Contributor post provided by ARC Costs.
Budget Variation Application: Persimmon Homes v Osborne Clark
A legal costs budget is typically prepared and filed at the CMC stage, covering any costs which are incurred to date and costs to be incurred going forward, known as anticipated or estimated costs. A costs budget will be approved at a Costs Management Hearing by way of Costs Management Order (as per PD 3e of the Civil Procedure Rules) or agreed between the parties prior to the CCMC taking place. The costs of the receiving party at detailed assessment are then bound to the limits set out in the approved budget unless a good reason to depart from the budget can be provided.
This was a case whereby an application to amend costs budget was made. This case was a professional negligence claim of £10 million made by developers Persimmon Homes Ltd against international firm Osborne Clarke.
An application was made by the Claimant to increase their costs budget from £ 1.455 million to £2.8 million. The reason for the application to amend costs budget was that it had not been anticipated that the Defendant would have requested disclosure at the time of the initial budget being filed. Further CMCs held in the case were argued to amount to a ‘significant development’ in the case, which gave merit to a revised budget being approved.
It was the case that even before the initial budget was prepared, the parties had been unable to agree on an approach to disclosure. The Claimant stated that their approved costs budget was based on a different disclosure assumption to the one which took place later on in the proceedings.
The Defendant argued that the change in disclosure is a factor that should have been raised at the CMC and Master Kaye ruled that this type of development should have been expected given the issues between the parties.
The High Court refused permission to amend the agreed budget, resulting in an appeal being lodged by the Claimant in relation to their application to amend costs budget.
Master Kaye stated that not every significant development in litigation gave rise to a revision of the approved budget; this was the case even if that development had additional costs consequences.
Master Kaye dismissed the appeal stating that it would be inconsistent with the overriding objective to manage cases justly and efficiently if the court were to provide any discretion in this case; thus discretion was not deemed to be part of the rules and practice of the costs budgeting process.
Master Kaye held:
‘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.’
Furthermore, Master Kaye addressed the fact that most of the costs had been incurred prior to the application being made. Revision and variation of the costs budget could not be allowed as the changes were retrospective incurred costs despite then being shown on the costs budget as anticipated costs on the amended budget.
Important Factors to Note
Here are few points to take away on the findings of this case:
- There had been knowledge of the issues around disclosure at the first CCMC and could have been addressed by the parties, and the costs judge at the initial CCMC. However, it was clear that the full extent of the issues was not known at the time of the initial CCMC.
- In making their application to amend costs budget, the Claimant could have requested costs budgeting to be adjourned by way of an interim application until the issues at hand in relation to future directions were resolved. This would have resulted in a more accurate costs budget being prepared.
- A significant amount of the additional estimated costs had already been incurred at the time of the application to amend the costs budget.
- The application to amend the costs budget was made 12 months after the significant development was known.
How Can ARC Costs Assist?
ARC Costs hold vast experience in preparing costs budgets and ensuring their accuracy. This is done by undertaking a detailed review of the case and the issues between the parties to ensure estimated costs cover all potential issues which can arise in the future. We can also assist in the preparation of Precedent R and in negotiating the costs budgets with the opposing party.
Furthermore, as Costs Lawyers, we can provide representation at any Costs Case Management Hearing.
If you wish to discuss your query further, you may contact us on 01204 397302 or firstname.lastname@example.org.