The High Court’s decision in ML Technology Limited and Naurex Limited v B.E.A.T. SAM Limited and others [2026] EWHC 2142 (Ch) holds that mutual agreement between parties to a costs budget variation may attract closer scrutiny than a contested application, because the court cannot rely on the adversarial process to test the justification.
Background
ML Technology Limited and Naurex Limited brought proceedings against B.E.A.T. SAM Limited (trading as Naurex B.E.A.T. SAM) and seven other defendants in the Intellectual Property List of the Business and Property Courts. The claim concerned the use of the trade mark NAUREX and related intellectual property rights following a share purchase agreement under which, in broad terms, the claimants contended that the defendants had continued to use the Naurex brand beyond any licence they were entitled to rely upon. The defendants, for their part, sought declarations of ownership and entitlement to use the rights in question, relying on complex agency arguments. Parallel proceedings were on foot in Switzerland concerning the share purchase agreement itself.
The main judgment was handed down on 18 June 2026. The central issue that emerged at trial was the length of the period of reasonable notice required to terminate the implied licences. The court found that the defendants had infringed the registered trade marks for a period after expiry of that notice period, but the claims in passing off and joint tortfeasorship failed entirely, and the website copyright claim also failed. The second consultancy contract copyright claim succeeded only to the extent of £4,000, a figure agreed on the basis that it was not worth disputing whether it should be lower.
A costs and case management conference had been held, at which costs budgets were approved. The claimants’ total approved and incurred budget at that stage stood at £716,239.24, with a budgeted disclosure phase of £97,768 and an ADR/settlement discussions budget of £5,000. The defendants’ equivalent total was £840,229.20, with a budgeted disclosure phase of £135,000 and an ADR/settlement discussions budget of £4,964. By the time of the pre-trial review in February 2025, both sides had applied for substantial increases to their costs budgets, principally in respect of the disclosure phase. The claimants sought an increase of £259,069.67 for disclosure alone, together with £29,500 each for the witness statements and trial preparation phases. The defendants sought an increase of £470,747.25 for disclosure. The parties had, by that stage, reached a position of mutual acceptance of each other’s proposed increases and submitted an agreed draft order to the court.
Deputy Master Dew directed on 19 February 2025 that the applications be considered at the pre-trial review unless time was insufficient or the judge considered it inappropriate. At the pre-trial review, the judge declined to approve the increases and instead deferred both applications to after trial, so that the value of the additional disclosure could be assessed retrospectively. Neither party objected to that course. The consequentials hearing took place on 21 July 2026 and addressed, among other things, the claimants’ renewed application for approval of the increase to their costs budget for the disclosure phase.
The Application for Budget Variation
Two distinct costs questions required determination at the consequentials hearing. The first was whether the court should retrospectively approve an increase to the claimants’ costs budget for the disclosure phase in the sum of £259,069.67, being an increase of more than three times the originally budgeted figure of £97,768. The claimants indicated that if this increase were approved, they would not press the remainder of their variation application. The defendants had withdrawn their own variation application entirely by the time of the hearing, which prompted the claimants to adopt a more focused position and press for approval of the disclosure increase alone.
The second question was the incidence of the costs of the proceedings as a whole, including whether either party could be identified as the overall winner for the purposes of CPR r.44.2, and whether any issue-based or proportionate costs order was appropriate.
On the budget variation, the claimants’ position was that the increase to the disclosure phase was justified by significant developments after the costs and case management conference, including the need to search additional data sources and to review a larger volume of the defendants’ disclosed documents than had been anticipated. The defendants had agreed in principle to the disclosure increase (though not to the witness statements and trial preparation increases), accepting that the disclosure exercise had been more substantial than originally envisaged. By the time of the consequentials hearing, the defendants had withdrawn their own variation application, and the claimants pressed for approval of the £259,069.67 disclosure increase on the basis that it was not opposed.
The Court’s Decision on Budget Variation
The court refused to approve the retrospective increase to the claimants’ disclosure budget, notwithstanding that the defendants did not oppose it. The reasons given are of direct relevance to costs practitioners and merit careful attention.
