Costs Budget Revision Rejected for Lack of Promptness
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A delay of 3-5 months after a significant development was deemed not prompt, leading to the rejection of certain variations in the Precedent T related to the same developments.
What is a Costs Budget Revision?
Costs budgeting is an essential part of case management. A costs budget revision, also known as a budget variation is used to make changes to an approved or agreed budget. A costs budget revision is usually required by the receiving party if the costs incurred have increased significantly due to an unforeseen significant development in the litigation. If there is already an approved Budget in place following a Costs Management Order, a Precedent T should be utilised to detail the additional costs expected to be incurred to deal with the significant development, the costs of which may impact on a number of already approved phases.
As of 1 October 2020, parties seeking to make changes to their approved costs budget should do so using a Precedent T as prescribed by Practice Direction 3D (previously PD 3E).
Rules for revision and variation of a budget can be found under CPR 3.15a and state the following:
3.15A.
“(1) A party (“the revising party”) must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions.
(2) Any budgets revised in accordance with paragraph (1) must be submitted promptly by the revising party to the other parties for agreement, and subsequently to the court, in accordance with paragraphs (3) to (5).
(3) The revising party must—
(a) serve particulars of the variation proposed on every other party, using the form prescribed by Practice Direction 3D;
(b) confine the particulars to the additional costs occasioned by the significant development; and
(c) certify, in the form prescribed by Practice Direction 3D, that the additional costs are not included in any previous budgeted costs or variation.
(4) The revising party must submit the particulars of variation promptly to the court, together with the last approved or agreed budget, and with an explanation of the points of difference if they have not been agreed.
(5) The court may approve, vary or disallow the proposed variations, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed, or may list a further costs management hearing.
(6) Where the court makes an order for variation, it may vary the budget for costs related to that variation which have been incurred prior to the order for variation but after the costs management order.”
Essentially, if a party seeks approval by the court for a costs budget revision, they should do so promptly using a Precedent T. They should also be able to demonstrate a significant development within the case.
What Constitutes a Significant Development?
Approval must be sought from the court when it comes to revising a budget; therefore, even if agreement to amend the Budget is sought from the other side, the party must show a material change in circumstances which could not have been foreseen when the original budget was prepared.
This was demonstrated in the case of Sharp V Blank when the Defendant made an application to have its costs budget amended. The Chief Master stated;
“The policy is clear. If there have been significant developments, the budgets must be revised. A claim for additional costs should not be left until a detailed assessment because the parties need to know what is their exposure to costs and the costs of detailed assessment should be minimised.”
An example of a significant development may be that in a PI claim, the Defendant has provided surveillance evidence, which would significantly affect the phases of Disclosure and Expert Reports, and which also could not have been originally been foreseen by the Claimant’s legal representatives if they had not been put on notice of the surveillance. In Sharp V Blank, the Chief Master also stated;
“Interim applications may be significant developments as may the consequences that flow from an interim application.”
In the case of Churchill v Boot [2016] EWHC 1322 (QB), it was held that the change in the monetary value of a claim (a o did not amount to a significant development in the case and permission to amend the costs budget was refused, on the basis that the increased value, though significant, did not actually materially change the level of work required.
The Judge in this case stated that the doubling value of the claim did not mean that the costs would be higher. Picken J stated that the case had taken a typical course following the original budget and that the developments could have been predicted at the time of drafting the original costs budget.
He further stated that an adjournment of Trial did have the potential to be a significant development however, on the facts of this case, it could not be considered as a significant development under paragraph 7.6 of Practice Direction 3E (now PD 3D).
Khokan v Nirjhor (Re Costs)- Costs Budget Revision Rejected for Lack of Promptness
A costs budget revision was recently rejected as a delay of 3-5 months after a significant development was deemed not prompt.
In the case of Khokan v Nirjhor (Re Costs) [2024] EWHC 1873 (KB), Mr. Justice Hill DBE examined a Defendant’s request to alter a Costs Budget after the Claimant’s claim was struck out.
This case offers valuable insights into the conditions under which a budget can be revised and the importance of promptness.
The ruling referenced Persimmon Homes Ltd v Osborne Clark LLP [2021], where Master Kaye emphasised that revisions to a costs budget require a significant development justifying the change and must be made promptly.
“there has to be a significant development warranting a revision and there has to be promptness. It is only if both those mandatory requirements are met that the threshold test is satisfied, such that the court will go on to consider whether as an exercise of discretion it should approve, vary or disallow the proposed variations pursuant to CPR 3.15A(5).”
Only when these criteria are met will the court consider, at its discretion, whether to approve, modify, or reject the proposed changes under CPR 3.15A(5).
In the current case, the Court had mandated the submission of Precedent Ts by June 21, 2024, but they were not served until July 8, 2024. The Court found this delay reasonable, acknowledging that the Defendant was justified in waiting in order to ascertain the consequentials of the claim having been struck out in June 2024.
However, the revisions to the Defendant’s Costs Budget were considered overly extensive, and also it should be observed that it is somewhat unusual in the writer’s experience, for a Costs Budget to be amended retrospectively and after the additional costs have all been incurred, as this would leave little, if any costs, to be budgeted for.
This is clearly not the purpose of costs management, which is to carefully manage forecasted costs of the future steps of litigation. To incur the full extent of costs, then apply for retrospective revision of a Budget, somewhat defeats the purpose of costs management.
Nevertheless, in Khokan, as a previous order had been given for Precedent T’s to be filed, the Court was willing to consider potential variation notices however, it was highlighted that the two mandatory components of applying for a variation under the CPR was that there must be 1) a significant development, and; 2) promptness to the application for a variation.
Taking into account these principles, the Court allowed variations to the Defendant’s Budget in Disclosure, Witness Statements, PTR and Trial phases. However, variations in Issues/Statements of Case were not permitted, particularly given that amended Particulars of Claim had been settled in April 2024 by the Claimant, and despite a PTR having taken place since, no issue had been raised as to an amended Defence being required by the Defendant, and it could not be considered prompt the issue having been brought up 3 to 4 months later.
It appears to be a consideration then, that not only time delay, but the fact that a hearing had taken place in the intervening period (at which the Defendant had failed to report a significant development) was taken into account in partially refusing variations to the Defendant’s Budget.
Other aspects of the variation were also rejected, as costs for interim applications for summary judgment had previously been summarily assessed on an indemnity basis, and therefore made the application for a variation somewhat otiose.
In summary, the Defendant was successful in their application to vary the Budget to a degree, but not for those aspects which were considered time-delayed, or had been failed to have been reported to the Court at the PTR.
How can ARC Costs Assist?
The ARC Costs team are always happy to assist with the preparation of any Cost Budget and negotiation of the same. We can also provide guidance and assistance in updating your approved Costs Budget under the current procedure set out in CPR 3.15A.
We assist both paying parties and receiving parties.
We can be contacted via email at info@arccosts.co.uk, or by telephone on 01204 397302. For more information on legal costs, please find out more about our speciality areas of expertise and our services on our legal costs page.