18 April 2013Print This Post

High Court issues strong warning over costs budget mistakes

Budget errors: lack of prejudice not usually a strong enough reason

It will usually be “extremely difficult” to persuade a court to revise a costs budget that contains mistakes, even if the other party has not been misled or suffered prejudice, the High Court has warned.

Mr Justice Coulson said there was “considerable force” in the argument that “if approved costs budgets can be revised at a later date because of mistakes or self-induced inadequacies in the original, the whole purpose and effect of the new costs management regime may be thwarted”.

Though the case – Murray & Anor v Neil Dowlman Architecture Ltd [2013] EWHC 872 (TCC) – related to the pre-1 April costs management pilot in the Technology and Construction Court, the judge said the new CPR were “very similar”.

The error in the approved £82,500 budget was the claimants’ solicitors’ failure to be clear that it excluded a success fee and after-the-event insurance premium. The defendant had been notified about both and had, in fact, raised the issue a month after the budget was approved.

The claimants’ solicitors issued an application for relief from sanctions, but Mr Justice Coulson said this was not the situation and in effect the solicitors were asking for permission to revise the budget.

He said: “In my view, in an ordinary case, it will be extremely difficult to persuade a court that inadequacies or mistakes in the preparation of a costs budget, which is then approved by the court, should be subsequently revised or rectified…

“The courts will expect parties to undertake the costs budgeting exercise properly first time around, and will be slow to revise approved budgets merely because, after the event, it is said that particular items had been omitted or under-valued. I also agree that any other approach could make a nonsense of the whole costs management regime.”

The judge said that in this case there could be no suggestion that the defendant was misled or confused by the error. “However, I am not persuaded that the absence of prejudice alone would be sufficient (either in this case or more widely) to justify the revision of an approved budget.

“The whole basis of the recent amendments to the CPR is the emphasis on the need for parties to comply with the CPR, and the court orders made under it. It will, I think, no longer be possible in the ordinary case for parties to avoid the consequences of their own mistakes simply by saying that the other side has not suffered any prejudice as a result.”

Nonetheless on the basis of the particular facts of the case – relating to the pre-1 April Form HB – the judge allowed the budget to be revised.

By Neil Rose

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