“Please, sir, I want some more” –The court’s power to revise costs budgets upwards

Articles | Tue 16th Jul, 2019

In Seekings v Moores [2019] EWHC 1476 (Comm) (May 2019), the Defendant sought to revise his costs budgets upwards by a total of over £130,000 on the basis that there had been significant developments in the litigation. HHJ Worster, sitting as a judge of the High Court, was asked to determine (1) whether the court has power to allow an increase in circumstances where the vast majority of the increased costs in the revised budget have already been incurred, and (2) whether on the facts there were any significant developments which would justify a revision.

The relevant rules on costs budgets are set out at CPR 3.12 – 3.15. Those rules provide:

CPR 3.12

(1) The purpose of costs management is that the court should manage both the steps to be taken and the costs to be incurred by the parties to any proceedings so as to further the overriding objective.

CPR 3.15

(1) In addition to exercising its other powers, the court may manage the costs to be incurred (the budgeted costs) by any party in any proceedings.

(2) The court may at any time make a ‘costs management order’. Where costs budgets have been filed and exchanged the court will make a costs management order unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made. By a costs management order the court will—

(a) record the extent to which the budgeted costs are agreed between the parties;

(b) in respect of the budgeted costs which are not agreed, record the court’s approval after making appropriate revisions;

(c) record the extent (if any) to which incurred costs are agreed.

(3) If a costs management order has been made, the court will thereafter control the parties’ budgets in respect of recoverable costs.

(4) Whether or not the court makes a costs management order, it may record on the face of any case management order any comments it has about the incurred costs which are to be taken into account in any subsequent assessment proceedings.

Practice Direction 3E further provides:

7.4 As part of the costs management process the court may not approve costs incurred before the date of any costs management hearing […]

7.6 Each party shall revise its budget in respect of future costs upwards or downwards […]

What constitutes “significant developments”?

The judge dealt first with the question of what might constitute “significant developments”. Highlighting the fact that the origin of costs budgeting lay in the Jackson reforms, HHJ Worster observed that “the court expects parties to prepare costs budgets with care” and that “it is not consistent with the overriding objective to allow parties to amend their budgets because they have overlooked something or made some careless mistake” (at para 30). 2 important functions of costs budgeting was to allow litigants to understand the costs consequences of managing the case in a particular way and to appreciate their possible costs exposure.

The court then turned to consider the Defendant’s witness statement in support. Dealing with the matters raised therein, HHJ Worster held that:

1. The continuing cost of the electronic disclosure platform should have been anticipated by the Defendant;
2. The Claimant’s requests for information had been made before the Defendant prepared his budget, and therefore the Defendant should have budgeted for the requests;
3. The fact that the Defendant had incurred costs in unsuccessfully resisting the Claimant’s requests for information was irrelevant. It only indicated that the Defendant had failed to property clarify his case at the outset;
4. Whilst the Defendant had had to review more documents than they had anticipated, the documents in question were the Defendant’s own documents and the Defendant should have accurately budgeted for their review;
5. The fact that the greater number of documents had increased the fees charged by the Defendant’s expert was again due to the Defendant’s fault in failing to accurately assess the number of documents that would need to be reviewed;
6. The Defendant should have anticipated that a list of issues might be required, as such lists are invariably helpful in complex litigation and the Defendant should have budgeted accordingly.

The court’s power to allow an increase retrospectively

On the basis that there were no “significant developments”, the judge considered it unnecessary to determine the issue of the court’s jurisdiction to increase costs budgets where costs had already been incurred. It seems clear, however, from the CPR rules cited, and from the judge’s underlining of the word “future” in PD3E, para 7.6 and his general discussion of the origins of costs budgeting, that the court was leaning against the applicant on the point. Where there is a truly significant development, parties should apply promptly to the court for permission to revise their budgets before costs have been incurred.

Conclusion

The master in Dickens’ Oliver Twist beat poor Oliver about the head with a ladle when he asked for more gruel. HHJ Worster was much gentler with the applicant in this case, but the message is nevertheless clear. Parties must think carefully at the outset of litigation about the work that will need to be done. Where there is a need to revise, an application should be made promptly. Lastly, it should be remembered that costs budgets should represent the upper end, or “worst case” scenario, of the possible expenditure of a party. Better to budget high and spend low, than to budget with caution only to later spend money on applications to amend.