Cost Budgets: Not Necessarily for Life, Maybe Just For Christmas – CPR Rule 3.15A

The Covid-19 pandemic has dominated the legal landscape throughout 2020 with many changes being made to the way professionals work as well as the rules they are subject to. There have been many amendments and additions made to the Civil Procedure Rules as a result of the pandemic, however they are not the only such changes that have been made.

Civil Procedure (Amendment No.3) Rules 2020 (SI 2020/747) sets out changes that impact upon the process of variation of costs budgets, including the introduction of rule 3.15A, which provides:

(1) A party (“the revising party”) must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions.

(2) 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).

(3) The revising party must-

(a) Serve particulars of the variation proposed on every other party, using the form prescribed by Practice Direction 3E;
(b) Confine the particulars to the additional costs occasioned by the significant development; and
(c) Certify, in the form prescribed by Practice Direction 3E, that the additional costs are not included in any previous budgeted costs or variation.

(4) The revising party must submit the particulars of variation promptly to the court, together with the last approved or agreed budget, and with an explanation of the points of difference if they have not been agreed.

(5) The court may approve, vary or disallow the proposed variations, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed, or may list a further costs management hearing.

(6) Where the court makes an order for variation, it may vary the budget for costs related to that variation which have been incurred prior to the order for variation but after the costs management order.

Any party wishing to revise their cost budget should do so promptly, as soon as a significant development that warrants such a revision becomes apparent. Pursuant to PD3E para 3(b) this must be done using Precedent T (annexed to PD 3E) which must then be submitted to the other parties for their agreement/points of dispute, and it must then be submitted to the court together with the last approved or agreed budget with an explanation of any points of difference.

There is no definition of significant developments but examples that have been accepted (CPR 3.15A.1), depending on the circumstances of the case, are the grant of permission to call additional expert witnesses, the adjournment of a trial, receipt of far more documents by way of disclosure than could have been foreseen and a change of position by the defendant in relation to causation in a clinical negligence claim such that the instruction of leading counsel by the claimant was justified.

This process can be undertaken at any stage during the proceedings, including during trial, however at that late stage, pursuant to National Museums and Galleries on Merseyside Board of Trustees v AEW Architects ad Designers Ltd [2013] EWHC 3025 (TCC) it may not be appropriate for the trial judge to go further than to give an indication as to what adjustment may be appropriate.

Guidance

It has of course always been prudent for parties to regularly review their costs budgets, but it is now arguably even more important to do so. Rule 3.15A is clear that any proposed revision to a budget must be notified promptly thus when proceedings take an unexpected twist, which can often be the case, particularly in complex multi-track cases, it is important to not simply deal with the immediate issue that presents itself (albeit that in itself may be far from simple), but also to consider the potential impact that it may have on the cost budget and if necessary seek to vary the same.

Whilst Rule 3.18(2) may potentially be used as a saving provision if a cost budget has not been varied this should not be relied upon as it is far from certain, particularly where there is no guidance as what would justify a ‘good reason’ and indeed the introduction of Rule 3.15(A) may imply that the threshold to satisfy the ‘good reason’ criteria is now likely to be higher than it was previously.