When Should You Revise a Costs Budget?

Knowing when to revise a costs budget is one of the most important parts of modern litigation costs management. Too often, firms treat costs budgets as something prepared once at the case management stage and only revisited at the end of the case during detailed assessment.

That approach creates risk. Litigation rarely follows the exact path anticipated at the outset. New expert evidence arises, disclosure expands, interim applications become necessary, and trial preparation often becomes far more complex than first expected. When that happens, the question is not simply whether costs have increased, but whether you need to revise a costs budget to protect recovery.

Failing to do so can leave substantial work outside the scope of the approved budget and vulnerable to challenge.

Why it matters to revise a costs budget

Under the costs management regime, parties are required to prepare and exchange costs budgets setting out both incurred and estimated costs for each phase of the litigation.

The court then makes a costs management order, approving or commenting on the future estimated costs of the case. These become the party’s approved or agreed budgeted costs.

At the conclusion of the case, the court will consider those approved figures when assessing costs. Unless there is good reason to depart from them, recovery will usually be linked to what was originally budgeted.

This means that where work significantly exceeds the approved figures, and no attempt has been made to revise a costs budget, recovery becomes much harder.

CPR 3.15A and the right to revise a costs budget

The key rule governing budget variation is CPR 3.15A.Introduced in October 2020, CPR 3.15A allows a party to revise a costs budget where there have been significant developments in the litigation which justify amendment.

This rule reflects the reality that litigation changes. Costs management is not intended to punish parties where genuine developments create work that could not reasonably have been anticipated.

However, not every increase in work will justify an application. The court expects parties to distinguish between normal case progression and developments that are genuinely significant.

The question is not simply whether more work has been done, but whether something material has changed that makes it necessary to revise a costs budget.

What counts as significant developments in the litigation?

This is often where disputes arise. A significant development must go beyond the ordinary progression of the case. It must justify costs that were not reasonably anticipated when the budget was approved.

Examples may include:

• A major amendment to pleadings
• New expert disciplines becoming necessary
• Additional disclosure far beyond expectations
• Significant interim applications
• A split trial or trial adjournment
• New allegations being introduced
• Additional work caused by opponent conduct
• New court orders requiring substantial further work

Routine progression is unlikely to be enough. For example, spending longer than expected on disclosure or witness statements may not justify a revised budget if that work was always foreseeable. The court will expect strong evidence showing why the development is genuinely new.

Previously budgeted work or a reason to revise a costs budget?

A common issue is distinguishing between work that was already previously budgeted and work that genuinely justifies revision. The court will carefully examine whether the additional work falls within the scope of the existing phase or whether it represents something materially different.

For example, if expert evidence becomes more extensive, the question may be whether that was always foreseeable given the nature of the claim. Similarly, if senior fee earners become more involved, the court may ask whether that reflects genuine complexity or simply poor delegation.

A successful application depends on showing that the work is new, necessary, and outside the original assumptions. Simply exceeding the figures is not enough.

When should you revise a costs budget?

Timing is critical when it comes to revising a costs budget. One of the biggest mistakes firms make is waiting until the end of the case or until preparing for detailed assessment before considering revision. The application should be made promptly after the significant development occurs.

The court expects parties to act quickly once it becomes clear that the existing budget is no longer sufficient. Delaying can seriously weaken the application. Late applications create problems because:

• They undermine the argument that the development was significant
• They create prejudice for the opposing party
• They suggest the issue could have been managed within the original budget

If you are asking whether you should revise a costs budget, the safest answer is usually to review it immediately. Waiting rarely improves the position.

Incurred costs and estimated costs when you revise a costs budget

It is important to understand the difference between incurred costs and future estimated costs. The court generally approves future estimated costs, not costs that have already been incurred. This distinction is crucial.

If a phase has already been overspent before the issue is identified, revising the budget may not protect the work already completed. Instead, it helps protect future anticipated work. The budgeting exercise focuses on what remains to be done.

This is why early review matters. If firms wait too long to revise a costs budget, the opportunity to protect recovery may already have been lost. The distinction between incurred and estimated costs is often central to whether a variation application succeeds.

Court orders and external changes that justify revision

Changes created by court orders are often the strongest grounds for a revised budget. If the court orders additional disclosure, further expert evidence, a split trial, or significant procedural steps that were not anticipated, these are usually easier to justify.

This is because the additional work arises from an external development rather than internal case management decisions. Similarly, where the conduct of the opposing party creates additional work, such as late disclosure, failed compliance, or unnecessary applications, this may strengthen the argument for variation.

The clearer the link between the development and the additional work, the stronger the case to revise a costs budget.

Why failing to revise a costs budget causes problems at detailed assessment

Many firms first realise there is a budgeting issue when preparing for detailed assessment. At that stage, the paying party will often argue that work exceeding the approved budget should not be recoverable because no application for revision was made.

This creates a difficult position. Even where the work was necessary and reasonable, the absence of a formal budget variation can lead to substantial reductions.

The paying party may argue that:

• The work was foreseeable
• The overspend reflects poor case management
• The additional costs should not be allowed

At that stage, the receiving party is forced into defending avoidable problems that could often have been prevented by revising the costs budget earlier.

Practical steps to revise a costs budget successfully

To avoid problems later, firms should treat costs budgeting as an ongoing process rather than a one-off exercise. This means:

• Reviewing costs budgets regularly
• Monitoring spend against approved phases
• Recording why overspend is developing
• Identifying significant developments early
• Making prompt decisions about whether to revise a costs budget

It also means ensuring that fee earners understand the budgeting framework rather than treating it as a separate costs issue. The stronger the internal process, the easier it becomes to protect recovery later.

How ARC Costs can help you revise a costs budget

At ARC Costs, we regularly advise firms on costs budgeting, budget variation, and strategic decisions under the costs management regime. This includes reviewing whether developments justify revision under CPR 3.15A, preparing applications to revise a costs budget, and advising on how to protect recoverability where the case has moved beyond what was originally anticipated.

We also assist with the wider consequences at detailed assessment, ensuring that costs budgets support final recovery rather than undermine it. The earlier budgeting issues are identified, the stronger the position becomes.

Need to revise a costs budget? Speak to ARC Costs

The best time to deal with a costs budget issue is before it becomes a dispute. If your case has changed significantly since the original costs management order, or if you are concerned that work is exceeding what was approved or agreed budgeted, early advice can prevent major recovery problems later.

At ARC Costs, we work with firms throughout the life of litigation, not simply at the end. Whether the issue is costs budgeting, variation, proportionality, or preparation for detailed assessment, we provide practical advice focused on protecting recovery.

To speak to a member of the team, feel free to give us a call on 01204 397302 or send an email to info@arccosts.co.uk.

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