A defendant who offered very low sums in their budget discussion report in the hope that the court may compromise in the middle of the polarised figures put forward by the two sides is guilty of “an abuse of the cost budgeting process”, a High Court judge has ruled.
Warning that budgeting is not “a game”, Mr Justice Coulson said he wanted his ruling published on Bailii “because of the critical need to ensure that the Precedent R process is carefully and properly adhered to”.
In Findcharm Ltd v Churchill Group Ltd  EWHC 1108 (TCC) , he said the introduction of Precedent R, which requires each party to comment on the cost budget of the other, has led to a “great saving” of judicial time, “because it has obliged the parties to adopt a realistic attitude to the budget of the other side, and has assisted in the identification of the real disputes between the parties on costs”.
But he continued: “However, even now, some parties seem to treat cost budgeting as a form of game, in which they can seek to exploit the cost budgeting rules in the hope of obtaining a tactical advantage over the other side.
“In extreme cases, this can lead one side to offer very low figures in their Precedent R, in the hope that the court may be tempted to calculate its own amount, somewhere between the wildly different sets of figures put forward by the parties. Unhappily, this case is, in my view, an example of that approach.”
The case involves an £820,000 claim by Findcharm, which operates a restaurant within the Churchill Hotel in London, over a four-month closure that followed a gas explosion.
Coulson J recorded: “In contrast to Findcharm’s detailed pleaded claim, Churchill’s defence could not be more basic. It is a combination of bare denials and non-admissions of the kind that the Civil Procedure Rules was designed to sweep away.
“It is, bluntly, an insurer’s defence straight out of the 1970s. For example, despite the fact that the explosion happened in its hotel, Churchill does not even formally admit the cause of that explosion.”
Findcharm’s budget was £245,000; through its Precedent R, Churchill offered less than £90,000.
The judge said: “In my view, Churchill’s Precedent R is of no utility. It is completely unrealistic. It is designed to put as low a figure as possible on every stage of the process, without justification, in the hope that the court’s subsequent assessment will also be low. In my view, therefore, it is an abuse of the cost budgeting process.”
Among the examples of “the lack of reality” in Churchill’s Precedent R were its offer of £5,300 for Findcharm to prepare three witness statements and consider Churchill’s two; Findcharm’s estimate was £40,235.
“[Churchill’s figure] is simply incredible in a case where, not only does the background and circumstances of the explosion need to be explained, but also where a large claim for loss of profits will need to be underpinned by detailed factual evidence.”
As a result, the judge said he was “obliged” to disregard Churchill’s Precedent R, and considered Findcharm’s budget to be both proportionate and reasonable.
Churchill’s own budget was just under £80,000. “Even on Churchill’s own case, it seems erroneous on its face,” Coulson J said.
“For example, it allows nothing at all for fire experts, even though at the CMC Churchill were arguing that causation was in issue and an expert was necessary. It also purports to estimate a sum of less than £7,000 for the preparation of a High Court trial. It is, therefore, on any view, an unrealistically low budget.”
However, Findcharm had, “not unreasonably”, agreed the Churchill’s budget and so Coulson J approved it.