The decision of Mr Justice Birss in Thomas Pink Ltd -v-Victoria’s Secret UK Limited [2014] EWHC 3258 has only recently been posted on Bailii.  However it contains an interesting example of the court considering the issue of costs, fixed costs and costs budgeting when making an interim order as to costs.


  • When the parties agreed costs budgets and lodged them but no formal order was made the court still approached the matter as if a costs budgeting order had been made.
  • The case had been transferred away from a court where fixed costs applied at the defendant’s request. It was not now open to the defendant to argue that fixed costs should apply for the period that the matter was in the fixed costs regime.
  • Given the costs budget the court ordered 90% of the costs budget as an interim payment on account of costs.


The claimant brought an action for breach of its trademark “Pink”. The claimant was successful and the court considered issues of costs.

  1. It now falls for me to deal with costs. This is one of the first times I have been required to get into much of the detail relating to the impact of costs budgeting on the costs orders which are made following trial. It is apparent, if I may say so without any disrespect, that it is also an early stage in both sides’ legal teams having to deal with how costs budgeting impacts on the handling of costs after trial.
  2. This case began in the Patents County Court (now called the Intellectual Property Enterprise Court), where costs are capped, and where costs budgeting does not apply. The action reached the point of the case management conference. In October 2013 there was an application by the defendant to transfer the case to the High Court. It was contested but was successful. From then on the case proceeded in the High Court. The matter came before Arnold J and at that stage the question of costs budgeting naturally arose, since the matter was to proceed in the High Court.
  3. The parties exchanged budgets and attempted to agree them. The case management conference in the High Court was adjourned for the parties to send their costs budgets to the judge and to see if there was a necessity for a further hearing which would, of course, have been a costs management hearing. The parties exchanged budgets and exchanged correspondence dealing with detailed points which needed to be explained. The detail does not matter. In approximately December 2013 they were able to agree each parties’ respective costs budget.
  4. In accordance with the procedure the budgets include figures for the costs already incurred and estimates for the costs in future. The important one now is the claimant’s budget. The claimant’s budget agreed in December was dated 19th December 2013. In that budget a total of £185,937.20 (= £22,781.70 plus £163,155.50) had been incurred already. The balance to take the case to trial produced a total overall figure of £576,927.20. That was the budget which the defendant agreed was a budget for the claimant. A corresponding budget was agreed for the defendant by the claimant.
  5. The budgets were sent to the court and an e-mail was sent to the judge’s clerk explaining that the parties had agreed costs budgets. In the light of that agreement, they were awaiting the judge’s instruction as to whether he still wished them to attend a case management conference. It was clear that the court decided there was no need for a further case management conference, having considered the budgets.
  6. The effect of this was that, in fact, no costs management order was made at that time. This is important because rule 3.18 is as follows:
“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 budget for each phase of the proceedings; and
(b) not depart from such approved or agreed budget unless satisfied that there is good reason to do so.
(Attention is drawn to rule 44.3(2)(a) and rule 44.3(5), which concern proportionality of costs.)”
  1. A point taken by Miss Himsworth today is that, in fact, no costs management order has been made in these proceedings and therefore rule 3.18 does not apply.
  2. Miss May submits that it would be quite unfair to regard this case as a case in which no costs management order had been made formally; given that it was quite clear that what was envisaged was that the court would consider the budgets and would call the parties in for a costs management hearing if the court was concerned about the budgets. Therefore, tacitly the court has approved the budgets. All that has happened is simply that in order to save costs and unnecessary expense, no formal order approving a costs budget has been made.
  3. In my judgment Miss May’s submission is right. It would be unfair, given the way this case has gone, to treat it as a case in which no costs management order had been made.
  4. I should say that in future I think this is an indication that even when the parties have agreed and the court is satisfied that the budgets do not require the parties to attend for a costs management hearing, it will be necessary to ensure that a costs management order to that effect is made, even if it is made by consent with the court’s approval.
  5. The matter proceeded to trial and the parties exchanged further budgets and agreed them. The last of the claimant’s budgets which was agreed by the defendant was a budget dated 11th June 2014. At that stage the incurred costs were £310,599.15 (= £37,481.65 plus £273,117.50) and the total was £628,129.15. That was a budget which the defendant agreed.
  6. On 24th July 2014 the claimant’s solicitors wrote to the court including a further budget which it sought to be approved. The point of the approval was to approve the increase in that budget from the previously agreed budget. That occasion was after the trial and after the draft judgment had been provided to the parties but before the judgment was formally handed down.
  7. The increase was to take the figure of about £628,000 to £678,009.10. The increase involved two elements.
  8. First, the actual costs incurred by the claimant until the date of that budget (19th July 2014) had reached a total of £644,829.10. In Mr. Walsh’s evidence (who is the solicitor for the claimant) he explained that the reason for that increase was because the trial had started a day later than had been anticipated which increased the costs somewhat and also that the trial had included a day in the middle for the parties to prepare written closings and that increased the overall length of the proceedings.
