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NEW YEAR’S RESOLUTION - I WILL REMEMBER TO REVISE MY BUDGET


“Well, just do the best that you can” is a recurring phrase heard by Costs Lawyers from their Solicitor clients when it is pointed out that they are significantly over budget when the Bill comes to be drawn. Absent some magical negotiation, even the best Costs Lawyer will often struggle to persuade the opponent (or ultimately the Court) that there is some good reason why more should be allowed in any particular phase than as provided for by the budget.

It really is a case of “shutting the stable door after the horse has bolted”. The better approach, of course, is to have drawn the budget well in the first place (your friendly Costs Lawyer is here to help) or, if necessary, have sought to revise the budget during the currency of the litigation.

A recent decision of Master Davison in the High Court gives some assistance (and encouragement) should that latter course be required – in particular by saying that the bar for what constitutes a significant development should not be set too high. In the case of Ohoud Al-Najar (a protected party by her litigation friend KhadiaAl-Almulla) and others v The Cumberland Hotel (London) Limited [2018] EWHC 3532 (QB) the Master reviewed the relevant rules and case law upon an application by the Claimants for an upward revision in the disclosure phase of their approved budget.

The starting point is PD 3E paragraph 7.6:

"Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions. Such amended budgets shall be submitted to the other parties for agreement. In default of agreement, the amended budgets shall be submitted to the court, together with a note of (a) the changes made and the reasons for those changes and (b) the objections of any other party. 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."

(As something of an aside here, we imagine that there will be very little case law on applications to revise budgets downwards, with practitioners likely to be almost wholly indifferent to the level of the budget provided it amply provides for the required work).

The Master made mention of the comments of Chief Master Marsh in the case of Sharp v Blank & Others [2017] EWHC 3390 (Ch), in the course of which the Chief Master stated that the relevant considerations would be fact specific in light of the nature of the litigation and the manner in which it had unfolded, coupled with the extent of the revision sought. In relation to that latter aspect, the Chief Master noted that it would be difficult to conceive that a development leading to modest additional legal expenditure could amount to a significant development. He also added, at paragraph 37:

“It is obvious, however, that a mistake in the preparation of a budget, or a failure to appreciate what the litigation actually entailed, will not usually permit a party to claim later there has been a significant development because the word 'development' connotes a change to the status quo that has happened since the budget was prepared. If the mistake could have been avoided, or the proper nature of the claim understood at the time the budget was prepared, there has been no change or development in the litigation. By contrast, if the claim develops into more complex and costly litigation than could reasonably have been envisaged, that may well be the result of one or more significant developments."

In the case before Master Davison, the Claimants sought an increase on the disclosure phase from £62,626 to £111,811 (a 78% increase). The reason for the request was that the Claimants had anticipated 20 to 30 lever arch files full of documents by way of disclosure from the Defendant, but what in fact arrived was 55 lever arch files.

The Master noted, accepting that it was with the benefit of hindsight, that it would have been prudent to have specifically set out the anticipated scale of disclosure within the assumptions in the budget – the assumptions in fact used by the Claimants were relatively generic.

The Master identified 5 broad principles to guide him:

“(a) Whether a development is "significant" is a question of fact which depends primarily on the scale and complexity of what has occurred.

(b) If what has occurred is something that should reasonably have been anticipated by the party seeking to revise its budget, then that party will probably be unable to label it significant or, for that matter, a development.

(c) However, there is no requirement that the development must have occurred other than in the normal course of the litigation. That is clear from the final sentence of para.37 of Master Marsh's decision which I have quoted and also from the fact that in that case a revision of the trial estimate, the disclosure of 984 documents and the service of an expert report were all characterised as significant developments.

(d) As a matter of policy, it seems to me that the bar for what constitutes a significant development should not be set too high because, otherwise, parties preparing a budget would always err on the side of caution by making over-generous (to them) assessments of what was to be anticipated.

(e) Lastly, and I think this is uncontentious, if there has been a significant development, then the question is whether the figures in the revised budget are reasonable and proportionate in the light of the development.”

The Master felt that he had to consider whether the assessment in the original budget had been a reasonable one. Importantly, he noted that in the specific circumstances of this case, it was no answer to the application to say that the level of disclosure could have been foreseen or anticipated, because that would impose “an altogether unrealistic burden and encourage the sort of bloated, defensive budgets which are to be deprecated”.

The Master found that disclosure of documents being nearly double that which had been anticipated did indeed amount to a significant development and he therefore went on to consider the reasonableness and proportionality of the requested increase (the details of which are not particularly relevant for the broad purposes of this article).

We do hope therefore that this article will serve as a reminder to practitioners to ensure that they keep their work in progress under review in relation to the approved budget. Whilst it is clear that simply spending more time or disbursements than originally anticipated is not of itself sufficient to persuade a Court to increase a particular phase of the budget, if there are twists and turns in the litigation which could merit the title of being “significant” then the opponent should be approached as soon as practically possible with a view to agreeing a revision. If (which may often be the case) there is a lack of agreement, then again a swift application to the Court should certainly be considered in order to preserve an appropriate recovery of costs upon conclusion.

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