In Persimmon Homes Limited & Taylor Wimpey UK Limited and Osbourne Clark LLP & Osbourne Clark (a firm)  EWHC 831 (Ch) the High Court dismissed the Claimants’ bid to double an approved costs budget.
The Claimants (hereafter ‘the Developers’) brought a £10m claim against the Defendants (‘OC’) for professional negligence.
The Procedural chronology was:
- CCMC before a Deputy Master on 18 November 2019;
- The Deputy Master adjourned the CCMC part-heard to 3 December 2019;
- On 3 December 2019 the Deputy Master approved the Developers’ budget in the sum of £1.45m;
- The CCMC order (3 December 2019) provided for a further CMC;
- The first further CMC was heard on 26 August 2020 and adjourned to 7 January 2021;
- On 3 December 2020 the Developers submitted their Precedent T to OC and subsequently issued their application to vary their budget on 21 December 2020;
- The second further CMC proceeded on 7 January 2021; and
- The application to vary came before the court on 18 January 2021.
The judgment set out the differences between CPR 3.15A and the ‘old’ PD3E 7.6. In short, CPR 3.15A contains peremptory language – ‘must’ is in place of ‘shall’ (i.e. a mandatory requirement) – and there is an explicit requirement for promptness.
The Judge set out ‘the threshold test’ that: (i) the applicant must satisfy the court that there has been a significant development in the litigation since the last approved budget which warrants a revision to the approved budget, and (ii) that the ‘particulars of variation’ (i.e. the Precedent T) has been submitted promptly both to the other side and to the court.
It is only once the threshold test has been met that the court may then consider the exercise of its discretion to ‘approve, vary or disallow the proposed variations’.
The Developers sought to increase their approved budget from £1.45m to £2.36m citing three ‘significant developments’: (1) requests for further information (RFIs); (2) further CMCs and (3) disclosure – the latter being by far the biggest issue.
In brief, the disclosure issue was that the parties had, prior to the first CCMC, been unable to agree the approach to disclosure under PD51U – the Developers basing disclosure on Models A and B (‘adverse documents’ and ‘Limited disclosure’) – although on or about 18 November 2019 the parties agreed Model C (‘Request-led Search based disclosure’).
The Developers filed a revised costs budget on 29 November 2019 which, the Developers said, was still based on Model A and B disclosure. On 3 December 2019, the Deputy Master approved the Disclosure Review Document (‘DRD’) based on Model C and the Developers’ revised costs budget.
Crucially, in light of the DRD, the Developers did not seek to vary or amend the costs budget before the CCMC order was sealed.
Leading Counsel for the Developers argued that the change to Model C in November 2019 was a significant development in the litigation which warranted a revision to the costs budget to the disclosure phase of £581k and to the later phases of £585k – a total increase of £1.167m across the budget as a result of the change to Model C.
The problem, for the Developers, was that the parties knew that disclosure would proceed under Model C from 18 November 2019 – ‘[the Developers] allowed the CCMC to continue on 3 December 2019 including the approval by the Deputy Master of a Model C DRD and their costs budgets which, they say, did not take into account the change to Model C. This allowed the Deputy Master and OC to proceed on what they say was the wrong basis. They did not seek time to amend the costs budget whether under PD51U or at all’.
In answer to the question of promptness, it was argued that it was only when viewing the disclosure exercise in retrospect that it was then possible to accurately understand the costs and the impact on later phases oof the budget. This was not accepted by the Judge who said ‘this approaches the purpose of costs and case management from the wrong end. It is primarily a prospective not retrospective exercise’.
Counsel for OC made a number of submissions: that the change to Model C was known before the budgets were approved (i.e. not a change which occurred after the last approved budget); that a variation to a budget is not intended to enable a party to add-in costs that they should have included in their original budget after the event. However, the principal argument was that application was too late, such that it failed the threshold test.
In respect of each ‘significant development’ cited by the Developers, the threshold test was not met because the application was not submitted sufficiently promptly. In respect of the RFIs the Precedent T was made ten months after the event. In answer to the Developers’ submission that an application can be made retrospectively (after the costs have been incurred), the judge re-stated that prompt action, upon identifying a significant development, is key. The application was too late.
As to the further CMCs, the application was submitted four months after the first further CMC took place. This was not prompt and it, too, failed the threshold test.
The second further CMC was interesting because the application (issued on 31 December 2020) preceded the CMC (on 7 January 2021). The question was whether the application was made promptly. The Judge said it was not – the second further CMC was listed on 26 August 2020 and the application – four months after the Order fixing the second further CMC – was issued too late.
As to Disclosure, the Court found that the Developers knew on 18 November 2019 that they were going to have to undertake disclosure on a different basis to the assumptions set out in their costs budget – at which point ‘the onus switched to the Developers to make their position clear to both OC and the Deputy Master rather than allowing the Deputy Master to cost and case manage, on their case, on the wrong basis’.
The change to Model C preceded the budget and was therefore not a significant development (given it was already known at the time the budget was approved) but, in any event, the application, 12 months after the change to Model C, was too late.
The absence of promptness is fatal to an application to vary a costs budget. The Judge noted that the case ‘emphasises the need for the parties to keep their costs budgets under review and to use the tools available to them’.