Incurred Costs must be challenged at CMC says Court of Appeal

The Court of Appeal has recently ruled on an appeal against an application for Security for Costs in the case of Sarpd Oil International Limited v Addax Energy SA & ANR [2016] EWCA Civ 120.

​At first instance, the Court had regard to the amount of the Defendant's costs budget when considering an appropriate figure for security. The Claimant suggested that the Court had erred in taking such an approach and that the Judge should have considered whether the incurred costs were reasonable and proportionate.

​Lord Justice Sales rejected that argument stating that "all the parties appreciated, or should have appreciated, that the first CMC was the appropriate occasion on which issues between them regarding the quantum of costs shown in their respective costs budgets should be debated". Lord Justice Sales went on to state that "parties must appreciate that if they wish to take issue with another's costs budget, they should do so at the first CMC".

​The Court of Appeal refused to go behind the 'settled budget' and proceeded to use the costs budgets as a relevant reference point when considering the order to be made for Security for costs.

​If this approach to incurred costs is adopted generally, then it is likely that many parties will have missed the chance to challenge incurred costs on detailed assessment. The Court does still have some discretion though as CPR 3.18 does state that the Court will "not depart from such approved or agreed budget unless satisfied that there is good reason to do so". It remains to be seen what might be considered a 'good reason' to depart from the agreed budget.