Costs Budget Variations: High Court Confirms the Limits in Bassey v Whittaker

The High Court has provided important clarification on when parties can vary an approved costs budget, confirming that judges do not have a general discretion to make changes simply because the costs of litigation have developed differently from expectations.

In Bassey v Whittaker & Watford Insurance Company, Mr Justice Cavanagh held that, unless the parties agree, there must be a significant development in the litigation before an approved costs budget can be varied.

For solicitors dealing with multi track cases, the decision reinforces the importance of getting costs budgeting right from the outset and recognising that ordinary developments in litigation will not necessarily justify increasing a budget later.

What happened in Bassey v Whittaker?

The case arose from personal injury proceedings in which a district judge had permitted variations to the parties’ costs budgets. The proposed variations related to developments including additional work by medical experts, further disclosure and an extension to the anticipated trial window.

However, the district judge had also concluded that these were not significant developments in the litigation. The High Court found that this created a fundamental problem.

Once the court had determined there was no significant development, it did not have a separate general discretion to vary the budgets anyway. Mr Justice Cavanagh therefore allowed the appeal.

When can a costs budget be varied?

The judgment focuses attention on CPR 3.15 and CPR 3.15A, which govern costs management and revisions to approved budgets. Once the court has made a costs management order, the approved or agreed budget provides an important framework for the future costs of the litigation.

A party cannot simply return to court whenever its original estimates prove inaccurate.

Where the parties do not agree a proposed revision, a significant development is a necessary precondition for varying the budget.

This reflects the purpose of cost budgeting itself. If budgets could continually be revisited whenever assumptions changed, their usefulness as a costs management tool would be significantly reduced.

What is a significant development?

Perhaps the most useful aspect of Bassey is the High Court’s discussion of what will, and will not, amount to a significant development. The question is not simply whether something changed after the budget was approved. Litigation naturally evolves.

Instead, the court considered whether the development was something that could reasonably have been anticipated when the original budget was prepared.

In Bassey, additional medical evidence did not satisfy that test. In a personal injury case, the possibility that experts might need to undertake further work was reasonably foreseeable.

Likewise, modest movement in a trial window and additional disclosure were regarded as ordinary possibilities that could have been anticipated.

Costs budgets are necessarily estimates

This is an important practical point for solicitors. When parties file a costs budget, they are predicting the future costs of litigation. Those predictions will rarely prove completely accurate.

Fee earners may spend more time than expected on one task and less on another. Experts may require further instructions. Disclosure may expand. Hearings may move. This does not automatically create a right to a budget variation. As the High Court recognised, costs budgeting is necessarily a broad-brush exercise.

The budgets rule would lose much of its purpose if every difference between an estimate and the work ultimately required could justify revision.

The importance of the original budget

For ARC Costs, the decision reinforces something we regularly emphasise when preparing budgets: the original assumptions matter. Before filing and exchanging budgets, the litigation needs to be considered realistically.

That includes anticipating the work that may reasonably arise before trial rather than budgeting solely on the most optimistic scenario. The budget will ordinarily be considered at a costs and case management conference, alongside the parties’ budget discussion report.

Once approved, the court’s approach to recoverable costs can be heavily influenced by that budget. Under-budgeting therefore carries genuine risk.

What happens if circumstances genuinely change?

Bassey does not prevent costs budgets from being varied. Where something genuinely significant and unforeseen occurs, an application under CPR 3.15A remains available.

The distinction is between an unexpected significant development and the ordinary evolution of litigation. A major amendment introducing new issues, an unexpected counterclaim or another substantial development that could not reasonably have been anticipated may potentially justify revision.

Additional work that falls within the ordinary range of possibilities anticipated when preparing the budget may not.

Timing is also important. A party identifying a genuine significant development should address it promptly rather than allowing substantial additional costs to accumulate before seeking approval.

What happens if parties fail to budget properly?

Costs budgeting carries procedural consequences as well as implications for recovery. Where a represented party is required to file a budget but fails to comply, the court can impose sanctions.

Under the costs management regime, failing to file a required budget can result in the party being treated as having filed a budget comprising only the applicable court fees, unless the court otherwise orders.

The relevant deadline will depend upon the circumstances and applicable rules and directions. In some stages of costs procedure, periods such as 21 days are particularly important, but practitioners should always identify the specific deadline applying to the particular case rather than assume a general timeframe.

Different considerations may also apply to litigants in person, who are not generally subject to costs budgeting requirements in the same way as represented parties.

Proportionality remains important

Costs management is ultimately intended to ensure litigation is conducted at proportionate cost. This requires balancing realistic expenditure against the value, complexity and importance of the proceedings. From our experience at ARC Costs, an unrealistically low budget can be just as problematic as an excessive one.

If a budget does not properly anticipate the work reasonably required, a firm may later find that additional expenditure cannot simply be incorporated through a variation.

That makes early input from experienced costs professionals particularly valuable in substantial or complex litigation.

How ARC Costs can help with costs budgeting

ARC Costs works with law firms throughout the costs management process, from preparing the original Precedent H through to advising on proposed variations and the eventual assessment of recoverable costs.

We assist with preparing and reviewing costs budgets, budget discussion reports, negotiations before the costs and case management conference, applications to vary budgets and arguments concerning departures from approved costs at detailed assessment.

The decision in Bassey v Whittaker & Watford Insurance Company makes the position clearer: without agreement, a significant development is required before the court can vary an approved budget.

For law firms, that makes accurate initial budgeting and prompt identification of genuine significant developments more important than ever.

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