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Elvanite Full Circle Ltd v Amec Earth & Environmental (UK) Ltd [2013] EWHC 1643 (TCC) - 14/06/13


The successful defendant sought twice the amount approved in a costs management order and covered by the claimants ATE insurance, raising the issues: of whether the defendant was entitled to costs on an indemnity basis; if so, the relevance of the existing costs management order; and if not, whether the defendant could seek to amend the costs budget after judgment.

Held: The primary function of an approved costs budget is to ensure that costs are reasonable and proportionate to what is at stake. As such, the court will be slow to revise or depart from an approved budget unless it is satisfied in all the circumstances that there is good reason to do so (per Henry v News Group Newspapers Ltd [2013] EWCA Civ 19). The starting point of an assessment of costs, on either a standard or indemnity basis, is the budget approved in a costs management order. Whether an award of indemnity costs is a good reason to depart from the order depends on the particular facts of the case. Although it is always open to a party to seek to depart from the original approved budget on the basis that there is good reason to do so, prima facie, it is not possible to seek retrospective approval to amend. Should a party wish to change its budget, it must seek formal approval as soon as it becomes apparent that the original costs have been significantly exceeded, so the court can consider whether there was good reason to depart from the budget. The mere making of a mistake in a budget, absent of any indication of error, does not, of itself, amount to a good reason.

Indemnity costs are only justified where the conduct of the paying party takes the case out of the norm and amounts to a forfeiture of the rights to the benefit of the doubt on reasonableness, such as in pursuing a hopeless or disproportionately wide claim.

In the present case, indemnity costs were not justified as the claim was arguable and it was reasonable and proportionate for the claimant to proceed to trial. Although the defendant had not demonstrated good reasons for not making an application to amend costs or for the court to depart from the costs management order in relation to expert's fees, it was for the costs judge to assess whether some of the increases constituted good reason.