Costs Management: Departing from Costs in the Case

Specifically, this article considers the decision of Mr Justice Constable in GS Woodland Court GP 1 Ltd & Anor v RGCM Ltd & Ors [2025] EWHC 285 (TCC) as it relates to the Defendants’ successful Application for costs of the costs management hearing. Broadly, we consider the gradual shift in how the courts are dealing with parties who file overly ambitious budgets. 

Background 

A claim had been issued for damages arising from a construction dispute valued well in excess of the £10million threshold for budgeting. By order of the court, however, proceedings were subjected to costs management and budgets exchanged accordingly. At the conclusion of the case and costs management conference, the Defendants advanced their Application for costs of the hearing on the basis that the Claimants’ budget was unreasonably high. 

Overall Reductions 

In granting the Defendants’ Application, Mr Justice Constable held that ‘there are a number of features of this case that suggest that the Claimants’ position is clearly on the wrong side of the line’. In the round, the court was primarily influenced by the amount by which the Claimants’ budgeted costs had been reduced at the hearing –  

	INCURRED	BUDGETED	TOTAL
CLAIMED	£3,162,244	£8,743,141*	£11,905,385
ALLOWED	£3,162.244	£4,212,126	£7,374,370
REDUCTION	n/a	51.8%	38.1%

 

(*At the outset of the hearing, Counsel for the Claimants conceded a reduction of ‘around £1m [which] was due, in large part, to a recognition that Reply witness statements and expert reports, for which there is no Order, should not have been part of the budget’. It is therefore arguable that the incorrect inclusion of work – which itself totals a significant proportion of a budget – should be a factor considered by the court when deciding whether to depart from the usual order for costs in the case.) 

The sheer scale of the reduction applied made it readily obvious to the court that the Claimants’ budget was ‘unrealistic both in terms of reasonableness and proportionality’.  

Other Factors 

The unreasonable and disproportionate nature of the budgeted sums turned both on the number of hours and hourly rates claimed. In relation to the former, the judge commented that he ‘had to make a number of remarks on a phase-specific basis in relation to the hours, which at one point I remarked as "implausible".’ And in relation to the hourly rates claimed, whilst those were significantly in excess of the guideline rates claimed (e.g. £1,089 for Grade A fee earners against £566 for Band 1 (London)), the only justification provided by the Claimant – which was, in truth, no justification at all – was that the Defendants had likewise claimed rates in excess of the guideline rates. 

(a word of caution on this point: this was a finding made in the context of the Court of Appeal’s decision in Samsung Electronics Co Ltd & Ors v LG Display Co Ltd & Anor (Costs) [2022] EWCA Civ 466. In essence, it was held that Band 1 (London) rates already have built into them an allowance for complex and very heavy commercial work. There was no such finding by the Court of Appeal in relation to any other Band – London or otherwise.)  

The court determined that this was an ‘expert’ driven case and was not the sort that needed to be ‘over lawyered, either in terms of rates reflecting overly complex litigation of this type, or, indeed the number of hours that lawyers need to put in in order to support the investigations’. 

Mr Justice Constable also highlighted the contrast between what the Claimants had budgeted for against what the Defendants had offered (presumably in their budget discussion report). The Defendants had offered between £2.7 million and £3.5 million against the £8.7 million claimed. In that context, it was held that the £4.2 million budgeted by the court could be said to represent a ‘loss’ for the Claimants at the hearing. 

Other factors included – 

• the fact that a good portion of the expert-led work would already have been undertaken before the claim was even issued 

• although arbitrary comparisons between opposing parties’ budgets are fundamentally unhelpful, the fact that the Claimants’ budget was as great as the totality of the Defendants’ budgets (of which there were seven) served as a ‘preliminary indicator’ that the Claimants’ costs were unreasonable and/or disproportionate 

• Specifically in relation to the rates, it was noted that if the rates claimed were substituted by the guideline rates, then the budgeted costs pleaded would have been reduced by approximately £1.4 million 

The court was persuaded that the aggregate of the aforementioned factors meant that the Claimants’ budget had crossed the line and so departed from the usual order for costs in the case. 

Matters Generally 

The movement by the courts of departing from the normal order for costs in the case at the conclusion of a costs and case management hearing is slowly gathering momentum. Constable J referred to two recent decisions by Master Thornett. In Nicholas Worcester v Dr Philip Hopley [2024] EWHC 2181 (KB), it was observed that – 

"19.  In short, a party that resolutely proceeds to a separately listed costs management hearing with an overly ambitious budget should not readily assume that the court will be willing to see both its time and resources and those of opposing parties' engaged without any potential consequence in costs. 

20.  Neither do I agree that if there is to be an order other than "in the case", the starting point is that a party that secures approval of a sum at least something in excess of that offered by an opponent thereby establishes "success" and so should avoid an adverse costs order against them. Not least because success could equally be defined as that of the opposing party in securing substantial reductions. Hence, as I am satisfied, why it is appropriate for the court to take a more rounded and general view of the process that took place. 

[…] 

30. The overall impression and conclusion I reached was that the Claimant's Precedent H was unreasonable and unrealistic in terms of proportionality. It led to a polarised approach between the parties on budgeting that had prevented settlement and so necessitated a separate hearing proceeding that either might have been vacated or, even if not, should have followed a more conventional process of modest arithmetical adjustment and modification, rather than fundamental deconstruction of the Claimant's proposals and as led to sizeable reductions." 

Master Thornett adopted the same approach in Jenkins v Thurrock Council [2024] EWHC 2248 

In essence, when faced with an Application of this type, the court is to adopt a holistic approach. Constable J put it this way – 

[22] I also agree that, in considering whether a party has 'succeeded', it is not determinative that the sum allowed exceeds the amount they have been offered. Equally, the mere fact of a reduction, as a matter of course, will not itself mean 'success' for the opposing party. The word 'resolutely' is important, because the reasonableness of the sums offered is also obviously a factor in judging the conduct of the party whose costs are being scrutinised. There will be a range within which, in the round, and even where there is a separate costs management specific hearing, the appropriate starting point of costs in case remains the appropriate order, if the conduct of both parties is within the range of reasonableness. The Court has to step back and look at the numbers involved and use its judgment to determine whether this case is a case that is on the wrong side of the line, and where one party cannot demonstrate appropriate conduct in approaching the cost-management process. Have the parties had a realistic view as to what is reasonable and proportionate and likely to be recovered? 

Conclusion

An order for costs in the case undoubtedly remains the starting point. But practitioners ought not to presume that it will necessarily be the end point. There is now more than sufficient authority upon which opposing parties can marshal an argument for departure from the normal rule in cases where at least one party has filed an overly ambitious budget. Equally, parties should guard against being over-zealous in making such an Application: each decision will turn heavily on its own facts and costs will surely follow the event in the event of a failed Application. 

Please contact Christopher McClure to discuss any query relating to this article. Christopher is based at our Manchester office and can be contacted on 0161 835 4087.