The Court of Appeal decision in Lejonvarn v Burgess & Anor  EWCA Civ 114 has determined that an approved costs budget is irrelevant where indemnity costs are ordered.
The appellant’s case was that whilst there was an approved costs budget of £415,000, her actual costs were £724,265.63. To allow this would effectively reward her for failing to keep within the budget. Interestingly the budget was only partially costs managed and therefore was subject to change in certain phases in any event.
Lord Justice Coulson acknowledged “The figure produced by an approved cost budget mechanism (CPR r.3.12-r.3.18) is a different thing to the final assessment of costs following the trial. The former is prospective; the latter is retrospective. True it is that, in many cases, the approved costs budget will be the appropriate starting point for the final costs assessment. But that does not detract from the underlying proposition that they are different figures produced by different considerations with different purposes” and in any event “If there is an order for indemnity costs, then prima facie any approved budget becomes irrelevant”.
Although Lord Justice Coulson was not persuaded that there was an approved budget in this particular case he made it clear that costs assessed on an indemnity basis are not constrained by an approved costs budget. He even went so far as to say that his obiter comments in the cases of Elvanite and Bank of Ireland v Watts which suggested the contrary, should be disregarded.
Anna Lockyer is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at firstname.lastname@example.org and 0113 288 5619, or the Clarion Costs Team on 0113 246 0622