Costs budgeting: when is a development a “significant” one for the purpose of revising a costs budget?

Paragraph 7.6 of Practice Direction 3E provides that a party “shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions… The court may approve, vary or disapprove the revisions, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed.”

But what does this actually mean? What is a “significant development”? The courts have provided some general guidance.

  • Whether a development is “significant” is a question of fact which depends primarily on the scale and complexity of what has occurred.
  • If what has occurred is something that should reasonably have been anticipated by the party seeking to revise its budget, then that party will probably be unable to label it significant or, for that matter, a development.
  • A mistake in the preparation of a budget, or a failure to appreciate what the litigation actually entailed, will not usually permit a party to claim later there has been a significant development (Sharp v Blank). This is unsurprising. Neither of these matters can be said to be a development in the litigation.

A survey of the case law makes it clear how fact specific the decision are.

  • It is likely that a party seeking to revise their costs budget is on fairly strong ground if the application relates to the fact that there was a longer trial than was budgeted for. The additional costs involved with each additional day are obvious and easily calculated. This was treated as a significant development sufficient to require a revision to the budgets in both Asghar and another v Bhatti and another and Al-Najar v Cumberland Hotel.
  • Another perhaps fairly straightforward application would be where additional expert evidence over and above that which was anticipated at budgeting stage is relied upon. As long as the court gives permission for this additional expertise, it is difficult to see how this cannot be seen to be a significant development. Thus the costs incurred in dealing with an additional expert report served by the other side (without permission) was considered to be a significant development in Sharp v Blank.
  • It becomes more difficult to know whether an application for a revision to the costs budget will be allowed when the significant development is that there was more disclosure than was anticipated. Whether this is a significant development, or a failure to appreciate what the litigation entails, will very much depend on the facts. Parties would be well advised to make the amount of disclosure they are budgeting for explicit in the assumptions. An application to revise the costs budget for this reason was successful in Sharp v Blank, but failed in the case of Parish v Danwood.
  • Developments that have not been considered significant by the court are the service of an additional witness statement (Parish v Danwood) and the fact that the value of a claim had doubled (Churchill v Boot).

So how can parties give themselves the best chance of succeeding if such an application needs to be made? The biggest risk is in the court considering that there has not been a significant development, but instead a failure to appreciate what the litigation involved. However, if the assumptions upon which the costs budget is based are set out in some detail on the costs budget, and the other party/court agrees/approves that costs budget, the party is on firmer ground in establishing that (i) their view of the realities of the litigation where not only reasonable, but before the court and approved, and (ii) that what has in fact transpired is a significant development when compared to the work the parties/court considered proportionate at the time of budgeting.

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