Since the advent of costs budgeting in 2013, the process for varying approved budgets has been evolving. The most recent CPR update last autumn (the Civil Procedure (Amendment No 3) Rules 2020 (SI 2020/747)) saw the introduction of Precedent T, a document for setting out the budget variations sought in a uniform manner to ensure a more consistent approach. However, there remains a lot of uncertainty and subjectivity when seeking to vary costs budgets.
CPR 3.15A tells us that a party must revise its budget upwards or downwards if significant developments in the litigation warrant such revisions and that such revisions must be submitted promptly. However, there is a lack of clear guidance on what constitutes a “significant development” and what sort of timescale constitutes “promptly”. There will doubtless be numerous disputes on the interpretation of both issues.
There had been encouraging signs for those seeking to vary a budget to be found in the comments from Master Davidson in Al-Najar v The Cumberland Hotel (London) Limited. The master indicated that the bar for what constitutes a significant development to justify revisions to a budget “should not be set too high” for fear that if a party cannot revise their budget as developments occur, there is a danger of bloated budgets being submitted in the first instance to allow for worst case scenarios as opposed to the most likely.
In Persimmon Homes Limited and Taylor Wimpey Homes UK v Osborne Clarke LLP, however, both the issue of what constitutes a “significant development” and the issue of promptness were put to the test as Master Kaye refused to increase the claimant’s costs budget.
The claimant had identified an unexpected request for further information, further case management conferences (CMCs) and a change to the disclosure model under the Disclosure Pilot Scheme (resulting in more disclosure than anticipated) as the significant developments in the case and sought to increase their costs budget from £1.45 million to £2.8 million. The chronology of the case was as follows:
- The claimant’s budget was approved at a CMC in December 2019. The parties had agreed on a “Model C” request led search-based approach to disclosure.
- The defendant made the request for further information in February 2020 to which the claimant responded in August 2020.
- In August 2020, the defendant made an application for further disclosure and a further CMC took place on 26 August 2020 where the judge made orders pertaining to disclosure and the CMC but adjourned the disclosure application to be heard at a further CMC in January 2021.
- The claimant submitted their budget variations to the defendant on 3 December 2020 and issued the same on 21 December 2020.
Master Kaye rejected the claimant’s application for a budget variation on the basis that either the developments were not “significant” such as to warrant a variation to the budget, or that if they were, the application hadn’t been made promptly.
While this decision won’t serve as a definitive guide as to what constitutes a significant development or how promptly a Precedent T must be submitted in order to be successful, it does serve as a warning to practitioners that they must remain alive to developments in the litigation on budgeted cases and be proactive in seeking budget variations where appropriate.
Despite this outcome, we know from the decision of Chief Master Marsh in Sharp and others v Blank and others that just because some of the significant development costs have been incurred, a party isn’t automatically precluded from varying the budget to include these costs, because for the purpose of the budget variation, these costs would be treated as estimated costs.
As such, this costs lawyer’s advice would be that parties shouldn’t be discouraged from seeking variations to their budgets when variations occur, even if some of the costs have already been incurred, but should ensure that they act as swiftly as possible to maximise their prospects of securing the variation sought.
