the norm and are arguably examples of extremes. Cost management is generally acknowledged as being a subjective exercise, specific to each claim’s detail. Different Judges will approach costs management differently. If context were not applied, and concessions and fear caused a domino effect of greater caution and presentation of unrealistically low budgets, the Courts will only ever have such (low) budgets to compare other costs budgets to, and the gap between costs claimed/needed -vs- costs allowed will inevitably get bigger.
What do you need to do to protect your costs?
Decide what evidence is needed and what steps are reasonably foreseeable, to get the matter to conclusion
- What have you done thus far and what is yet to be done?
- Are directions agreed? Can they be agreed?
- What are the differences between the parties on case directions, and what impact does it have?
- What are the chances of getting the Directions you are asking for and do you have a “plan b”?
Be mindful of the issues vs proportionality
- Can you/will you delegate work to lower grades of fee earner?
- Have you considered/agreed agreed what involvement is needed from Counsel (if at all) and can you explain how you are not duplicating this?
- Does your client/s or witnesses have vulnerabilities that will result in increased time, beyond what is normally envisaged, being needed?
- Is the ELH for the CCMC long enough to deal with Directions and Costs Management?
Use and trust the guidance of your costs specialist:
Just as you would use a medical expert to assist with evidencing your client’s injuries, costs specialists have a breadth of experience that comes from experience such as preparation of Bills of Costs (schedules and budgets) and dealing with them on Assessment. We have daily experience of seeing the work that goes into an array of claim types and values, and we know what costs are normally accrued in claims that reach Trial. This means we know how to support the estimated work in a costs budget, in detail; combined with our experience of CCMC’s – we are best placed to share this knowledge and support your costs.
What to do if you face arguments of an adverse costs Order (due to heavy budget reductions):
Consider whether the case law can be distinguished from yours?
Costs Management Orders are most frequently made at Costs and Case Management Conferences, where Directions are also determined thus normally leading to “costs in the case” orders. All of the above reported cases relate to instances where a separate hearing has been necessary, purely for the purpose of cost management and such penalties should normally only be likely where conduct is also an issue.
Consider “why” the reductions have been made.
Costs budget reductions, where significant reductions are made, aren’t always due to an overestimation or unrealistic approach. It is often due to aspects (such as an expert type or Trial length) falling away from the claim and such costs also therefore falling away. It can also be because the estimated costs haven’t been properly explained and/or considered. Court’s aren’t undertaking a Detailed Assessment and, in our experience, a number of them like to consider figures in the round. This is not an unreasonable approach, but that is not to say that detail as to how the figures are made up should be ignored.
Is there an alternative order that could be made?
There are more reasonable and alternate “penalties” that could be adopted, especially if one considers the fact that eh Claimant’s costs are subject to review at two stages – once at budget stage, and secondly at detailed Assessment. Arguably, conclusion of a claim is the best place to fully ascertain the reasonableness and proportionality of costs so one option that Judge’s have discretion to Order is “costs be reserved”.
Despite costs management being a well-established process, there still appears to be much to be considered and lessons to be learnt.
If you’d like copies of the Judgments referred to in this article, or have any questions with regards to anything raised, please do not hesitate to contact the writer, Charlene Turner, or one of the Litigation Team.