The case of Napp Pharmaceutical Holdings Ltd v Dr Reddy’s Laboratories (UK) Ltd & Ors [2017] EWHC 1433 (Pat) was a £100 million patent infringement action. The Claimant/Respondent was unsuccessful at first instance and also at Appeal.

At the latest Hearing on the matter, concerning an Application based on a Request for Further Information in an enquiry as to damages on a cross-undertaking, Mr Justice Birss considered the issue of cost budgeting. The Respondent submitted that, although it was accepted that the case fell outside the scope of CPR Rule 3.12 – which excludes cases pleaded at in excess of £10 million from the budgeting process – cost budgeting should be ordered in this case.

Birss J accepted the Respondent’s submissions that, in accordance with the decision of Coulson J in CIP Properties v Galliford Try, the Court’s discretion to order budgeting in cases exceeding the limits set by the CPR was unfettered. Further, it was accepted that cost budgeting is generally a good idea and can be a useful case management tool.

The Respondent submitted that there was specific reasoning behind the Respondent’s request for cost budgeting to be ordered. Due to the fact that the case was now proceeding as a damages inquiry, the usual considerations of self-interest which might constrain a party in incurring costs for fear of having to bear them themselves, did not apply. It was further submitted that Sandoz Limited, the Applicant, appeared to be approaching the matter as if they were litigating at the Respondent’s expense rather than their own and, in addition, had given no good reason for resisting cost budgeting other than by reference to the £10 million limit set by CPR 3.12.

In response, the Applicant submitted that the Court should not impose cost budgeting in this case, as the Detailed Assessment process is sufficient protection with respect to the recovery of only reasonable and proportionate costs, and because the case in question was complex and therefore difficult to cost budget. Further, the Applicant submitted that the imposition of cost budgeting can prevent the recovery of reasonable and proportionate costs in some cases. Birss J strongly rejected the Applicant’s submissions, stating:

“I entirely reject the submission that cost budgeting creates a problem whereby reasonable and proportionate costs may not be recovered…. budgets can and indeed often are altered during the course of proceedings, precisely in order to accommodate things that happen which were unexpected. The fundamental objection by Sandoz to cost budgeting is wrong.”

It was submitted by the Applicant that statements regarding the costs incurred to date and proper estimates regarding future costs could be provided to the Respondent in the future and that this would amount to a sufficient safeguard from the Respondent’s point of view. Birss J considered this issue and whether or not to go further and direct that the matter be budgeted.

Ultimately, Birss J was not satisfied that cost budgeting in this case was required and therefore declined to impose the same. He stated that the way to deal with costs was to require the parties, once pleadings had closed, to produce and exchange statements of the costs incurred to date and estimates of the future costs. The door was however left open for the Respondent to return to Court once the costs estimates had been exchanged and again submit that cost budgeting should be imposed.

Whilst of course it should stand to reason that cost budgeting does not prevent reasonable and proportionate costs being recovered, in practice questions remain regarding how often the parties can be expected (or indeed, allowed!) to vary their cost budgets to cater for the unexpected, particularly in the most high value and complex of cases. What constitutes a “significant development in the litigation” to warrant the varying of a budget, as per CPD 3E 7.6, is still a relatively grey area and the threshold to be met is high.