A High Court master has sent out a strong message on the need to seek budget variations promptly after refusing a bid to increase two claimants’ budgets by £1.3m.
Master Kaye warned parties that wanted to maximise their recoverable costs to keep their costs budgets under review.
“If there is a significant development that means that the basis on which the costs budget was prepared has changed in a way that warrants a revision, the parties should follow CPR 3.15A.
“This case is an example of the difficulties that may arise when that approach is not adopted.”
Rule 3.15A, which came into force last October, introduced a formal procedure to revise budgets in the event of significant developments in the litigation, whether upwards or downwards. It said this must be done “promptly”.
The developer claimants in Persimmon Homes Ltd & Anor v Osborne Clarke LLP & Anor  EWHC 831 (Ch) are suing the Bristol-based law firm for £10m over alleged negligence in drafting of two option agreements and ancillary advice relating to the development of land in Oxfordshire.
Osborne Clarke has issued a claim for £400,000 in unpaid fees against Persimmon Homes; the cases are being case managed together.
The claimants’ £1.46m budget was approved by Deputy Master Linwood in December 2019, of which just over £1m were future costs. Before Master Kaye a year later, they sought a variation to increase the budget to £2.8m, taking future costs to £2.4m.
Disclosure was the main cause, with the claimants saying they budgeted on the basis of model A and B under the disclosure pilot scheme, only for them to end up using model C. This was a significant development, they argued.
However, the master found that, by the time of the case and costs management conference (CCMC), the claimants anticipated this change but allowed the CCMC to go ahead without saying so.
It was “simply not good enough” to say they did not have time to revise the costs budget in advance of the CCMC and failed tell the deputy master and Osborne Clarke that they had not done so – the disclosure pilot explicitly allows for the deferral of budgeting in these circumstances but the claimants did not use this facility.
The claimants also told the master that they could not have accurately foreseen the scale of the disclosure exercise at that point, and that it only began to become clear several months later.
This meant it was only when considering the disclosure exercise in retrospect that it was possible to accurately understand its costs and its impact on the later phases of the budget.
Master Kaye rejected this too, saying it approached the purpose of costs and case management “from the wrong end”.
She stressed: “It is primarily a prospective not retrospective exercise. Whilst these arguments may assist on a detailed assessment to support a contention that the developers have a good reason to depart from the last approved costs budget, I am not persuaded that they assist on an application to vary.”
As a result, given it was already known at the time the budget was approved, the change in disclosure model did not constitute a significant development.
Even if it was, Master Kaye went on, “it does not seem to me that a 12-month delay until 3 December 2020 before making an application to vary can be considered prompt”.
This was the same for two other, much smaller, elements of the budget that the claimants sought to vary – a request for further information and a second CCMC.
There was no evidence that the claimants had considered the former to be a significant development when it was served in February 2020, while the £73,000 extra sought was “modest” in the context of the budget as a whole.
The master concluded that the request and associated costs were not a significant development that warranted a revision.
Also, it was again not made promptly – 10 months after the request and four months after the costs had been incurred.
“I do not accept [the] argument that an application to amend a costs budget can be made after all the costs have been incurred and/or retrospectively after the full extent of the effect of the significant development is understood.
“That is not what the clear wording of CPR 3.15A says nor is it the actual or intended purpose or effect of CPR 3.15A (6). The proposed variations must be submitted promptly after the identification of a significant development said to warrant a revision in the costs budget.”
She made a similar finding in respect of the second CCMC.
Master Kaye said: “It is not the function of an application to vary to enable the developers to address any overspend or miscalculation after the event and after a large part of those costs are incurred.
“I agree with [counsel for the defendant] that the prospective predictability and control of costs outweighs the retrospective correction of costs in terms of the exercise of discretion. It is here that the issues of promptness and significance of the development re-emerge in particular as part of the exercise of discretion.
“The prejudice to the developers in having to seek to persuade a costs judge after the event to allow them to vary their costs budget or to determine the costs that are at large is far outweighed by the prejudice to [Osborne Clarke].”