The High Court has delivered the most significant judgment since the implementation of the use Precedent T for budget revisions in October 2020, and the provisions of CPR 3.15A.
The case
In Persimmon Homes Ltd and Anor v Osborne Clarke LLP and Anor [2021] EWHC 831 (Ch), the developer Claimant’s brought an action for negligence arising from the drafting of agreements and ancillary advice relating to the development of land. The Defendants had issued a claim for unpaid fees against the Claimant and the matters were being heard together.
A Costs Management Order had been made in December 2019, with the Claimant’s budget approved in the sum of £1.445m and was proceeding to a third CCMC in January 2021. Prior to the third CMC, an application was made to vary the approved costs budget by the Claimant on 21st December 2020 to increase their costs by circa £1.339m. The Precedent T had initially been submitted to the Defendant on 3rd December 2020.
The application was made on the basis that there had been 3 significant developments in the litigation, which were not anticipated when the case was initially cost managed. The costs of preparing a Request for Further Information and considering responses, costs of two additional CMC’s and the biggest issue, in relation to disclosure was that the budgets were based on model A & B in the disclosure pilot scheme, with model C eventually being used.
The framework for an application to vary an approved costs budget is outlined within CPR 3.15 A as many practitioners may be aware. Within this framework is an obligation on the parties, using the form prescribed by PD 3 E (Precedent T) to:
- Revise its budgeted costs upwards or downwards if significant developments in the litigation
- submit any revised budget promptly to the other party for agreement.
- Confine the particulars to the additional costs occasioned by the significant development.
- 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.
The Court may then approve, vary or disallow the proposed variations, having regard to any significant developments, or may list a further costs management hearing. Where an order is made by the Court, 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.
Master Kaye identified that to successfully persuade the Court to approve any variation, the threshold of a variation arising from a ‘significant development’ and being submitted promptly must be satisfied before any discretion as to the scope of the variation itself can be considered. The application to vary therefore involves a two-stage process.
In relation to the first alleged significant development, Master Kaye noted that the request for variation had been submitted ten months after the request was made and four months after all costs in relation to it had been incurred. The Claimant’s submissions that an application to vary can be made after all costs were incurred were rejected, and it determined that whilst “there may be some incurred costs at the point at which an application is made, in respect of which the court may be persuaded to exercise discretion.…. CPR 3.15A (6) was never intended to and is not open season to come back and vary a costs budget after the event.” The application was therefore deemed too late.
Similar observations were also made in relation to the sought variation in relation to the costs of additional CMC’s. With Master Kaye taking issues with the fact that whilst the further hearings were not contemplated at the time the initial hearing took place, the application to vary did not come until 4 months after the order fixing the hearing was made. It was commented that “the absence of promptness in making the applications not only affects whether the application to vary meets the threshold test but has consequences from a practical perspective…… it may have been possible, had an application been made earlier in the year, to identify in advance of incurring all the costs factors which might have persuaded the judge prospectively that they amounted to a significant development that warranted a revision to the last approved costs budget. Prospectively it may then have been possible to persuade a judge that there were additional to be incurred costs said to arise from the RFI/RRFI and CMCs before the costs were incurred thus enabling the court to prospectively manage and control the costs. The very purpose of the variation process.”
The third, and biggest limb of the proposed variation in relation to disclosure was also rejected by Master Kaye. Issue was taken again with the timing of the application in view of the fact the Claimants were aware of the changes in respect of disclosure at earlier CMC’s yet failed to react to the situation. The application was made over 12 months following the switch to model C and therefore was not prompt. Stressing again the need to act prospectively, not retrospectively, Master Kaye confirmed that “Cost budgeting is about setting prospective costs and CPR3.15A is to enable the court to approach the question of variations and amendments in a practical and purposive way not to oust the role of the costs judge”.
Conclusion
The case highlights the extent of the obligations on the parties brought about by CPR 3.15, to revise budgets upwards or downwards throughout the litigation. Throughout the judgement Master Kaye highlighted that the additional costs will be determined by the costs judge at assessment, however the success of such submissions considering this judgment will be interesting to see. To protect their position, parties must assess the content of their approved budgets, and in particular the assumptions which were provided with them at the time of costs management and ensure that any deviations result in the preparation of a Precedent T, at the same time work is being carried out to deal with such deviations. This is the best way to ensure you protect your costs position.
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