When is a delay to vary a Cost Budget fatal? It ultimately depends on significant development

Yelland v Space Engineering Services Ltd [2023] EWHC 2823 (KB)

Introduction

The introduction of formal procedure to vary cost budgets in October 2020 was heralded as a common sense and natural extension to the cost budgeting rules. It introduced rules and the Precedent T that would offer all parties more clarity and a standardized approach should a variation be required. Unfortunately, the rules and procedure included terms that were unfortunately vague without providing a definition such as “what amounts to a significant development?”.

Another question that required judicial input was what amounts to a delay when applying to vary a cost budget?

The facts

This was the subject that Cost Judge McCloud was required to answer in Yelland v Space Engineering Services Ltd. This was a personal injury claim that was being brought by the Claimant. A CCMC was held on 30 June 2021 and budgets were set (exc. The PTR, Trial Prep and Trial phases).

Surveillance evidence was covertly obtained by the Defendant between July and August 2021.

A further CCMC took place in April 2022 where the PTR, Trial Preparation and Trial phases were budgeted for. Further budgeted costs were allowed for the expert phase in respect of psychology/psychiatric evidence. This was due to the expert evidence not yet being finalized or exchanged. The psychiatric expert evidence was exchanged in November 2022.

The Defendant disclosed the surveillance footage in December 2022. In January 2023 the Defendant made an application to rely upon the surveillance evidence and sought a revised budget. Steps were then taken by both the Claimant and Defendant in February 2023 to serve Precedent Ts to request budget variations.

In March 2023, by consent, an Order was made for permission to rely upon the surveillance evidence and Directions were duly updated to allow for responses. Budget variations were not dealt with.

The parties could not agree on the variations to be made to the Cost Budgets and the matter was ultimately listed for a further Costs Management Hearing which took place at the end of October 2023.

The decision

The Claimant objected to the Defendant’s approach in respect of the disclosure of the surveillance evidence and the ‘promptness’ with which they applied to vary their cost budget. Cost Judge McCloud considered the special nature of the surveillance evidence and the policy considerations set down in Purser v Hibbs & Anr [2015], namely that surveillance evidence should only be disclosed once a party has in effect ‘pinned their position to the mast’. Given that the ‘proper time’ to disclose the surveillance evidence was once the Claimant had finalized and served their expert evidence, then there was minimal delay. Costs Judge McCloud holding that the Defendant had acted promptly and stating that when considering ‘promptness’ in respect of CPR 3.15A then context was important.

The second point raised by the Claimant was in respect of the correct interpretation and approach to be adopted to CPR 3.15A(6):

‘Where the court makes an order for variation, it may vary the budget for costs related to that variation which have been incurred prior to the order for variation but after the costs management order’

Costs Judge McCloud noted that the rule was not worded in the clearest of ways and also seemed to be worded on a presumption that there would only be one CCMC Hearing and Costs Management Order in a matter. This was not the case in this matter where only some phases were budgeted for at the first CCMC Hearing in June 2021, including the phases that related to the obtaining of surveillance evidence. Importantly, this first Costs Management Order was made prior to the costs of the surveillance evidence were incurred.

Costs Judge McClouds interpretation of CPR 3.15A(6) was as follows:

‘…the rule must be construed as meaning that the restriction on the court’s power to vary a budget only in relation to costs ‘after’ the Costs Management Order is a reference to:

(i) costs relevant to the phases which were subject to costs management in that previous order;

(ii) Whilst (i) is sufficient in this case, in any event it would not have been consistent with the public policy as to keeping surveillance secret until the appropriate moment, to construe the rule as meaning that where, for good reason, certain costs are not included in a proposed variation, the court is then debarred from making a later variation. Therefore, if it had been the case that phases relevant to surveillance had been costs-managed by the second CMO, I would have found that a purposive construction would allow the court to vary the budget nonetheless for those surveillance costs pre-dating the CMO.’

Summary

This decision further underlines the fact that Cost Budgeting remains a heavily context dependent process with decisions made on a case by case basis. Whilst the decision suggests that there is some ‘lee-way’ when it comes to the timeframes for applying to vary cost budgets it cannot be guaranteed that a similar outcome would be achieved. Therefore, we would always recommend a pro-active approach be adopted and variation should be sought as soon as the ‘significant development’ arises.

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