Payments on Account in Budgeted Matters – How much should I seek?

This was dealt with in the case of Lifestyle Equities CV & Anor v Royal County of Berkshire Polo Club Limited & Ors [2023] EWHC 2923. The case centred around a breach of trademark and passing off. The Claimants were the owners of the Beverley Hills Polo Club brand and had accused the Defendants of passing off their brand logo. The Defendants were successful, and the Claimants were ordered to pay the Defendants’ costs, to be assessed if not agreed.

Once the substantive matter had concluded, there remained a dispute over the appropriate value of the payment on account of costs that the Claimants should have to pay to the Defendants. The matter was remitted to the High Court before the Honourable Mr Justice Mellor.

Mr Justice Mellor noted the importance of CPR r.3.18 in a budgeted case such as this. More specifically:

“In any case where a costs management order has been made, when assessing costs on the standard basis, the court will –

(a) have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings;

(b) not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so; and

(c) take into account any comments made pursuant to rule 3.17(3) and recorded on the face of the order.

Mr Justice Mellor considered recent case law, where it had been held on numerous occasions that the payment on account of costs should equate to 90% of the total approved budget.

The Defendants argued that the payment on account should be £880,951.00, made up of 85% of incurred costs and 95% of budgeted costs. This was on the basis that the Defendants’ costs were significantly lower than the Claimants’ costs overall, and that the Claimants had deemed the Defendants’ incurred costs to be reasonable in the Precedent R budget discussion report, presumably because the Defendants’ costs claimed in their budget were less than those costs claimed in the Claimants’ budget – a common phenomenon.

The Claimants argued that the payment on account should be £552,800.00, made up of 41% of incurred costs, and 90% of budgeted costs, totalling £691,000.00, with a 20% reduction applied overall.

Mr Justice Mellor awarded a payment on account of costs in the sum of £750,000.00, payable by the Claimants to the Defendants. This equated to 80% of the incurred costs, and 90% of budgeted costs, with some rounding down. Mr Justice Mellor pointed out that the calculation was not an exact science, but that in this matter it was based on the Defendants’ likely costs recovery being relatively high.

While the case establishes that 90% of the budgeted costs is a reasonable amount to request from the paying party on account, in appropriate cases, it perhaps also highlights the importance of properly considering your opponent’s Costs Budget, and not merely agreeing it in full simply because it is smaller than yours. Statistically, Claimant Budgets are probably more often higher in monetary value than Defendant Budgets, but this will not always ring true.

Are you struggling to agree a payment on account with the other side? Do you feel inclined to automatically agree your opponent’s budget in full, simply because it is smaller than your own? For advice on these issues, please get in touch.

Mike Hollin, Costs Consultant