It is just over a year since the introduction of the Precedent T and now is a good time to reflect on the current position regarding what amounts to “good reason” to depart from a Costs Budget. One case which is good to look at is that of Persimmon Homes Ltd & Anor -v- Osborne Clark LLP  EWHC 831 (Ch).
This case is of the upmost importance as it not only sets out that not every significant development would warrant a budget revision but also sets out the need to be prompt when seeking an amendment to the Costs Budget.
This is a matter in which the Claimant brought a claim for negligence following instructions to the Defendant regarding the drafting of agreements and ancillary advice relating to the development of land. In response, the Defendant issued a claim relating to unpaid fees – the two claims were to be heard together.
The Claimant’s Costs Budget had previously been approved in December 2019 in the sum of £1.4million. The matter was listed for a third CCMC to take place in January 2021 and prior to the same the Claimant made an Application to increase their Cost Budget by circa £1.3million – the Precedent T was submitted in December 2020.
The basis of the Application was that there had been three significant developments;
- The costs of and responding to the Part 18 Request for Further Information.
- There were the costs of two additional CMCs.
- The Disclosure was based on Model A and B when in fact Model C was used (Models based on Disclosure Pilot) – this formed the major part in the Claimant’s argument.
In considering whether it was appropriate to agree to the Costs Budget variation, it was necessary for Master Kaye to consider CPR 3.15A and namely;
(4) The revising party must submit the particulars of variation promptly to the court, together with the last approved or agreed budget, and with an explanation of the points of difference if they have not been agreed.
(5) The court may approve, vary or disallow the proposed variations, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed, or may list a further costs management hearing.
In respect of the Disclosure phase issue, Master Kaye held that by the time the CCMC took place, the Claimant would have been aware that the incorrect model would have been utilised for budgeting however, they allowed the CCMC to take place.
In response, the Claimant argued that they could only recognise the impact of the disclosure phase on the Costs Budget in retrospect.
Master Kaye rejected this argument stating that budgeting was “primarily a prospective, not retrospective exercise”. Therefore, given that the disclosure model budgeted for was known to be incorrect at the time of budgeting, it did not constitute a significant development.
Furthermore, Master Kaye went on to say that “it does not seem to me that a 12-month delay until 3 December 2020 before making the application to vary can be considered prompt.” Therefore, it is reasonable to suggest that had the disclosure issue be deemed to be a significant development, it would have failed in any event as result of CPR 3.15A(4).
In respect of the other two issues, the Master did not consider them to be significant developments and also reiterated his point regarding the delay.
Interestingly, Master Kaye went on to say that “conceptually” there could be an urgent significant development that led to costs being incurred by the time a prompt application was made he stated the following;
“I am not currently persuaded that where a phase, including the costs for which a variation is sought, have been fully incurred before the application to vary is made that there would be any jurisdiction to approve a variation to the last approved costs budget for those phases after the event”
“Thus, if no application to vary is made promptly, and the costs are then fully incurred, such costs would, it seems to me, either be subject to the question of whether there was a good reason to depart from the last approved costs budget or the costs would be at large and in either case it would be a matter for the costs judge in due course.”
The above case puts perfectly into practice the way in which the CPR and relevant practice direction has been utilised with reference to case law.
It also demonstrates that whilst a development may be considered significant, it does not automatically mean that you would be successful in varying a Budget.
Our practical advice would be to make your assumptions within the Cost Budget are as specific as possible as it makes it abundantly clear what time has been estimated and if there is a development in proceedings which was not foreseen, and the Precedent T is completed promptly, it stands a party in the best stead to be successful in varying their Costs Budget.
Please see here for the full case.
If you have any questions regarding this summary case law please contact Karl Robson here