Expensive at half the price? A recent High Court ruling in GS Woodland Court GP Ltd & Anor v RGCM ltd & Anor v RGCM Ltd & Ors [2025] EWHC 285 (TCC) (17 January 2025) has provided important guidance on costs management in complex construction disputes. The decision has highlighted the court's increasing willingness to scrutinise excessive costs and penalise parties who advance unrealistic budgets.
Background
The case concerns alleged defects in a modular-built student accommodation block. The Claimants alleged significant fire-safety failings and sought approximately £11 million in costs being claimed against a potential remediation cost of £30 million. The litigation involved seven Defendants, including the construction manager (D1), the architect (D2), the cladding contractor (D3), the modular unit supplier (D4), the developer (D5), the fire-stopping contractor (D6) and the installer (D7). A half day costs management hearing took place during which several defendants applied for their costs. The Defendants argued that the Claimants had advanced an excessive and disproportionate budget.
The decision
Mr Justice Constable ruled that the Claimant's proposed costs were unrealistic and a specific disparity between the Claimants budgets and the Defendants counter-offers was noted. The key findings were as follows:
- The Claimants initially sought £8.74 million
- The highest counter-offer from the Defendants was £3.54 million, with other offers ranging from £2.7 million to £3.4 million
- The court ultimately allowed £4.21 million which was significantly lower than the Claimant's initial proposal
Hours Scrutinised
The court also took issue with the Claimant's legal fees, which had far exceeded guideline rates. The rates claimed by their solicitors Jones Day were:
- Grade A (partner): £1,089/ hour (guideline £566/hour)
- Grade B (senior associate): £450/ hour (guideline: £385/hour)
- Grade C (junior associate): £421-446/ hour (guideline: £299/hour)
- Grade D (trainee solicitor or paralegal): £248/hour (guideline: /£205)
Mr Justice Constable held that while Band 1 London rates were appropriate given the complexity of the case, the claimed rates were excessive. He applied a "relatively sizeable downward adjustment in each of the phases where there are heavy time costs to reflect the excessive rates" to reflect this disparity. An estimated reduction of £1.4 million from the overall budget would have occurred had the guideline rates been applied.
Practical Impact of the Decision
- Proportionality matters
The court emphasised that budgets must be realistic, albeit in line with the complexity of the case. Inflating costs, however, comes with serious consequences.
- Hourly Rates Under Scrutiny
The Claimant's solicitors claimed rates far exceeding guideline figures without reasonable justification and this led to significant reductions by Justice Constable. Expect continued rigorous judicial oversight on rates.
- Costs Management Conduct Can Have Consequences
The TCC followed a recent decision in Nicholas Worcester v Dr Philip Hopley [2024] EWHC 2181 (KB) which confirmed that unreasonably high budgets can result in adverse costs orders.
- Defendants Should Challenge Unrealistic Budgets
In GS Woodland Court GP 1 Ltd & Anor v RGCM Ltd & Ors [2025] the successful Defendants (D2, D3, D4 and D5) not only avoided liability for inflated costs by the Claimant but also recovered their own costs of the hearing.
Conclusion
This case is a timely reminder to construction lawyers involved in litigation that unrealistic budgets will be reduced by the courts and can result in financial penalties. Lawyers must ensure that costs estimates are well-founded, justifiable and proportionate - or risk the court's intervention.
