Costs Management Hearing | Unrealistic Budgets May Face Adverse Costs Orders

ZAVOROTNII V MALINOWSKI [2025] EWHC 260 (KB)

The High Court warns that parties presenting unrealistically ambitious costs budgets may face adverse costs orders, emphasising judicial discretion to deviate from standard “costs in the case” orders when cost estimates are significantly inflated, as demonstrated by reducing the claimant’s budget from £511,125.30 to £308,909.30.

In my judgment, the claimant had been overly ambitious in the sums it sought to have approved as its budget for work going forwards, the fact that the claimant achieved 60% of that which it sought, and obtained approval to expend costs which were 18% above that offered by the defendant, mean it cannot be said that the claimant was entirely unrealistic. The claimant did, however, come very close to such a finding.

Citations

AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507 The Civil Procedure Rules imposed a higher discipline on parties in conducting litigation, requiring them to assist the court in furthering the overriding objective, including in costs matters. Jenkins v Thurrock Council [2024] EWHC 2248 (KB) A party may not be immune from costs sanctions in a costs management hearing if it submits an unreasonable or unrealistically ambitious budget, requiring excessive time and resources to address. Nicholas Worcester (by his wife and litigation friend Dominique Worcester) v Dr Philip Hopley [2024] EWHC 2181 (KB) The court may depart from a “costs in the case” order where a party submits an unrealistically high budget, leading to significant reductions, and resulting in unnecessary litigation costs. Reid v Wye Valley NHS Trust and the Robert Jones and Agnes Hunt Orthopaedic Hospital NHS Foundation Trust [2023] EWHC 2843 CPR 44.2 enables the court to depart from any assumed default position on costs if the circumstances justify it, including where a party has acted unreasonably in costs budgeting.

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Key Points

The court retained discretion under CPR 44.2 to depart from the usual “costs in the case” order where a party’s costs budget was found to be unrealistic or unreasonably high. [25-26]
A costs management hearing did not automatically result in “costs in the case” as the default order; the court could consider conduct and whether a party’s budget was exaggerated or unreasonable. [18-21, 25]
A claimant who submitted an unrealistically high costs budget, which was significantly reduced by the court, risked a costs sanction rather than benefiting from the usual cost-neutral outcome of a budgeting hearing. [19, 23-24, 27]

The court considered proportionality in costs budgeting, evaluating whether a party had worked to narrow disputes and whether disputes over costs budgets had been exacerbated by an unreasonable stance. [24, 27]
A significant reduction in a claimant’s proposed budget, particularly where the claimant had increased costs estimates after initial case management, could justify the court in considering whether to impose a costs penalty when determining costs of the budgeting hearing. [27-28]

In my judgment, the claimant can properly say that he succeeded at the costs management hearing in that he obtained an order approving budgeted costs... However, in this case the success of the defendant was far greater in reducing the amount being sought by the claimant. The reduction for the three phases being dealt with was from £511,125.30 down to £308,909.30, a reduction of £202,216.

Key Findings In The Case

The claimant, Mr Zavorotnii, was a passenger in the defendant’s vehicle, which collided with a stationary HGV due to the defendant’s admitted failure to drive with due care and attention. The accident caused serious personal injuries to the claimant. [2, 6]
The defendant, Mr Malinowski, had brought Part 20 proceedings against the HGV driver, Mr Nikolov, and his insurer, NFU Mutual, alleging negligence for parking the HGV overnight without lights. These third-party proceedings were settled before trial. [4]
The claimant had sought a costs budget of £511,125.30 for the disclosure, witness statement, and expert phases; however, the court approved only £308,909.30—approximately 60% of the claimed amount and 18.2% above the defendant’s proposed budget. [10-11]

The claimant had increased his proposed budget for disclosure and witness statements after the initial case management hearing, exacerbating the dispute rather than narrowing it. This was a relevant factor in assessing whether the costs budgeting hearing required a departure from the usual “costs in the case” order. [27]
While the claimant’s cost budget was significantly reduced, the judge determined it was not wholly unrealistic, meaning a costs sanction was not warranted in this instance. The usual “costs in the case” order was therefore applied, though the judgment emphasised that future excessive costs budgets could attract adverse costs orders. [28]

In my judgment, having taken into account the complexities and difficulties in this case, the claimant did continue with an overly ambitious costs budget which verges on the edge of being described as ‘unrealistic’ ... While the usual order will be ‘costs in the case,’ that is not the only order that could be made.

Background

This legal judgment concerns a complex personal injury claim arising from a tragic road traffic accident that occurred on 31 March 2018 involving multiple parties. The primary claimant, Mr Leon Zavorotnii, a Moldovan resident in the United Kingdom, suffered severe and life-altering injuries when travelling as a passenger in a vehicle driven by Mr Lucasz Malinowski, both of whom were employed as night shift cleaners at the Norton Industrial Estate in North Yorkshire.

The accident transpired when Mr Malinowski’s VW Bora vehicle collided with a stationary Volvo HGV tractor and trailer parked roadside without illumination. Mr Malinowski subsequently pleaded guilty to driving without due care and attention, while the HGV driver, Mr Plamen Nikolov, pleaded guilty to allowing a vehicle to remain stationary during darkness without lights.

The proceedings were characterised by significant procedural complexity, notably including claims initiated outside the standard three-year limitation period. Judge Walden-Smith exercised discretion under Section 33 of the Limitation Act 1980 to allow the proceedings to continue against Mr Malinowski, recognising the substantial nature of the claim.

Mr Zavorotnii alleged extensive personal injuries, including skull and facial fractures, severe traumatic brain injury, dental damage, psychiatric and psychological trauma, sensory impairments, and potential long-term neurocognitive disabilities. These injuries were alleged to have comprehensively disrupted the claimant’s educational and professional prospects, potentially rendering him unable to live independently.

Costs Issues Before the Court

The primary costs issue centred on the approach to be taken regarding costs orders following a discrete costs management hearing. Specifically, the court was required to determine whether the standard “costs in the case” order was appropriate, or whether an alternative costs order might be justified given the parties’ conduct during costs budgeting.

The Parties’ Positions

The defendant, Mr Malinowski, argued that the court should depart from the conventional “costs in the case” order. He submitted that the claimant had presented an unrealistically high and ambitious costs budget, necessitating significant judicial intervention and time expenditure during the costs management process.

The claimant contended that the costs management hearing was routine and that the standard “costs in the case” order should be maintained. They suggested that any criticism of their costs budget should be limited to a cautionary “shot across the bow” for future proceedings.

The Court’s Decision

After careful consideration, Judge Walden-Smith determined that while the “costs in the case” order would be maintained in this instance, the judgment represented an important commentary on costs management practices. The court recognised that CPR 44.2 provides significant judicial discretion in costs orders.

The judgment highlighted that the claimant’s costs budget was significantly reduced from £511,125.30 to £308,909.30 – a reduction of £202,216 and representing only 60% of the original claim. While the claimant achieved some success by obtaining an 18.2% increase over the defendant’s offered budget, the court viewed the original budget as verging on being “unrealistic”.

Critically, the judgment warned that future costs management hearings might result in adverse costs orders against parties presenting manifestly inflated or unreasonable costs budgets. This represents a potentially significant development in judicial approach to costs management, signalling increased scrutiny and potential financial consequences for parties presenting excessive or poorly prepared cost estimates.

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