[2025] EWHC 2307 (KB)

Provided there is transparency, the first CMH judgment confirmed that a party may set out costs in its budget which are less than it has actually incurred. The statement on the Precedent H refers to the budget being “a fair and accurate statement of incurred and estimated costs which it would be reasonable and proportionate for my client to incur in this litigation.” If a party considers its total incurred or estimated costs are unreasonable or disproportionate, it can put lower sums in the budget and still follow the statement of truth. It matters not whether they were reduced as being unjustified or for some other tactical reason (as the claimants suggested).

The claimants sought to suggest that this approach was widespread on the defendants’ side. This led to a steady procession of advocates professing, generally on instruction, that the rates claimed in their client’s budgets were indeed the full rates agreed to be paid. It would appear that the defendants were concerned that this was a point on which the claimants had hit home.

Why this was so, was not immediately apparent. The concept of a party incurring more costs than it could recover is hardly new. The beginning of the often quoted paragraph 13 of the judgment of Leggatt J (as he then was) in Kazakhstan Kagazy Plc v Zhunus [2015] EWHC 404 (Comm) says:

“In a case such as this where very large amounts of money are at stake, it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party.”

The difference between the costs incurred by a party and its solicitor and those that it might recover from an opponent was also encapsulated by Sir Rupert Jackson in his Review of Civil Litigation Costs in 2009 when he described “actual costs” and “recoverable costs”. The former represented the full costs of the litigation and which fell upon the parties (and sometimes the general population). The latter represented a source of funding for the winning party and thus promoted access to justice (see 2.9 Final Report). He then said (at 2.10) that in some areas of litigation, “both the recoverable costs and the actual costs are excessive.”

The only rationale for the defendants being concerned at the idea that they had spent far more than was set out in their budgets would be that, in some way, otherwise reasonable and proportionate costs would appear to be unreasonable or disproportionate. In the current situation, where budgeting judges have made costs awards against parties whose budgets were maintained at levels considered to be unrealistic, there is certainly something to be said for a party considering its putative budget based on actual costs and then reducing it if it considered the sums claimed to be too high to be justified between the parties. It is at least as appropriate an approach as the claimants’ position i.e. that they have put in all of their costs because only costs recovered from the defendants or deductions from (as yet unquantified) damages are the only sources of funding.

In any event, the budgeted sums are the ones before the court and they are either reasonable and proportionate or they are not. Where we have considered them to be the latter, we have reduced them. It is only if indemnity basis costs orders are made against the parties that they need to be concerned by any larger sum of actual costs incurred by their opponents (see Vardy v Rooney [2025] EWHC 1027 (KB)). In order for the claimants to be at any such risk, they will have had to indulge in conduct which the court considers to be out of the norm.