Findcharm Ltd v Churchill Group Ltd  EWHC 1108 (TCC)
“Some parties seem to treat cost budgeting as a form of game, in which they can seek to exploit the cost budgeting rules in the hope of obtaining a tactical advantage over the other side”
Summary of the Case
The Judgement on this case was handed down recently, confirming the importance of Budget Discussion Reports which are to be filed ahead of the first Case Management Conference (CPR 3.13 (2)). Practice Direction 3E provides the requirements for the same.
- Budget discussion reports
6A. The budget discussion report required by rule 3.13(2) must set out—
(a) those figures which are agreed for each phase;
(b) those figures which are not agreed for each phase; and
(c) a brief summary of the grounds of dispute.
This case stemmed from a fire at the Churchill Hotel (operated/owned by the Defendant ‘Churchill’) caused by a gas explosion, the Claimant ‘Findcharm’ operated a restaurant within the building and issued a claim for damages including loss of business following a fourth month closure. The value of the claim was in the region of £820,000.00 plus interest, with the single largest claim being that for loss of profit/interruption of business.
The claim pleaded by Findcharm was very detailed as compared to the sparse Defence filed by Churchill, at paragraph 5 of his Judgement Mr Justice Coulson can be quoted:
“In contrast to Findcharm’s detailed pleaded claim, Churchill’s defence could not be more basic. It is a combination of bare denials and non-admissions of the kind that the Civil Procedure Rules was designed to sweep away. It is, bluntly, an insurer’s defence straight out of the 1970’s. For example, despite the fact that the explosion happened in its hotel, Churchill does not even formally admit the cause of that explosion”
This lacklustre approach was echoed within the Cost Budget of Churchill.
Before the CCMC Findcharm revised their budget, firstly to account for the fact that no expert evidence would be necessary to deal with the single cause of the explosion, as no positive Defence has been pleaded by Churchill in relation to this and secondly on the basis that one joint expert would be required for the Forensic Accountant Report. This highlighted the fact that the Claimant was taking the issue of cost budgeting in a more serious manner than that of the Defendant. The Cost Budget filed by Findcharm was £244,676.30.
The Cost Budget filed by Churchill totalled £79,371.23 an unrealistically low figure when taking into account the value of the claim and the issues involved. One example is that Churchill only allowed an estimate of less than £7,000.00 within their budget for the preparation of a Trial in the High Court. Prior to the CCMC Findcharm had agreed to the Cost Budget of Churchill, thus Mr Justice Coulson did not go behind that agreement; he did however comment that Findcharm were not unreasonable in agreeing it even knowing the figures were not representative of the work required on the case.
Within their Budget Discussion Report Churchill offered £46,900 for the estimated costs of Findcharm, coupled together with incurred costs this allowed a total of less than £90,000.00 (under 11% of the total amount claimed within the main action). Mr Justice Coulson was critical of this and he can be quoted at paragraph 9 of the Judgment stating:
“In my view, Churchill’s Precedent R is of no utility. It is completely unrealistic. It is designed to put as low a figure as possible on every stage of the process, without justification, in the hope that the court’s subsequent assessment will also be low. In my view, therefore, it is an abuse of the cost budgeting process. I make clear that none of this is intended to be a criticism of Ms Akyol, the solicitor at Kennedys who appears this morning, because she told me that both Churchill’s cost budget, and its Precedent R, were prepared by Kennedys’ costs department. It is, unfortunately, a criticism of them”
Mr Justice Coulson later illustrates four reductions made by Churchill to the estimated costs of Findcharm before later concluding “For all these reasons, I am obliged to disregard Churchill’s Precedent R” before allowing the Cost Budget of Findcharm as drawn.
There is no doubt that this case will be welcomed by Claimant’s Solicitors. Defendants filing tactically low budgets to influence the Court’s assessment of the Claimant’s costs is a regular occurrence and this matter shines a critical spotlight on the practice.
If you have prepared a reasonable and proportionate Cost Budget and you find the Defendant is making large/unreasonable reductions on the basis of their own unrealistically low budget, this case will undoubtedly support your position. The case if anything supports the importance of the Budget Discussion Report, with the main aim to save time and costs involved for all parties.