[2016] EWCA Civ 120 highlighted to all when dealing with costs budgets not to ignore any area of costs to include incurred costs. Sales LJ when dealing with an appeal upon an application for security for costs placed great reliance upon the costs budgets agreed during the litigation.

Sales LJ said “First, 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”. That was so both in relation to the estimated costs elements in the budgets, in respect of which a costs management order might be made under CPR part 3.15(2)(b) and pursuant to paragraph 7.4 of practice direction 3E to record the court’s approval of those elements, and in relation to the incurred costs elements in the budgets, in respect of which it would be open to the court to make comments under paragraph 7.4 of PD3E. Moreover, CPR part 3.17 makes it clear that costs budgets are to be important instruments for all case management decisions, so all parties must appreciate that if the wish to take issue with another’s costs budget they should do so at the first CMC, when there is to be debate about the costs budgets.”

In the above matter Sarpd had chosen not to dispute the reasonableness and proportionality of the costs included in the parties budgets Sales LJ said “on this application, it would be contrary to the overriding objective to allow Sarpd to try to re-open costs issues which it had already had a fair opportunity to address. It would not be just to permit it to do that and it would add disproportionate cost in dealing with the case if a court had to go behind the settled costs budgets in a case like this. To allow such a course would add unnecessarily expense, rather than save it (see CPR part 1.1(2)(b)); would be likely to add to time and effort required to argue and determine a security for costs application and so would contravene the requirements to ensure that cases are dealt with expeditiously and fairly (see part 1.1(2)(d)); and would also involve allocating an inappropriate share of the court’s resources in having to revisit an issue already dealt with by the court (see part 1.1(2)(e)). Of considerable importance was how the judge noted the costs budgets as “approved” and appended to the order made at the CMC, “will be a strong guide as to the likely costs order to be made after trial, if Addax is successful, both in relation to the incurred vista elements and to the estimated costs elements. It is therefore appropriate that the costs budgets as so ‘approved’ should be used as the relevant reference points for considering the amount which should be ordered for security for costs. While the court cannot ‘approve’ incurred costs, failure to register specific objection to that element at the right time (ie the CCMC) can put the eventual paying party in difficulties when challenging later. Agreement of budgets can bring ‘good reason to depart [downwards]’ into play for incurred costs too. This looks to me like much stronger authority than Lord Justice Moore-Bick’s obiter remarks in Troy Foods. The implications are quite serious for those might have thought agreeing budgets just kicked the can along the road to detailed assessment.”