“If there is an order for indemnity costs, then prima facie any approved budget becomes irrelevant”

In Lejonvarn v Burgess & Anor [2020] EWCA Civ 114 the appellant was awarded indemnity costs of not less than £725,000 against a budgeted sum of £415,000. The respondent argued that the court should not make an order for indemnity costs as this would provide the appellant with a way round her own approved costs budget. The Court of Appeal rejected this argument.

Lord Justice Coulson noted the difference between an approved budget, determined prospectively, and the retrospective final assessment of costs. While generally the approved costs budget will be the starting point for assessment, that does not detract from the underlying proposition that they are different figures produced by different considerations with different purposes.

In reviewing the applicable principles Lord Justice Coulson noted that “if there is an order for indemnity costs, then prima facie any approved budget becomes irrelevant” citing, amongst other cases, Denton and Others v TH White Limited [2014] EWCA Civ 906: “If the offending party ultimately loses, then its conduct may be a good reason to order it to pay indemnity costs. Such an order would free the winning party from the operation of CPR r.18 in relation to its costs budget”.