‘Significant Development’ – What is a ‘significant development’ and which phases are affected?
The case of BDW Trading Ltd v Lantoom Ltd  EWHC 2744 (TCC) (16 October 2020) is a useful one for all practitioners who deal with Budgeted cases.
The Judgment deals with what the Court may deem, or may not deem, a ‘significant development’, and which phases are affected by a ‘significant development’.
The dispute arose from the supply of allegedly substandard stone by the Defendant to the Claimant for the purpose of a housing development.
The first case and costs management conference (CCMC) took place on 25 October 2019 where directions were given and the parties’ costs budgets approved, with certain adjustments.
On 9 March 2020 the Claimant sought an increase of £90,000 in its costs budget for the disclosure phase. The reason given was that the Claimant’s costs budget had included an express assumption that fewer than 50,000 documents would be collected for disclosure purposes, with individual review required of no more than 15,000 documents after applying keywords; whereas in collecting the documents it had transpired that they numbered more than 250,000 documents, of which it was thought likely about 70,000 would have to be individually perused.
The Claimant asserted that this amounted to a “significant development” and that the Claimant’s costs budget was being updated accordingly. Other, smaller increases in respect of expert evidence were also separately suggested.
In April 2020 the parties agreed an increase to the Claimant’s costs budget for the disclosure phase by £90,000 and an increase of £8,500 for the expert reports phase. Agreement was also reached to increase the Defendant’s costs budget by £70,000 for the disclosure phase.
Disclosure took place in April 2020. Witness statements were exchanged in June 2020. On 23 June, the Claimant wrote seeking a further increase to its costs budget for the witness statement phase of £55,000 to cover solicitor time costs.
The Defendant argued that the increase was already captured by the previously agreed increase in respect of the disclosure phase and therefore refused to agree the same. The Claimant then on 6 July 2020 made an application which was the subject of this Judgment.
At the hearing the Claimant explained that the unexpectedly high number of documents that had to be reviewed (roughly a five-fold increase as against the initial express assumption) was having a knock on effect on the proofing of witnesses, with whom the additional documents had to be considered. Furthermore, additional witnesses of fact would have to be called.
An increase to the experts phase was also requested due to, amongst other things, the additional disclosure resulting in the need for its experts to review and address substantially voluminous documents for the purposes of preparing their reports; and also that following discussions between the parties’ respective experts it became apparent that the Defendant’s experts had visited many other sites and were relying on those other site visits in expressing their opinions. To be able to adequately respond to points being raised the Claimant’s experts had to visit various other sites to gather relevant information.
It was also argued for both phases that the Covid-19 crisis meant that the production of both rounds of witness statements, and the production of joint statements and expert reports, took longer than originally budgeted as face to face meetings were not possible, and work had necessarily been done virtually and via email.
The Defendant submitted that the developments relied on by the Claimant were not significant; the Claimant had merely underestimated the number of documents collected; and the significant aspect of that was already reflected in the previously agreed increase to the Claimant’s budget for the disclosure phase.
The Court accepted that the collecting of four to five times more documents than anticipated (and expressly assumed) and the need to review nearly five times as many documents as anticipated (and expressly assumed), is a significant development in the litigation.
The Court did not accept the Defendant’s argument that all the consequences of that development were captured by the Claimant’s £90,000 increase for the disclosure phase, finding the increase was not part of and did not apply to work done in the witness statement and expert report phases; but the knock on effects of the avalanche of documents anticipated by neither side were, by the same logic, likely to impact on the adequacy of budget provision for subsequent phases.
The Court therefore allowed an increase for the Witness Statements phase, and in relation to the Experts phase accepted that the Claimant’s experts had had to review more documents than expected, which was therefore a significant development, but found the visiting of more sites by the Defendant’s experts than the Claimant had expected was not in itself a separate significant development in the litigation.
In respect of the impact of the Covid-19 pandemic on the taking of evidence and on preparation for experts’ reports the Court found that “the Covid19 effect cuts both ways” in that in virtual meetings, things take longer, however any increase in time due to lack of face to face contact was probably offset by the saving of travelling time.
This case provides some good examples of what the Court may find to be a significant development or not. Note – although the extra site visits by the experts were not found to be a significant development, it will still be open to the Claimant at Detailed Assessment to argue that this is a ‘good reason to depart’.
Also rather surprisingly is that the Court allowed two separate revisions of the Budget despite both revisions being required as a result of the same ‘significant development’, and despite the Court recognising that it was logical to assume the extra disclosure would cause a knock-on effect for the Witness Statements and Experts phases.
In my opinion the Claimant was quite lucky in this scenario that the Court did not find that it should have revised its Witness Statement and Experts phase when it revised its Disclosure phase, as the general rule is that when applying to revise a Budget, the fact that costs were omitted which could have been reasonably anticipated at the point the Budget was drafted (or, one would assume, when the Budget was last revised) will not be a significant development.
So although the Claimant was fortunate in this case, it will always be best to consider whether any other phases, in addition to the obvious ones, will be affected by the ‘significant development’ for which you are revising your Budget.
If you think you may have encountered a ‘significant development’ in your case, get in touch with us and we can discuss whether a revised Budget is required. If required, we can prepare the Precedent T for you, negotiate with the other side and represent you at any Costs Management Hearing if the revisions are unable to be agreed.