The court’s starting point was that costs budgeting is not simply a matter between the parties. Control of costs serves the interests of third parties and of the court itself, because disproportionate expenditure on disclosure imposes burdens beyond those borne by the immediate litigants, including the court’s own resources in dealing with larger volumes of material. The court stated in terms that the fact that the parties and their advisers had agreed not to challenge each other’s proposed increases was a reason for examining the basis for the variation with more, rather than less, intensity. That proposition is the critical one for practitioners: mutual consent to a Precedent T variation does not provide a safe harbour. It may, on this analysis, attract closer scrutiny than a contested application, because the court cannot rely on the adversarial process to test the justification.
The court identified six reasons for refusing the increase. First, the proposed variations were substantial in both absolute and relative terms, and the more substantial the variation, the greater the justification required. Second, the costs already incurred and budgeted at the pre-trial review stage appeared high given the nature of the dispute, and the proposed increases would make them significantly higher. Third, and most significantly for the purposes of this analysis, it was unclear what value the additional disclosure had contributed to resolving the key issues between the parties. The court observed, having heard the trial and reviewed a large volume of the disclosed documents, that much of the disclosure had been of limited utility. The court noted that if the parties had identified at an early stage that the central issue was likely to be the length of the period of reasonable notice, a great deal of the disclosure exercise would probably not have been required. Critically, no attempt had been made in evidence or argument to explain specifically why the additional disclosure was of value, or why a sum of more than £259,000 (described by the court as roughly the price of an average UK house) needed to be spent on it. The court stated that in the context of a case where the costs budgeted appeared disproportionate, a party seeking a retrospective increase bore a heavy burden, and that burden had not come close to being discharged.
Fourth, the court said at the pre-trial review that it may need to consider whether applications to vary the costs budgets should have been made at an earlier stage, and in particular before the costs were incurred, so that the court could have exercised proper control over whether the proposed costs were likely to be justified by the anticipated benefit. The court emphasised that costs budgeting is intended to act as a constraint on future costs, in the interests of justice, not least because parties incurring increased costs at an earlier stage can hinder settlement and therefore result in still further costs in taking a case to trial. Costs budgeting has to take that into account and is not normally a vehicle for sanctioning costs already incurred.
Fifth, the court considered whether insufficient time, effort and cost had been devoted by the parties and their legal advisers to resolving the case at earlier stages, so avoiding further costs (whether on disclosure, witness statements or other work) such as by ADR or mediation. Limited provision had been made for this and, while the court did not know what without prejudice discussions there had been, no evidence had been provided that there were serious, third-party assisted attempts to resolve the case.
Sixth, the court noted that it has the power to depart from a costs budget in any event, albeit in limited circumstances, and stated that this would have been a case for doing so.
The court’s view was that, in the light of the applicable principles, the retrospective revision to the costs budgets should not be approved, even though it was not actively opposed by the defendants.
Comment
This decision provides important guidance on the court’s approach to retrospective costs budget variations, particularly where the parties have reached agreement. The proposition that mutual consent may attract more intense scrutiny, rather than less, is clearly stated by the deputy High Court judge, though as a first-instance decision it has not yet been tested at appellate level. The court’s reasoning makes clear that costs budgeting serves a wider public interest, not merely the interests of the parties, and that the court retains an active supervisory role even where the parties are agreed.
The decision is particularly valuable for identifying the evidence the court expected but did not receive: a specific explanation of what the extra disclosure actually contributed to resolving the issues, judged with hindsight after trial, plus evidence of serious third-party assisted settlement attempts. The court also noted that the parties’ limited provision for ADR in their own Precedent T schedules was a relevant factor in assessing whether insufficient effort had been devoted to early resolution.
The procedural mechanics are also instructive: the court deferred both parties’ variation applications from the pre-trial review to after trial, over an agreed draft order, so that it could assess value retrospectively. This approach enabled the court to evaluate whether the additional disclosure had in fact contributed materially to resolving the dispute, rather than accepting the parties’ prospective justifications at face value.
▶ Watch the case summary
CPR 3.15A | Costs Budget Revisions | Significant Developments And The Need To Act Promptly
Significant Developments And The New Precedent T
Proportionality In Costs Budgeting
TMC Legal provides advice on costs budgeting and the CCMC for solicitors across England and Wales.
