Natasha Partos on Cost Budgets – unrealistic budgets found to be an abuse of the cost process

Articles | Tue 6th Jun, 2017

On 12th May 2017 The Hon. Mr Justice Coulson handed down his judgement in Findcharm Limited & Churchill Group Limited [2017] EWHC 1108 (TCC).

Findcharm Limited operated a restaurant within the Churchill Hotel in London. In November 2014 there was a gas explosion at the hotel which necessitated a closure of the hotel for 4 months. Thereafter Findcharm Ltd made a claim against the Churchill Goup for £820,000, which included a claim for loss of profit, its costs and interest, arising from the 2014 explosion. Prior to the CMC in front of Mr Justice Coulson Findcharm submitted a cost budget of £244,676.30.

In response, Mr Justice Coulson described Churchill’s defence as, ‘bluntly a defence straight out of the 1970s’. with a combination of bare denials and non-admissions that were designed to have been eradicated by the introduction of the CPR. Mr Justice Coulson’s criticisms of Churchill did not end there. Prior to the CMC Churchill submitted a cost budget of £79,371.23. Mr Justice Coulson recorded that even on its own case Churchill’s cost budget appeared to be ‘erroneous on its face’ and ‘unrealistically low’. Mr Justice Coulson highlighted 4 areas of deficiently low and unrealistic areas of the budget, which could not be justified when examined in light of the issues in the claim.

Such were the deficiencies in Churchill’s budget Mr Justice Coulson simply concluded that it was of no utility, designed to put a low figure on every state of the proceedings and therefore an abuse of the cost budgeting process.

As a consequence of his findings Mr Justice Coulson disregarded Churchill’s Precedent R altogether and found that Findcharm’s budget was proportionate and reasonable and therefore allowed the entire budget of £244,676.30.

Mr Justice Coulson’s frustrations with the Defendant tactic of submitting an unrealistically low budget in order to undermined a Claimant cost budget, where is done without thought or justification for the issues in the case is made plain in the judgment. He reflected that the Precedent R process must be adhered to carefully in order to discharge the proper function of cost budgeting.

This judgment although short is a welcome reminder to all civil practitioners that Defendants will not be well served by serving unrealistically low budgets in order to simply undermined the other sides budget, if they are done without well thought-out justification.

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