  9. Second, Mr. Walsh then explained the increase from about £644,000 to about £678,000. It related to the costs of dealing with the judgment and attending the hearing today. Those matters had not previously been included in the claimant’s estimate.
  10. I take into account my general experience of dealing with cases of this kind. I also bear in mind that at the time the claimant’s budget was £628,129.15 (which had been agreed by the defendant), the defendant’s budget (which had been agreed by the claimant) was a larger sum of £660,000. I find that the claimant’s increased 19th July 2014 budget is reasonable. I will approve that increase in the budget.
  11. That means that I have today made a costs management order such as one referred to in rule 3.18. I would have been more circumspect about making such an order had I not already made the finding that, in substance, a costs management order should be treated as having been made in these proceedings in December of last year. If it was the case that it could fairly be said that no costs management order had been made before, I would have approached the matter differently today.
  12. The position before the court is that there is an approved budget for the winning party of £678,009.10.
  13. The next matter I have to decide is a payment on account of costs. The claimants contend that they should receive an interim award equal to their actual costs spent to date which are, at least at the time they made the submission, £644,829. They referred to rule 3.18, which is that the court will not depart in assessing costs on a standard basis from an approved or agreed budget unless satisfied there is good reason to do so. They submitted that this rule has an impact when one comes to decide upon the correct sum by way of a payment on account or interim award of costs. The effect of the rule is that the irreducible minimum which one can fairly identify as the correct payment to be awarded should generally be the approved figure in the costs budget.
  14. Miss Himsworth submits that that is not right. Her first submission was that rule 3.18 did not apply because there had been no formal costs management order in this case. I have already addressed that submission. As I said before, this case should be treated as a case in which a costs management order approving the parties’ agreed budgets was made in December 2013.
  15. The next point which Miss Himsworth makes is that because this case began in the Patents County Court, the recoverable costs which had actually been incurred for the period when the matter was in the PCC should be treated as being capped by the provisions applicable to the costs in the Patents County Court/IPEC at the time they were incurred.
  16. At the time the first costs budget was approved in December 2013, approximately £185,000 had been incurred in the past. It is fair to say that a not trivial portion of those had been incurred after the matter had been transferred. Doing the best one can with the information one has, it would appear that a sum of the order of maybe £150,000 or so of the claimant’s costs were incurred while the action was in the Patents County Court. If those costs were assessed using the costs capping procedure in the Patents County Court/IPEC, then the amount which would be recovered by a successful party would be a sum of the order of £17,000. The question is whether that should be taken into account in assessing the interim payment.
  17. A relevant factor is that it is the paying party, that is to say the defendant, who wanted the case transferred to the High Court. The defendant wished for this action to be transferred to the High Court. That had the consequence that the costs capping provisions no longer applied. No order dealing with the impact on costs of the transfer of the case from the PCC/IPEC to the High Court was made when the matter was transferred. If the defendant had wanted a direction that after transfer and at the end of the case the costs capping provisions were to applied to the costs already incurred, it could have asked for such an order at the time of the transfer. In my judgment it is fair in this case not to take the costs capping provisions into account. That is not to say that in other cases and in other circumstances, a different result might be a fair one. In this case I do not take that factor into account.
  18. The next point is as follows. The defendant submits that the fair quantification would be a sum of the order of £350,000. That is, I accept, a sum which one would ordinarily have awarded in a case like this before costs budgeting. The figure is a little over 50% of the incurred costs by the receiving party. Generally speaking, applying Mars v Teknowledge [2000] FSR 138, that would be the sort of figure one would expect to have awarded, possibly slightly more, possibly slightly less. The question is whether the costs budgeting rules have a significant impact on these orders.
  19. I have an action with an approved costs budget of about £678,000 and a request by the claimant for an interim payment of about £644,000. The question is what is a fair sum to award. It seems to me that the principle applicable in Mars v Teknowledge is still the same as it ever was. The court should strive to ensure that it does not overpay and should select a figure which is an irreducible minimum.
  20. Miss May refers to the sentence bridging pages 125 and 126 in the commentary on r3.18 in the current edition of the White Book. She submits that the impact of rule 3.18 is that unless there is a good reason to depart from the budget, the overall figure for assessed costs can never be less than the budget, but it can be less than the total of the budget sum, plus the reasonably incurred and reasonable in amount non-budgeted sum.
  21. The sum sought by the claimants is essentially the budgeted sum at the time they asked for it. It seems to me that the impact of costs budgeting on the determination of a sum for a payment on account of costs is very significant although I am not persuaded that it is so significant that I should simply award the budgeted sum. Bearing in mind that unless there is good reason to depart from the budget, the budget will not be departed from, but also taking into account the vagaries of litigation and things that might occur and the fact that it is, at least, possible that the assessed costs will be less, although no good reason why that is so has been advanced before me, I will make an award of 90% of the sum in the claimant’s budget (£644,829.10) rounded up to the nearest thousand. I will not do the mathematics in my head.