The judgment of Mr Justice Warby in Tim Yeo MP -v- Times Newspapers Limited [2015] EWHC 209 (QB) contains some interesting observations in relation to pleading allegations of fraud.  However here we look at the judge’s observations in relation to costs budgeting.


The action was for defamation with the claimant alleging that the defendant published defamatory articles. The action had been before the court previously when the court ordered that costs budgets be lodged. There was no agreement as to budgets


  • Costs budgeting should not be a lengthy exercise.
  • It was appropriate to use correspondence in place of a skeleton argument.
  • The court may well need to consider rates and projected hours when considering a costs budget.
  • Contingencies should only be included in the budget if they are reasonably likely to occur and do, in fact, fall outside any of the other areas in the costs budget.
  • In some areas, defamation in particular, it may be desirable for costs budgeting to take place at an earlier stage.
  • Counsel’s brief fees fall within the budget for trial and not trial preparation [this may appear obvious but one party had put them in the trial preparation part of the budget]
  • The budget need not be for the entire litigation. It is possible to budget for part of the action.


“Costs budgeting

  1. Costs budgeting is a major plank of the Jackson reforms. It was introduced by Part II of CPR rule 3 from 1 April 2013 for all multi-track cases with a value of less than £10 million. It is governed by CPR 3.12 to 3.18 and PD3E. One feature of the regime is that the notice of allocation served under CPR 26.3(1) will normally require the parties to file costs budgets by a specified date. That date will be not less than 28 days after service of the notice: r 26.3(6)(b)(ii). The parties must file and exchange budgets by the specified date or, if none is specified, 7 days before the first CMC: CPR 3.13.
  2. The court may then make a costs management order in respect of costs “to be incurred by any party in the proceedings”: CPR 3.15. It will do so unless satisfied that the litigation can be conducted “justly and at proportionate cost in accordance with the overriding objective” without such an order (CPR 3.15(2)), which will not generally be the case: see PD3E 7.1. To the extent that a party’s budget is agreed, that will be recorded by the court: CPR 3.15(1). In respect of budgets or parts of budgets that are not agreed the court will record its “approval after making appropriate revisions”: r 3.15(2).
  3. Where a costs management order is made, the last agreed or approved budget of the receiving party for each phase of the proceedings is the starting point for assessment of costs on the standard basis. Rule 3.18 provides that in making such an assessment the court will have regard to and “not depart from such approved or agreed budget unless satisfied that there is good reason to do so”. The process of agreement or approval therefore has the potential to be a powerful tool for controlling costs.
  4. Here, the parties filed and exchanged budgets after service of the Defence, on 22 July 2014. That was just over 7 days before the substantial CMC hearing at which I determined the issue of mode of trial and defamatory meaning. There was no costs management order made before, at, or after that CMC. Nor was any agreement reached. My order of 20 August 2014 gave the parties permission to restore for further directions and costs budgeting, which Mr Yeo eventually did on 8 December 2014. It was some two weeks later that TNL issued its application to strike out paragraph 14 of the Reply.
  5. For the purposes of this further CMC each party produced a revised costs budget, dated 16 January 2015. Neither was agreed by the other party. The issues were debated at some length in correspondence, which I read before the hearing. There were then two hours of oral argument. In the result, I have approved budget figures for costs to be incurred on future phases of this litigation by each party, in sums which are set out in Appendices to this judgment.
  6. I reserved my decision because, although costs budgeting has now been in place for over 20 months, the detailed implementation of the scheme is still relatively untested, the argument on this application addressed issues of methodology, and the case throws up some other issues of general importance for costs budgeting in publication cases. For those reasons only I thought it useful to give this judgment highlighting particular issues that arise, and offering some guidance for the future, with particular reference to publication cases. As will be seen, it is very far from being my view that a costs management conference should ordinarily involve lengthy oral argument and a reserved judgment.

(i) Hearing or no hearing

  1. “Where practicable, costs management conferences should be conducted by telephone or in writing”: CPR 3.16(2). In this case the parties’ rival contentions were set out very fully in correspondence, and each party treated its letters as a substitute for a skeleton argument on the issue. That was entirely appropriate. An oral hearing was justified because of the points of more general importance that arose. I do not consider that the detailed oral debate which took place over rates, hours, and proportionality would have justified a hearing.
  2. Rulings without a hearing take up judicial resources, but save time and costs for the parties. The recoverable costs of budgeting are capped at 1% of the approved budget for completing Precedent H and 2% of that budget for all other costs, save in exceptional circumstances: PD3E 7.2. For these reasons it is to be hoped that as the system becomes a firmly established and well-understood feature of multi-track litigation parties will propose and agree to this method of dealing with costs management.

