The High Court has considered the circumstances in which a costs budget, which has been approved by the court as part of a costs management order, can subsequently be revised or rectified: Murray & anor v Neil Dowlman Architecture Limited [2013] EWHC 872 (TCC).

Although permission to revise the budget was granted on the unusual facts of this case, the decision gives a strong steer that permission to revise a costs budget will not readily be granted in order to correct errors or inadequacies in the budget originally filed. This underlines the importance of getting the budget right first time around.

The decision also illustrates that it will not be sufficient to show that the error caused no prejudice to the opposing party. The judge (Coulson J) commented: “The whole basis of the recent amendments to the CPR [arising from the Jackson reforms] 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.”

Background

This case is proceeding under the pilot costs management scheme for cases in the Technology and Construction Court (TCC), under which the parties must file and exchange detailed costs budgets which the court may then approve after making any appropriate revisions. When assessing costs at the end of the case, the court will not depart from the approved budget unless satisfied that there is good reason to do so.

The rules require that where a party’s costs budget is no longer accurate, it must file and serve a budget revision showing what has changed and why. The court may approve or disapprove such departures from the previous budget.

The costs management regime which applies more broadly for cases commenced on or after 1 April 2013 contains very similar provisions, including that the court may “approve, vary or disapprove [any proposed] revisions, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed”. (Click here for more information on the costs management rules brought in from 1 April as part of the Jackson reforms.)

In this case the claimants’ costs budget was approved in the sum of £82,500. A month later, the defendant pointed out that the budget did not say it excluded the claimants’ conditional fee agreement (CFA) success fee and after-the-event (ATE) insurance premium. (Budgets in the TCC scheme are prepared in Form HB, with a box to be ticked to indicate what is excluded from the budget, but here the claimants had not used the correct form and therefore had not ticked the box.) The defendant said it intended to argue on any assessment that the claimants should not be permitted to recover any sum (including a success fee or ATE premium) over and above the budget.

The court considered whether the claimants should be permitted to revise the budget to clarify that it excluded the success fee and ATE premium.

Decision

Coulson J held that “on the particular and unusual facts of this case” the budget could be revised/rectified in this way.

He emphasised that, in an ordinary case, it will be “extremely difficult” to persuade a court that a budget should be revised to correct inadequacies or mistakes in the approved budget. He said:

“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.”

Any other approach could, he said, make a nonsense of the whole costs management regime.

There were however two factors which made this a very special case:

  • First, the defendant had not been misled or confused by the information provided by the claimants, and had not been prejudiced by it, as the defendant had known about the success fee and ATE premium throughout and had become aware of the mistake within weeks of the case management conference.
  • Secondly, the claimants’ error boiled down to a failure to tick the relevant box to indicate that the success fee / ATE premium were excluded. The judge said he was uncomfortable with the notion that a claimant should be penalised merely because of a failure to tick a box. This was reinforced by the fact that Precedent H (which is the costs budget form for cases falling under the new regime) expressly excludes the success fee and the ATE premium, without requiring a box to be ticked.

The judge said that the first of these, the absence of prejudice, would not be sufficient to justify the revision of an approved budget, either in this case or more generally. The critical point, on which he based his decision, was the second factor, arising out of the particular wording of the costs budget forms.

Comment

This decision is significant as the first reported authority in which the court has considered the proper approach to granting permission to revise or rectify an approved costs budget. Although decided under the TCC costs management pilot, there is no reason to think the court’s approach would be different under the broader costs management regime which applies for cases commenced on or after 1 April.

The judgment gives a strong indication that permission will not be granted lightly. In particular, it will not be sufficient to show that there was an error or inadequacy in the original budget and that the opponent has not been prejudiced. The obvious message is that parties preparing costs budgets will want to take care to include all appropriate items in the original budget, as they may not have another bite at the cherry.

In his judgment, Coulson J refers to the Court of Appeal decision in Silvia Henry v News Group Newspapers Ltd [2013] EWCA Civ 19 (see our post on the decision) which he says shows a “rigorous approach”. The passage quoted by Coulson J includes the statement that: “If, as is the intention of the rule, budgets are approved by the court and revised at regular intervals, the receiving party is unlikely to persuade the court that costs incurred in excess of the budget are reasonable and proportionate to what is at stake.” The present decision indicates that this rigorous approach will be applied not only to departures from the budget at the assessment stage, but also to whether revisions to the budget to correct mistakes or under-valuations should be permitted.