PDF Article: Bank of Ireland v Watts Group Plc

Guidance with regards to the same has been offered in the case of Bank of Ireland (Governors and Company of) & Anor v Watts Group Plc [2017] EWHC 2472 (TCC) (6 October 2017) that involved a professional negligence claim where the Defendant was the successful party.

The Defendant’s budget was approved in the sum of £345,000.00. There was also an agreement in respect of incurred costs of two additional interim applications of £39,424.00. This meant the Defendant’s enhanced Costs Budget figure totalled £384,424.00. Nevertheless, the Defendant’s actual costs were in the total of £616,000.00. The Defendant had never made an application to revise their Costs Budget.

When deciding on the amount of the interim payment, Mr Justice Coulson stated that it was the enhanced Costs Budget figure of £384,424.00 that “must be the starting point of any consideration of the interim payment.”

Mr Justice Coulson made reference to another case he had presided [the case of MacInnes v Gross [2017] EWHC 127 (QB) (3 February 2017)] where he stated that pursuant to CPR 3.18, when assessing costs on the standard basis where there is an approved or agreed budget, the Court will not depart from such approved or agreed budget unless there is a good reason to do so.

Mr Justice Coulson stated that he was not minded to order an interim payment that was in excess of the approved budget, particularly given that:

  1. The Defendant has never made an application to revise their costs budget;

  2. The costs were ordered on the standard and not indemnity basis [although the starting point would have still been the Approved Budget even on the indemnity basis].

The Court had considered that an appropriate figure for an interim payment was 85% of the Approved Budget which is still a significantly high percentage.

This approach is consistent with MacInnes v Gross as well as Thomas Pink Ltd v Victoria’s Secret UK Ltd [2014] EWHC 3258 (Ch) where an interim payment of 90% of the approved Costs Budget was awarded.

It is therefore paramount to present a strong and accurate Costs Budget and make an application to revise the same as soon as significantly higher costs are being incurred as compared to the Approved Budget. This is specifically important not only for the purpose of an interim payment on account but also given that the Approved Budget will be the starting point but also very likely the end point when assessing the parties’ costs and any overspent may be difficult to be recovered without a good reason.