Budget revisions require prompt attention – do not delay keeping your budgeted costs under review!
Once a costs budget has been set, it can be easy for litigators to put all their efforts into running a case without periodically checking in with the approved budget. This could prove very detrimental to the costs recovery process because, if a budget revision is required, it must be done promptly. You do not want to miss the opportunity to get paid. A recent decision of the High Court provides a reminder that, if there are significant developments, applications to vary a budget must be done promptly. This is a mandatory requirement.
In a recent decision on costs, we have been reminded of the importance of seeking budget variation promptly.
The judgment in the case Khokan v Nirjhor (Re Costs) [2024] EWHC 1873 (KB) dealt with consequential matters arising out of the automatic strike out of a claim following the Claimant’s failure to pay an outstanding costs order of £20,646.58 by 4pm on 14 June 2024.
As a result of the strike out, the Defendant sought an order for the Claimant to pay his costs of the claim and sought to vary his budget.
It was decided that there was no good reason to depart from the general rule that the Claimant (as the unsuccessful party) should pay the Defendant’s costs of the claim and an order was made to that effect.
The decision thereafter provides some interesting reading on budget variation.
The Defendant’s original costs budget had incurred costs of £18,913.70 and estimated costs of £76,000.00. The parties had been ordered to file Precedent T’s regarding proposed variations by 21 June 2024. This was not done as the claim had been automatically struck out after the Claimant’s failure to make payment by 4pm 14 June 2024.
The Defendant filed a Precedent T on 8 July 2024 seeking extensive revisions to:-
- The issue/statements of case phase – For Counsel to provide further Particulars of Claim and advice;
- Disclosure phase – To consider a further 222 pages of material disclosed by the Defendant and 47 hours to transcribe and translate audio/video material;
- Witness statement phase – To prepare two further witness statements (whose existence emerged after the original budget was approved);
- PTR phase – To reflect the fact this went ahead; and
- Trial – As the Defendant had already paid for flights, accommodation and a visa for his witnesses to attend trial given the claim was struck out three weeks before trial.
The Defendant also sought to add two contingencies to his budget to reflect A) the incurred costs on various interlocutory applications and B) the current costs hearing to determine consequential matters.
The revisions being sought reflected an additional £82,954.78 in estimated costs which would double the original budgeted costs if permitted.
The Claimant submitted that the Defendant’s budget revisions should not be permitted because the applications to revise the budget had not been made promptly. It was submitted that this was required by virtue of CPR 3.15A which provides:-
(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).
The Claimant cited Persimmon Homes Ltd v Osborne Clarke LLP [2021] EWHC 831 (Ch) which confirmed that there had to be a significant development and promptness. Accordingly, only if both these mandatory requirements were met, should the Court consider whether to approve the revision.
The Court was satisfied that the revisions to the following phases should be permitted:-
- Disclosure;
- Witness statements;
- PTR;
- Trial;
- Contingency A (in so far as the Defendant’s applications which became before the Court on 7 June 2024 for an unless order and security for costs); and
- Contingency B.
The Court was not persuaded by the other elements of the Defendant’s application to vary his budget. The date of Counsel’s advice was not known but the voluntary further particulars were signed on 3 April 2024. There was no record of the need to vary the budget to reflect these developments at the PTR and it was not clear why these issues had not been raised earlier. Therefore, raising them at a late stage was not considered prompt.
This was also the stance taken in relation to some of the applications provided for in Contingency A which had been before the Court on 21 February 2024.
In conclusion, the Defendant was permitted to vary his costs budget but on a limited basis. Elements that were being raised late were simply not permitted.
Summary and take away points:-
- Parties should keep their budgets under constant review; extending to both the amount being spent and the work being done with reference to the budget assumptions.
- If there has been a significant development, an application to vary the costs budget (upwards or downwards) must be made promptly. The process is set out in CPR 3.15A.
- The components of a request to vary a budget, will be scrutinised closely – be prepared to explain why the variation is required in each phase.
How can PIC help?
Partners in Costs (PIC) are an expert team of costs lawyers and draftsmen with a wealth of experience in preparing budgets, Precedent T’s and attending cost hearings. We also offer a bespoke budget monitoring service; Total Timeline+.
If you require any assistance or would like further information, PIC can be contacted on 03458 72 76 78.
Michelle Farlow, Legal Costs Service Manager
19.09.2024