Significant Developments and Budget revisions on account of the same: recent Case Law: Finsbury Food Group plc v Axis Corporate Capital UK Ltd and Others [2022] Costs LR 1337
As has been well documented, in October 2020 the Rules were amended with regards to Budget variations. Once the Court has approved a Parties’ Budget, the Parties are required by the Rules to revise their Budget if significant developments in the litigation warrant such revisions.
This was considered in the recent case of Finsbury Food Group plc v Axis Corporate Capital UK Ltd and Others [2022] Costs LR 1337.
The Rules
CPR 3.15A provides that:
(1) A party (“the revising party”) must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions.
(2) Any budgets revised in accordance with paragraph (1) must be submitted promptly by the revising party to the other parties for agreement, and subsequently to the court, in accordance with paragraphs (3) to (5).
(3) The revising party must—
(a) serve particulars of the variation proposed on every other party, using the form prescribed by Practice Direction 3E;
(b) confine the particulars to the additional costs occasioned by the significant development; and
(c) certify, in the form prescribed by Practice Direction 3E, that the additional costs are not included in any previous budgeted costs or variation.
(4) The revising party must 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.
(5) The court may approve, vary or disallow the proposed variations, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed, or may list a further costs management hearing.
(6) Where the court makes an order for variation, 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.”
There is no definition as to what a ‘significant development’ is (per Sharp –v- Blank & Ors [2017] EWHC 3390 (ch) and each case is determined on its facts.
The Facts
The underlying litigation concerned a claim in relation to the Defendant’s liability under a warranty and indemnity insurance policy which was valued at approximately £4,000,000.00.
Following a Cost Management Order being made, the Defendant sought to revise their Budget to account for the following proposed significant developments:
1) An increase in the level of quantum in view of amendments to the case (Issue/Pleadings and Expert Reports)
2) The unanticipated level of disclosure (Disclosure and Expert Reports)
The issue of the Budget revision was heard before Mr Nicholas Vineall KC (Sitting as a Deputy Judge of the High Court).
In considering whether the above amounted to significant developments warranting a revision of the Budget, Mr Vineall KC commented that: “The significant developments in this case are, at least at a high level, agreed. They are a development … The difficulty facing the court is the difficulty which always faces the court, which is that this is not an assessment of costs, that I am much more distant from the detail than the parties or their counsel, but I have to make value judgments as to what is reasonable and proportionate and in this case, some judgments as to the link between the increased costs claimed and the significant developments.”
In the Issue/Pleadings phase, the Defendants’ approved Budget figure was £47,000.00 and a further £36,500.00 was sought on account of the significant developments relating to amendments to the Claimant’s Pleadings and the work associated with the same, for which the Claimant had offered £18,250.00. An additional amount of £30,000.00 was allowed (with the majority of the same being incurred) on the basis that “the increase is, for the most part, justified.”
In the Disclosure phase, the Defendants’ approved Budget figure was £38,000.00 and an additional £110,000.00 was allowed against the additional £156,000.00 sought, for which the Claimant had offered £78,000.00. It was accepted by the Claimant that the disclosure exercise had been a much more forensic exercise as in view of the type of claim, it was only ever the Claimant who would have disclosure to provide. There were also allegations that the Claimant’s disclosure was inadequate. In reaching his decision, Mr Vineall KC commented that “It is difficult for me, without having all the detail available and without a very granular explanation of the increased costs, to make a judgment. Perhaps, inevitably, I think, it lies somewhere between the parties’ positions. I do take into account that there is massive cost engendered in litigation when, instead of doing everything all at once, you have to keep coming back to it, and keep coming back to it, and keep coming back to it, and I am satisfied that that is what has happened here.”
In the Expert Reports phase, the Defendant’s approved Budget figure was £40,000.00 and an additional £199,000.00 was sought, the additional costs were broken down as to £19,000.00 for time costs, £9,000.00 for counsel and £171,000.00 for expert fees. Mr Vineall KC here commented that “I say straightaway that the extra time costs of solicitors and the extra counsel costs seem to me to be reasonable, but I have to say I am much more concerned about the experts’ fees, and I have to say I do entertain some doubts as to whether what is happening here to some extent is accounted for by an undercooking of the costs of the expert in the original costs budget.” The Defendants argued that the costs increase for the initial report were partly caused by piecemeal disclosure of documents and the problems caused by missing disclosure, and in considering the submissions made determined that “it seems to me obvious that extra costs would be caused by that, but I have to say I think the expert fees overall claimed are not reasonable and proportionate to the likely effect of the disruptive amendments, and doing the best I can, as against the £199,000 sought, I am going to allow £120,000 on the budget.”
Impact and MRN’s Conclusions
Whilst on first glance this is a good result, it is interesting that the Judgement does not appear to account for the ‘promptness’ provisions referred to above, and goes against recent case law on the issue given that the majority of costs were incurred at the point the budget revisions were sought.
We are of the opinion that it remains of the utmost importance to regularly review costs against the approved budget to determine whether there are any significant developments in the litigation in order for the Application to have the best chance of success.
If you feel that there has been a divergence from your last agreed or approved Budget, please do contact us to discuss how we can assist.