A very interesting case has appeared on Bailli recently and reveals an interesting view as to how the Master in the case approached the fixing of a budget.
The case [2025] EWHC 674 (Ch) involves Atlantic Ways Holding SA (Claimant) and Freetown Terminal Holding Limited (Defendant) in the High Court of Justice Business and Property Courts of England and Wales.
The hearing took place on 25 February 2025, presided over by Master Brightwell.
The primary issue was the disparity between the claimant’s budget (£449,000) and the defendant’s budget (£808,000).
The claimant took “a root and branch” opposition to the defendant’s budget.
The general principles for fixing a budget, were helpfully outlined by Master Brightwell, to include:
- Setting a Budget, Not Detailed Assessment: The court sets a budget without undertaking a detailed assessment in advance. Once a budget is set, the court will not later depart from it without good reason.
- Reasonableness and Proportionality: The court considers whether the budgeted costs fall within a range of reasonable and proportionate costs.
- Reference to CPR Rule 44.3(5): The court’s assessment of proportionality is made by reference to this rule, where value and complexity of the claim are the most important factors.
- Standard Basis Assessment: The budget is viewed with an eye to what would be permitted on a detailed assessment on the standard basis, where any doubts are resolved in favour of the paying party.
- Proportionality Over Reasonableness: If costs are reasonable but disproportionate, they will need to be reduced.
- Avoiding Direct Comparison: The court should avoid merely comparing one budget with another, although it cannot ignore the other budget entirely.
He also explained that the court determines reasonable costs by considering several factors:
- Range of Reasonable and Proportionate Costs: The court assesses whether the budgeted costs fall within a range of reasonable and proportionate costs, taking into account that costs may be at the outer end of this range but still be reasonable and proportionate.
- Complexity and Value of the Claim: The court evaluates the complexity and value of the claim, as these are important factors in determining proportionality.
- Standard Basis Assessment: The court looks at what would be permitted on a detailed assessment on the standard basis, where any doubts are resolved in favour of the paying party.
- Proportionality Over Reasonableness: If costs are reasonable but disproportionate, they will need to be reduced.
- Avoiding Direct Comparison: The court avoids merely comparing one budget with another, although it cannot ignore the other budget entirely.
He further explained that the assessment of proportionality was influenced by several factors, primarily guided by CPR rule 44.3(5). Generally, the most important factors included:
- Value of the Claim: The monetary value involved in the litigation.
- Complexity of the Claim: The intricacy and difficulty of the legal and factual issues in the case.
The court also had regard to hourly rates for budgets by considering the following:
- Guideline Rates: The court compared the hourly rates proposed by the parties to the guideline rates for different categories of work (e.g., London 1 rates for the heaviest corporate and commercial work).
- Reasonableness and Proportionality: If the hourly rates significantly exceed the guideline rates, this will affect the assessment of the reasonableness and proportionality of the budget.
- Nature of the Work: The court evaluates whether the nature of the work justifies the proposed rates. For example, the court may determine that the case does not fall within the category of the heaviest corporate and commercial work, which would justify lower rates.
- Comparison with Opposing Party’s Rates: The court may compare the hourly rates of both parties to ensure fairness and consistency.
In this case, Master Brightwell noted that both the claimant’s and defendant’s hourly rates exceeded the guideline rates, which influenced the assessment of the budgets.
Master Brightwell set the defendant’s budget, considering principles of reasonableness and proportionality, and made significant reductions to various phases of the budget.
The Master was requested to make an order for security for costs by the Defendant who also sought costs of the application.
He declared he was satisfied that an order for security for costs should be made “so I will deal with the question of principle before turning to the quantum”.
So far as the incurred costs are concerned, the defendant’s incurred costs are less than the claimant’s. The authorities suggest 65% as a general proposition being an appropriate percentage to award for security in respect of incurred costs. On the footing that there is often a reduction on detailed assessment, that seems to me to be an appropriate percentage reduction in relation to incurred costs where no particular objections have been brought to my attention. As far as the estimated costs are concerned, I have now fixed a budget. I have made significant reductions to the defendant’s budget. Mr Matthewson is right that the general rule is that costs will be limited to budgeted costs unless there is some good reason to depart from that. The reason why one may award a lower sum than 100% of budgeted costs for security is where there is real doubt as to whether those costs are in fact going to need to be incurred. That would explain the reduction of 30% which was made by ICC Judge Mullen in Asertis Ltd v Bloch [2024] EWHC 2392 (Ch). In respect of the most significant costs in this case, I do not consider that there is such a doubt, particularly in relation to trial preparation and trial where it seems to me if the trial goes ahead those costs are going to be incurred and probably exceeded. I may have some doubt in relation to the earlier phases for reasons that I explained earlier so the order I am going to make is that in relation to disclosure, witness statements and experts the sum for security will be 90% of the budgeted sum but for the other phases it will be 100%.
The application for security for costs was opposed and has been successful. The general rule is that the unsuccessful party is ordered to pay the successful party’s costs unless there is some reason to order something else. The position adopted by the Page 11Atlantic Ways Holding SA v Freetown Terminal Holding Ltd Master Brightwell Approved Judgment defendant in correspondence before the application was issued was that the amount of security should be based upon the budgeted costs in relation to costs which had not yet been incurred. It is correct to say, as Mr King does, that the defendant’s suggestion was in correspondence and indeed today that there should be security for 100% of the costs whereas in relation to some I have ordered 90%.
Essentially, the defendant’s position has been vindicated and it had to pursue the application to a hearing. The claimant made a considered decision to oppose the making of an order in principle which necessitated the incurring of additional costs. It seems to me there is no reason to depart from the normal rule here to order that the claimant do pay the defendant’s costs.
He added – this is a case where I should order that the costs are to be subject to assessment, with a payment on account, so as to enable that to be resolved in what I consider to be a far more satisfactory way than trying to, particularly when the hearing has already overrun, disentangle the matters which may inevitably relate to two discrete matters.
The judgment emphasises the importance of proportionality in costs management and the necessity of security for costs in litigation with the Claimant ordered to pay such costs.
https://www.bailii.org/ew/cases/EWHC/Ch/2025/674.pdf
Gary Knight, Partner and Costs Lawyer, Harmans