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Bar for budget revision “should not be set too high”

Kendall: Failing to revise budgets is storing up problems

The bar for what constitutes a ‘significant development’ requiring revisions to a budget “should not be set too high”, a Queen’s Bench master has said.

Costs lawyers have backed the ruling and told solicitors that they should be making more applications to revise budgets than they do now.

The claim in Al-Najar and Ors v The Cumberland Hotel (London) Ltd [2018] EWHC 3532 (QB) [1] – decided in October but only published this week – arose from an attack carried out on guests in London’s Cumberland Hotel, causing serious injuries to three members of the same family.

The claimant’s budget for the liability-only trial in a case the master described as complex was set last year at just over £1m.

The disclosure phase was approved at £62,626. At the time their solicitors were expecting somewhere between 1,000 and 1,500 documents, although this was not spelt out. Master Davison said: “I will say that it is perhaps not only with the benefit of hindsight that it might have been prudent to have recorded that in the assumptions.”

However, 3,250 documents were in fact disclosed and the claimants sought to increase their budget by 78% to £112,000. Most of the increase was in the solicitor hours but the figure allowed for counsel was doubled while the figure allowed for the expert increased eightfold to £9,000.

Citing the practice direction and the decision of Chief Master Marsh last year in Sharp v Blank, Master Davison said whether a development was ‘significant’ was a question of fact which depended primarily on the scale and complexity of what has occurred.

It should not have been something that was reasonably foreseeable at the time, he added.

“As a matter of policy, it seems to me that the bar for what constitutes a significant development should not be set too high because, otherwise, parties preparing a budget would always err on the side of caution by making over-generous [to them] assessments of what was to be anticipated.”

Here he found the development was significant: “The disclosure has been of a scale and complexity that is much larger than was actually budgeted for, which was not, in fact, envisaged and which could not reasonably have been envisaged.”

He allowed the revision of the fees for solicitors and counsel – and in fact suggested that at around three hours per ring-binder of documents may have been an underestimate – but found the increase in the expert’s costs unexplained.

“That figure, at the risk of tinkering, I will not approve. I would allow a doubling in the expert’s costs but no more than that.”

Francis Kendall, vice-chairman of the Association of Costs Lawyers (ACL), said: “We strongly support the comments of Master Davison that the bar for what constitutes a significant development should not be set too high.

“The ACL’s surveys over the five years since costs budgeting came into force have consistently shown that solicitors are not making enough applications to revise their budgets, when we all know in practice how often they are blown off course by events that were not reasonably foreseeable at the time they were set.

“Failing to revise a budget in such circumstances is just storing up problems for the later assessment of costs. We urge solicitors to learn from this case and keep in mind the need to update their budgets when the situation demands it.”