(ii) Incurred costs

  1. These are not subject to the approval process. This means that under the default procedure substantial costs may already have been incurred, without any budgetary control, by the time a decision is taken at a CMC. The parties’ costs figures in this case illustrate the point. The total incurred by the time of my budgeting decision was over £200,000 (£110,000 on the claimant’s side and £94,000 on the defendant’s). In a case that goes to trial the successful party’s costs incurred before approval of a budget will normally need detailed assessment, in the absence of agreement.
  2. However, if by the time the costs management process takes place substantial costs have been incurred, one thing the court may do is to “record its comments on those costs”: see PD3E 7.4. What the court will do is to “take those costs into account when considering the reasonableness and proportionality of all subsequent costs”: ibid. The court may reduce a budget for reasons which apply equally to incurred costs, or for reasons which have a bearing on what should be recoverable in that respect, for instance, that so much had been spent before the action began that the budgeted cost of preparing witness statements is excessive. If so, it is likely to help the parties reach agreement without detailed assessment later on if these reasons are briefly recorded at the time the budget is approved. I make some comments of this kind below.

(iii) The approach to approval

  1. “The court’s approval will relate only to the total figures for each phase of the proceedings”: PD3E 7.3. The figures may conveniently be set out in the form of a table such as the Appendices to this judgment. However, such a table need only include the approved figures. I have included the parties’ figures for incurred and estimated future costs, and contingencies, for the purposes of illustrating some of the points made in this judgment.
  2. Mr Browne submitted that in determining what was an appropriate figure for each phase the court should focus primarily on the proportionality of the costs, applying the test prescribed by CPR 44.3(5). It was not appropriate to conduct the kind of debate that had been undertaken on behalf of TNL in correspondence. The process was intended to be one conducted swiftly and economically, and of necessity had to be something of an impressionistic exercise. He submitted that this is a matter of substantial non-monetary value to both sides, complex, and raising issues of reputation and public importance on both sides of the case.
  3. In support of these submissions Mr Browne referred to a speech given by the Senior Costs Judge, Master Gordon-Saker, to the Commercial Litigation Association on 1 October 2014. This emphasised that costs management is not a prospective detailed assessment, and described the training given to judges on these issues as having suggested they should not look at hourly rates or hours but rather at overall reasonableness and proportionality. That may be so, but I note first of all that the Master recorded that the most common question raised by Judges was how they could approach the overall question without reference to hours and rates.
  4. Secondly, I note that whilst PD3E 7.3 states that “When reviewing budgets, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs” it also states that “in the course of its review the court may have regard to the constituent elements of each total figure.”
  5. Thirdly, Precedent H allows the court to review hourly rates and estimated hours by requiring these to be stated on the form. It seems to me that whilst the question of whether the totals are reasonable and proportionate will always be the overall criterion, the court’s may need to consider rates and estimated hours. The approach will need to be tailored to the case before the court.
  6. On one view, the costs of libel, privacy and some harassment cases typically become disproportionate at an early stage, before the ordinary time for costs budgeting has arrived. Such cases do in any event involve rights and interests that cannot be measured simply in money. In a case involving costs that run to six or even seven figures in total it is in my judgment appropriate to have regard not only to the factors listed in CPR 44.3(5) but also to the hours and rates, as would be done upon a summary assessment of costs at the end of an interim hearing. That is not the same as conducting a detailed assessment.

(iv) Contingencies and revision

  1. By PD3E 6 a budget must be in the form of Precedent H, which has a section for contingencies. This has caused difficulty in this case, as appears from the Appendices to this judgment. The parties between them identified six contingencies. Not one was common to the parties. The guidance notes on Precedent H state at paragraph 3 that this section of the Precedent should be used “for anticipated costs which do not fall within the main categories set out in this form … Costs which are not anticipated but which become necessary later are dealt with in paragraph [7.6] of the Practice Direction.”
  2. PD3E 7.6 provides that “Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions”, and sets out a procedure for doing so. The provisions of PD3E 7.9 are also relevant. This provides that “If interim applications are made which, reasonably, were not included in a budget, then the costs of such interim applications shall be treated as additional to the approved budgets.”
  3. The first point to make about contingencies is that they must involve work that does not fall within the main categories on Precedent H. Secondly, in order for work to qualify as a contingency it must be possible to identify to the opposite party and the court what that work would be. Otherwise it would be impossible to determine whether the work falls within or outside a specified category, and it is hard to see how any assessment could be made of what its cost would be. Thirdly, there is the important issue of how likely it needs to be that the work will be required, before it can properly be included as a contingency. Mr Browne submitted that the test should be whether the work was “reasonably likely” at the time the budget was approved.
  4. In my judgment work should be included as a contingency only if it is foreseen as more likely than not to be required. This seems to me a clear criterion that provides a practical solution, consistent with PD3E 7.4 and 7.9. If work that falls outside one of the main categories is not thought probable, it can reasonably and should be excluded from the budget. The time and costs involved in estimating how much work would cost are not easily justified if the work is no more than a possibility or is unlikely. If work identified as a contingency is included in a budget but not considered probable by the court no budget for it should be approved. If the improbable occurs, in the form of an unexpected interim application, the costs will be added to the budget pursuant to PD3E 7.9, unless the matter involves a “significant development” within para 7.4 in which case, if time permits, a revised budget should be prepared and agreed or approved.

