Costs budgeting plays a critical role in managing the financial aspects of litigation. It helps in ensuring that costs incurred are proportionate to the value, complexity, and importance of the case.

In the case of Peter Jenkins v Thurrock Council [2024] EWHC 2248 (KB), a claimant in a personal injury case was penalised for submitting an “unrealistic” costs budget.

Jenkins v Thurrock Council – Overview of the case

The hearing in question revolved around the Claimant’s costs budget, which had been significantly reduced during the hearing. The Defendant argued that an order other than “costs in the case” should be made, suggesting that the Claimant’s budget was excessively high and disproportionate, requiring a different approach to costs recovery.

The case itself involved a personal injury claim, with the Claimant seeking damages exceeding £200,000 following a workplace accident in June 2020.  It should be noted that it is not detailed in the judgment what the full value of the pleaded claim was (which may have been unknown at the time if the Schedule of Loss was incomplete). Liability had been admitted early in the proceedings however, and the case progressed primarily on the issue of quantum (the amount of damages).

Key Case Data:

• Claim form issued: June 2023
• Claimant’s initial budget totalled £1,195,754.26 (later reduced to £944,537.16)
• Defendant’s costs budget totalled £383,417.20

Costs budget proportionality principle

The principle of costs budget proportionality is backed in under CPR 44.3 and is a fundamental consideration in costs budgeting. Proportionality requires that the costs incurred or to be incurred by a party should bear a reasonable relationship to:

• The sums in issue in the proceedings.
• The value of any non-monetary relief in issue.
• The complexity of the litigation.
• Any additional work generated by the conduct of the paying party.
• Any wider factors, such as the public importance of the matter.
• Spend from the other party – comparisons between budgets may be informative in some cases 

In this case, the court was concerned with the disproportionate nature of the Claimant’s budget compared to the Defendant’s, especially given the relatively straightforward nature of the claim, where liability had already been admitted. While the Claimant’s injuries and psychological effects were significant, the court did not find the complexities of the case to justify such high estimated legal costs.

It is interesting to consider what the fully pleaded value of the claim was in this matter however, this is not revealed in the judgment, and this would suggest that even if quantum is significant, this has not factored into the proportionality considerations as much as may have been expected.  Nevertheless, the Court seems to have considered the liability admission already provided to have been an important factor, and this would have left the remaining costs to be incurred to relate to quantum only.

Costs management and the claimant’s position

During the Costs Management Hearing, the Claimant’s budget was reduced from an initial £1,195,754.26 to £944,537.16, but this was still viewed as excessive. The Claimant’s incurred costs were already close to the Defendant’s entire budget, which raised further concerns. The court’s role in costs management is not merely to “rubber-stamp” a party’s budget but to ensure that it is reasonable and proportionate to the case’s demands.

Key Points of Disproportionality Flagged:

• Trial Preparation Costs: The Claimant’s proposed costs for trial preparation were deemed particularly high and were deferred for future review, suggesting they lacked a solid foundation at the current stage of proceedings.
• ADR Costs: The Claimant’s budget for Alternative Dispute Resolution (ADR) was also significantly higher than normal for such cases, exceeding £49,000, which the court found disproportionate.

Comparative budgeting: Claimant vs. Defendant

A noteworthy feature of the case was the stark difference between the Claimant’s and Defendant’s budgets. While the court acknowledged that Claimants in personal injury cases often have higher budgets than Defendants (due to the nature of the work involved), the extent of the disparity in this case was unusual.

The Claimant’s budget was nearly three times higher than the Defendant’s, despite both parties following similar procedural steps.

The court noted that such disparities should have prompted more careful reflection and negotiation from the Claimant before the hearing. However, despite multiple opportunities for discussion and adjustment, the Claimant maintained that their budget was reasonable.

The court took a “rounded overview” in line with CPR 44.2, considering factors such as success and conduct, and concluded that the Claimant’s costs were unrealistic. As a result, significant reductions were made to the Claimant’s budget, particularly in relation to trial preparation and ADR.

As an observation, ARC Costs have sometimes observed Defendant parties seeking to unrealistically present their costs for budgeting, when it is clear they intend to compromise a claim, and such factors must also be taken into account when cross-referencing Budgets, as the Court has suggested here.  In a separate matter, the writer once came across a brief fee for a 7 day Trial in a complex matter, suggested to be £3,000, which was clearly an unrealistic forecast for future costs and was an attempt to show the Claimant’s Budget as being unreasonable, when it was not.

The court’s judgment on costs

The court ultimately found that the Claimant’s approach to costs management in Jenkins was unrealistic and disproportionate. The Claimant’s insistence on maintaining a high budget, despite the Defendant’s objections and the court’s initial observations, resulted in unnecessary time and resources being spent on unravelling an ambitious budget.

The court directed that the Claimant pay the Defendant’s costs associated with the Costs Management Hearing, a departure from the typical “costs in the case” approach.

The court also reduced the Claimant’s recoverable costs of preparing several budgets by 35%, as these were deemed inflated due to the Claimant’s unrealistic stance on budgeting.

Implications for costs budgeting & proportionality

This case underscores several key principles for legal practitioners regarding costs budgeting and proportionality:

Proactive negotiation:

Parties should engage in negotiation using budget discussion reports, especially when faced with substantial discrepancies between their own and opposing parties’ costs. Failure to do so can lead to adverse costs orders.

Realistic cost estimates:

Claimants, particularly in personal injury claims where quantum may be high but liability issues have already been resolved, must ensure that their budgets are realistic and reflect the complexities and requirements of the case. Excessive budgets, even if explained, may not be accepted if they appear disproportionate.

Costs management as a proportionate exercise:

The court emphasised that costs management is an ongoing exercise, and parties must continuously appraise their position to ensure they are operating within proportional bounds.

The role of conduct and success in Costs Orders:

The court is entitled to consider conduct and success factors at costs management hearings, just as it would in other types of hearings, to ensure fairness in the allocation of costs.

How can ARC Costs Assist?

The ARC Costs team are always happy to assist with the preparation of any Cost Budget and negotiation of the same. We can also provide guidance and assistance in updating/varying your approved Costs Budget under the current procedure set out in CPR 3.15A pursuant to the Precedent T procedure.

ARC Costs are independent costs experts, and we can assist both paying parties (in challenging costs) and receiving parties (in recovering costs).

We can be contacted via email at info@arccosts.co.uk, or by telephone on 01204 397302. For more information on legal costs, please find out more about our speciality areas of expertise and our services on our legal costs page.

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