Budgeting and Proportionality – dispute not simply as to money but legal novelty is not a good explanation for high costs – a party’s disproportionately low budget is not an appropriate yardstick to assess another party’s higher budget – Court will use its own experience to arrive at the appropriate figure

Red & White Services Limited v Phil Anslow Limited [2018] EWHC 1699 (Ch)

The High Court considered the budgets filed by (i) the Claimant, (ii) the Defendant and (iii) a Third Party. The Claimant and Defendant operated rival bus services from the Third Party’s bus station. The Claimant and the Third Party each filed budgets to trial in the sum of c. £1.5m. The Defendant’s budget to trial was £288,000.

The Defendant submitted that the Claimant’s and the Third Party’s budgets were disproportionate, asserting that damages were likely to be in the region of £80,000 to £120,000.

A number of authorities were considered. It was noted that costs may be disproportionate where it will cost significantly more to fight than a party stands to recover. One test is whether the trial is likely to be an end in itself or merely part of the process of arguing who should pay (all or most of) the costs. Where costs exceed quantum it will often be the latter, and costs may be disproportionate.

Consideration should be given to the complexity of the litigation.

The Judgment

The Judge considered the quantum of the claim against the budgets noting that, on that analysis, even the defendant’s budget was disproportionate (i.e. £288,000 to catch £80,000-£120,000). However, the Judge recognised that the dispute was not simply as to money. The claim had a higher value and greater significance than that shown only by the quantum of damages: the claim raised novel questions of land law; the competition issues in the case had serious implications on the parties (and a wider public law aspect). While modest value cases often raise legally novel issues, which may have far-reaching implications and which may justify modest increases in costs, the issues in the case did not justify disproportionate costs nor the very substantial differences between the parties’ budgets.

The Judge observed that budgeting is concerned with the other party’s cost risk and is not concerned (directly at least) with how much a party may actually spend. Litigants are free to spend what they like but what they spend and what they may recover are two different things. The Judge noted that the mere fact that a defendant faces costs of more than one party is of no great significance as the court’s job is to consider each party’s individual budget, not the net risk to a party of aggregating more than one budget.

The Judge rejected the argument that the other budgets should be set by reference to the Defendant’s budget because the Defendant’s budget was much too low and thus could not be a guide.

The Judge took an approximate approach to estimating the costs, taking into account his own experience while giving specific thought to two items in the Claimant’s and Third Party’s budgets (the Claimant’s trial costs were too high, the Third Party’s estimate for disclosure (£100,000) was much more realistic than that of the Claimant (£267,000)). The Judge ordered that the appropriate overall figure for the Claimant or the Third Party was £800,000.