Mr Yeo’s budget

  1. I marked the first three items on this budget N/A because the costs involved had all been incurred by the time I came to review them. I reduced all the other figures because I considered the solicitors’ hourly rates to be too high by 20-25%, and in some instances excessive partner time had been provided for. The disclosure exercise is likely to be more onerous and costly for the defendant than the claimant, and I reduced the claimant’s estimate accordingly. Mr Yeo will have at most one additional witness and very substantial cost was incurred before the action started and on the pleadings, which makes it appropriate to keep his witness statement costs well below the estimate.
  2. I consider that excessive preparation time was provided for in respect of the PTR. The trial preparation estimate is very considerably cut in my schedule, but this is because the estimated figure includes Counsel’s brief fees. The guidance notes make clear that these should be included in trial costs, which is what TNL have done. It is important that the schedules compare like with like, and departure from the guidance will only tend to confuse. I have therefore transferred what I consider appropriate for brief fees to the trial phase. I consider that the main sections allow enough for “strategy review and consultation” which is not a separate contingency. “Possible further work” meets none of the three criteria for a contingency that I have identified above. It is for these reasons that I have marked both Mr Yeo’s contingencies as not applicable.

TNL’s budget

  1. I have approved the majority of this budget, and there is little call for comment. I should however explain why I have marked three of the four contingencies N/A. This is because, on the basis of the evidence and argument I have seen and heard in this case to date I do not consider any of those three eventualities as more likely than not. Contingency A seems to me very unlikely. Contingency B is possible but no more. Contingency C was not understood by Mr Browne, nor by me. I have allowed Contingent cost D on the basis that it does not exceed the cap of 3% of approved costs to which I have referred above, and the costs of budgeting in this case will have been more significant than they ordinarily would be.


  1. I add some short observations about timing which are prompted by but do not apply to the present case. The court has power to give directions for the filing and exchange of budgets at an earlier stage than the CMC. This is so as part of its general powers of management but is reflected in CPR 3.13, which requires parties other than litigants in person to “file and exchange budgets as required by the rules or as the court otherwise directs”. If that power is exercised the general rule will apply, that the court will make a costs management order. An early costs budgeting process may be initiated by the court or by one of the parties.
  2. Libel and other publication cases are rarely undefended, and will all but inevitably be assigned to the multi-track. They therefore represent a class of case in which early intervention may be merited. I am far from saying that this should be routine; the standard process will be apt for many cases. But the fact that rights of freedom of expression are engaged is relevant, and there may be cases that are particularly apt for earlier intervention. One example would be a case in which there is a wide disparity in the parties’ resources, and a need to control costs as a means of ensuring equality of arms.
  3. If a budget is required at an early stage it need not be for the entire litigation: “In substantial cases, the court may direct that budgets be limited initially to part only of the proceedings and subsequently extended to cover the whole proceedings“: PD3E 6.


Work done/to be done Incurred Estimated Approved
Pre-action costs 27,334.25 0.00 N/A
Issue/statements of case 50,305.75 0.00 N/A
CMC 22,609.00 28,725 N/A
Disclosure 10,055.00 22,650 17,000
Witness statements 0 45,175 26,000
Expert reports 0 0 N/A
PTR 0 39,210 30,000
Trial preparation 0 217,000 56,000
Trial 0 128,515 223,000
ADR/Settlement discussions 0 28,340 18,000
Contingent cost A: Strategy Review and consultation 0 18,350 N/A
Contingent cost B: Possible further work 0 31,950 N/A
TOTALS 110,304 559,915 370,000


Work done/to be done Incurred Estimated Approved
Pre-action costs 5,230 0.00 N/A
Issue/statements of case 39,457.85 0.00 N/A
CMC 47,225.48 19,851.50 N/A
Disclosure 982.50 20,292.50 20,000
Witness statements 0 35,000.00 35,000
Expert reports 0 0 N/A
PTR 0 21,125.00 21,125
Trial preparation 0 39,800.00 39,800
Trial 0 208,900.00 205,000
ADR/Settlement discussions 0 17,175.00 17,175
Contingent cost A:
App. to s/o honest opinion
0 15,125.00 N/A
Contingent cost B:
App for specific disclosure
0 15,125.00 N/A
Contingent cost C:
App for 3rd party disclosure
0 15,125.00 N/A
Contingent cost D: Costs associated with costs budgeting 1,368.50 8,453.50 8,453.50
TOTALS 94,264.33 415,972.50 346,553.50