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Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd

6 September 2013
  • In a case run under the costs management pilot in the Birmingham Mercantile and Technology Court the court dismissed the claimant’s claim and allowed one element of the defendant’s counterclaim in the modest sum of £3,500. The claimant accepted that they were due to pay the Defendant’s costs, but objected to the amounts sought.
  • During the course of the litigation the judge had made costs management orders approving the defendant’s initial costs budget of £264,708 and subsequent increase of £268,488.
  • However, a month before the trial the defendant sent the claimant a revised costs budget which doubled the previous estimate to £531,946.18. Despite this enlargement, no application was made for approval of the budget and the same was not filed at Court. In fact, the first the Court became aware of the budget was when the Claimant opened their submissions

The Judge considered the case on three grounds:

1. In deciding whether or not there should be an award of costs on the indemnity basis, the Court rejected the Defendant’s submissions. Further, Coulson J offered his take on what this would mean for the budget:

“…the costs budgets represent the parties’ estimate of all the costs that they think that they will incur. It is not an estimate based on any particular form of costs assessment; it is just an estimate of likely costs. If it is an accurate estimate of all the costs that will be incurred, then it seems to me that it should be the relevant starting point for an assessment of costs on an indemnity basis as well as for an assessment on the standard basis”

2. In considering the Defendant’s application to revise the budget, Coulson J concluded:

“…an application to amend an approved costs budget after judgment is a contradiction in terms. First, it would mean that the exercise would no longer be a budgeting exercise, and would instead be based on the actual costs that have been incurred. Secondly, it would encourage parties to ‘wait and see'; only applying to increase the budget costs if it was in their interests. Thirdly, it would make a nonsense of the costs management regime if, at the end of the trial, a party could apply to double the amount of its costs budget. The certainty provided by the new rules would be lost entirely if the parties thought that, after the trial, the successful party could seek retrospective approval for costs incurred far beyond the level approved in the costs management order.”

3. And finally, in considering whether or not there was good reason to depart from the budget, it was concluded:

“…this was not a case which some how lurched off track after its commencement, or where the issues ended up being very different to those which had originally been canvassed in the pleadings. Everything went pretty much as it might have been expected to go. In those circumstances, it seems to me that the general scope for alleging in this case that there is good reason now to depart from the costs management order is relatively limited.”

The Defendants tried their best… seeking to justify their departure on the basis that these were actually the costs incurred conceding that  they had got their budget wrong in the first instance and that the Claimant had suffered no prejudice… but the Judge was not sympathetic. Costs were awarded as per the appropriate budget at £268,488.

A note from our Costs Manager:

Where do I begin? If ever there was a hard lesson learned, the defendant certainly learned it in this case… and I cannot imagine that such a conversation will have gone down well with their Client who was £270,000.00 out of pocket at the end of the case despite being successful.

Good practice would therefore suggest:

  1. Keep a close eye on costs budgets at all stages of the case and ensure that this is prepared properly. The court is not going to tolerate an excuse like “getting it wrong” to justify a departure without extremely good reasons.
  2. If at any point you think the budget is going to be exceeded, for whatever reason, apply to the Court as soon as possible for this to be amended. Do not leave it to the end. It seems that parties will get further in an attempt to revise as the case progresses than in an attempt to depart when the case has finished.
  3. Don’t rely on an award of indemnity costs at the end of the case to justify a last minute departure (and certainly not one double the original estimate!) – it might not happen, regardless of how clear cut you think your case may be.
  4. Finally, even if indemnity costs are awarded, there is no guarantee that this will allow a departure from the budget. Proper authority is still awaited.

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