Tag: Costs budgeting

Optimising Costs Management: Part 3

Ellena Hunter1 Comment
You can listen to the blog here

This is the final entry of our three-part series on optimising costs management.

The first blog in this series outlined the 2% budget process provision; how to utilise this to obtain the best outcome possible at a CCMC; and the benefits of monitoring budgets. This can be read or listened to here.

Our second blog detailed potential problems of not utilising the 2% budget process provision. This can be read or listened to here.

The focus of this blog is minimising risk. So what steps can be taken to reduce exposure to risk?

Utilising budget process provision

If you utilise the 2% budget process provision prior to CCMC by investing time in budget discussions then at best you can have your budget agreed in full and at worst, nothing will be agreed but you will know which issues are in contention ahead of the CCMC. Counterarguments can then be prepared. Either way, you are in a much better position than if you fail to engage from the outset. Attending a CCMC with little idea of what the other party will say is not advisable.

The best way to optimise costs management following CCMC is to regularly monitor the costs of a case. This will enable you to take a proactive, rather than reactive, approach to managing your costs and ensure you achieve the most beneficial outcome for your costs recovery.

PTA time recording systems

One of the most efficient ways to monitor costs managed cases is by utilising a Phase, Task and Activity (PTA) time recording system. If your time recording system allows, every entry that is recorded should be allocated to an appropriate phase, task and activity. The benefit of doing this is that a costs managed matter can be monitored quickly and easily to ensure that the budget is not being exceeded, or if it is, providing the significant development criteria is met, then an application to vary the budget can be made promptly. This will also allow you to keep your client regularly updated on how much of the budget has been spent within each phase and make them aware of any potential shortfall well in advance. It also allows you to factor this into the case strategy.

Regular monitoring

As aforementioned, one way a case can be monitored is by way of a PTA time recording. However, not all systems are equipped to process this information. If you find yourself in this position, then we can carry out regular phasing exercises on your behalf using an export of your time ledger. Following this, we will present you with the budget monitoring data and the options going forward. It will be clear how much of the budget you have used in each phase and whether there is likely to be an overspend.

Budget revisions

For a budget revision application to be successful, you must satisfy a two-stage test; that the budget variation is due to a ‘significant development’ and the application is made ‘promptly’ as required by CPR 3.15A (2).

If you have been utilising the 2% budget process provision then you will have early notice of and be able to make an application to vary a costs budget promptly. Master Kaye held in Persimmon Homes Ltd and Anor v Osborne Clarke LLP and Anor [2021]that an application made 10 months after the alleged ‘significant development’ was not prompt enough and the variation was refused.

If a ‘significant development’ arises that has not been provided for in the assumptions to your Precedent H, and ‘was not one which ought to have been reasonably anticipated before it happened’ as per Master McCloud in Thompson v NSL Limited [2021], then an application to vary a budget should be considered. Clear budget assumptions and a good CCMC note can hugely improve the strength of your grounds for revision and the prospects of being successful.

‘Good reason’ to depart from budget

If following settlement, a case which has been costs managed and is to be assessed on the standard basis, costs in any given phase exceed those on the costs management order then the overspend may be allowed if it can be shown there was ‘good reason’ to depart from the budget. It is however advisable to ensure the revision route is explored initially and without proper definition, and because it is a discretionary power which the judge will consider based on case circumstances, using ‘good reason’ as an overspend justification really is a last resort.

This brings our mini blog series to a close. We hope it has been useful and please get in touch if you have any queries at all relating to budget process provision and how we can assist you in making the most of the costs management regime.

You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.

Persimmon Homes Ltd v Osborne Clark LLP – A warning to act promptly when revising costs budgets

Daniel MurrayLeave a comment

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.

You can find out more about our services here or you can contact the Costs Team at CivilCosts@clarionsolicitors.com.

Reform to Trial Witness Statements in the Business and Property Courts

Anna LockyerLeave a comment

New duties and obligations will be placed on commercial litigators from the 6 April 2021 – Anna Lockyer and Professor Dominic Regan discuss the key features of these changes, their wider reaching implications in practice and the likely impact on costs budgeting

This video features Professor Dominic Regan who is working with the Costs and Litigation Funding team as a consultant.

Anna Lockyer is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at Anna.Lockyer@clarionsolicitors.com and on 0113 288 5619.