Revising costs budgets: What is a significant development?

The rule providing for budgets to be revised can be found at paragraph 7.6 of practice direction (PD) 3E, which states: 'Each 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.'

This presents two key questions: at what point should the application to update a budget be made, and what amounts to a 'significant development' in the litigation? The first has received some judicial attention recently, particularly in Tim Yeo v Times Newspapers Ltd [2015] EWHC 2132 (QB), and it has become apparent that any revisions to a budget must be made before the relevant work is undertaken.

Lack of clarity

On the other hand, clarity over the definition of a significant development has remained elusive. Authorities thus far have generally addressed what does not amount to one, rather than what does.

In Yeo, Mr Justice Warby did not accept that the need to consider the impact of parliamentary privilege following a repeal of section 13 of the Defamation Act amounted to a significant development, and further stressed that any such development must take place within the litigation.

The recent case of Churchill v Boot (22 April 2016) provides further guidance as to what will not amount to a significant development. The claim involved a road traffic accident which took place in 2009. Among his various injuries, the claimant was believed to have sustained a brain injury. A case management conference (CMC) took place in 2014, at which a costs management order was made by the court. Directions were also given, including provision for the claimant to obtain evidence from various expert witnesses. As the matter progressed, the claimant was required to take a number of steps which were in excess of those considered when drafting the costs budget. These included the provision of additional disclosure and the obtaining of updated expert evidence. Further, the value of the claim increased significantly, to double the amount first pleaded.

As a result, the claimant made an application pursuant to PD 3E 7.6 to increase the cost budget. The application
was refused, as the Master considered that there had been no significant development in the case to justify an increase to the budget. The claimant sought permission to appeal.

Tough approach

The court took the view that the doubling of the value of the claim did not necessarily justify an increase to the cost budget. Further, it considered that the disclosure required and additional expert evidence to be adduced was standard for a claim of this type, and the claimant should therefore have envisaged the potential for the additional expenditure when the original budget was drafted. Accordingly, the application for permission to appeal was refused.

Each of the above cases demonstrates the tough approach that the courts seem inclined to adopt to applications to revise costs budgets. Practitioners would be well advised to consider all of the potential avenues of the claim when drafting their costs budgets and take a 'worst case' approach, as any omissions are unlikely to be rectifiable later
if the court determines the expenditure should have been foreseeable.

Of course, there is a
delicate balance to be struck
in ensuring that a budget
covers every eventuality while avoiding the appearance of disproportionality, and those tasked with arguing for the budget at the CMC should be prepared to fully explain the approach to the court.

David Wright is a council member of the Association of Costs Lawyers @CostsLawyers www.associationofcostslawyers.co.uk