Professor Dominic Regan and Daniel Murray, Associate in the Costs and Litigation Funding team at Clarion, discuss the case of Persimmon Homes v Osborne Clark, the implications, and guidance and tips for budget revision.
You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com.
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.
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:
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”.
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.
The CPRC have released minutes of their latest meeting. The committee has provided further information regarding the proposals and options relating to revisions to CPR r3.15 and PD 3E, please follow this link to see our previous update.
CPR r3.15 will be re-drafted stating that revisions to budgets are made promptly rather than the initial suggestion that revisions are made without delay. There will be further amendments to practice direction 3E with the introduction of a precedent T and accompanying rules in relation to the completion of the same. The precedent T will provide much needed structure regarding the process of revising budgets and we are expecting that it will outline how to revise budgets. The intention is that these updates will feature in the October 2020 update to the rules.
Please do not hesitate to give me a call or email if you have any queries regarding revising your budget or any other cost management requirements. More detail regarding the importance of revising the budget can be found in our previous blog here. Remember that the rules provide for incurring 2% of your budget in respect to all cost management matters which includes monitoring and revising budgets.
You can find out more about our services here or you can contact the Costs Team at CivilCosts@clarionsolicitors.com
The CPRC have released minutes of their latest meeting. The committee had been asked to consider proposals and options relating to revisions to CPR r3.15 and PD 3E.
Discussions centred around whether the no retrospective costs budgeting rule applies and how it works within the budget variation. It was mooted that a rule change which sets out the factors that the court should take into account may be appropriate. Proposals were also made regarding a new draft precedent T (in excel format), its intention being to set out the particulars of the proposed budget variation.
It was recognised that there were varying practices currently in play when applying to revise a budget, and because of that it was proposed that a solution would be to codify the procedure.
The committee remained alive to the fact that any rule change should not open up parties to attempt to budget repair. More detail regarding the importance of revising the budget can be found in our previous blog here.
The subjective topic of what is a ‘”significant development” was discussed. Currently PD3E paragraph 7.6 provides that budget variations are warranted if a significant development occurs. It was considered critical that the significant development was explained early in the process to avoid any attempt to budget repair.
The committee agreed the Precedent T in principle. It was agreed to re-draft their proposals which cater for ‘retrospective costs budgeting’. We should also see some further guidance which will add clarity between ‘budget variations’ and ‘ood reason to depart from the budget’.
You can find out more about our services here or you can contact the Costs and Litigation Funding team at CivilCosts@clarionsolicitors.com