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Monitoring Costs Budgets – Part Two: Revising the Costs Budget and why being proactive is the answer

The requirement to monitor and revise the precedent H costs budget has been amplified, if the maximum costs recovery is to be achieved.

The obligation to revise a costs budget is now mandatory following one of the many recent rule changes, CPR 3.15A (2) now states that “Any budgets revised in accordance with paragraph (1) must be submitted promptly by the revising party to the other parties for agreement, and subsequently to the court, in accordance with paragraphs (3) to (5)”. Paragraph (1) states that “a party (“the revising party”) must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions”.

This change has cemented the comments made at paragraph 66 of Sharpe v Blank & Ors [2017] EWHC 3390 (CH) 21 December 2017 when Chief Master Marsh stated that “The revision of budgets under paragraph 7.6 is not optional. It is a requirement placed on the parties. This makes sense because once a costs management order has been made, the court is under a duty to manage the costs to be incurred”. The rules at the point of delivery of this judgment at CPR 3 PD 7.6a stated that, “Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions”. Master Marsh found that revisions to costs budgets were mandatory despite the rules stating that parties “should”, rather than “must”, revise the costs budget.

The rule change relating to the mandatory requirement to revise costs budgets has now addressed this, and parties must revise their costs budget if there has been a significant development in the litigation, and this must be made promptly.

However, the rules committee have not amended the rules to include any guidance regarding what is deemed a significant development. Determination of this is subjective and can lead to inconsistency, however there is some case law emerging that has created some assistance in that regard. Consequently, without any direction from the Judiciary, the assessment of this continues to be open to interpretation.

This absence of guidance creates uncertainty in determining whether a development is significant, and this naturally leads to problems if the assessing Judge’s view differs. If parties consider that a development is not significant and concludes that an application to revise the costs budget is not required, but the assessing Judge later finds that the development is significant, then the mandatory requirement to revise the costs budget will not have been satisfied.  Because of that, the assessing Judge can refuse to address the question of whether there has been any good reason to depart from the costs budget. The “good reason” test allows parties at detailed assessment to request costs that are in addition to the budgeted costs that were approved, but again determination of what is a “good reason” is open to interpretation and will be decided by the assessing Judge.

It is essential that the costs budget is continually reviewed, in particular the assumptions, alongside the case to identify any developments and to determine whether they are significant. Monitoring the costs budget enables any costs budget revision to be made promptly in the event that a significant development is identified. The Judiciary appreciates that monitoring legal spend is an integral part of litigation and the rules include a provision to recover the costs in that regard from the other side. The rules allow parties to recover a maximum of 2% of the assessed costs budget, and in exceptional circumstances this cap can be exceeded.

Monitoring the costs budget throughout the lifetime of the claim does allow parties to quickly identify the up-to-date costs position, which assists for a number of reasons. For example, this project management creates transparency and provides the client with more certainty in terms of how much they can expect to recover from the other side. In respect to further benefits from monitoring please read our previous blog.

Please do contact the team to explore how monitoring the costs budget can assist. Our award- winning team of legal costs specialist can assist you with any of your legal costs requirements and can be contacted on 01733 350 880 or by email mail@aandmbacon.co.uk. For more information please do visit our website www.aandmbacon.co.uk

Published 12 August 2021

Author – Sue Fox

 

 

 

 

 

 

 

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