Failure to anticipate work does not justify a revision to a costs budget (Seekings v Moores)

This decision includes a comprehensive review and summary of earlier decisions in which comment was made on what may or may not represent a ‘significant development’ which justifies a revision to a budget. In this case, it was held that where a defendant failed to respond adequately to a Part 18 request, served prior to agreement of the costs budgets, the work entailed in dealing with the request, after the costs budgets had been agreed, was not a ‘significant development’ which justified the increase. The court held that the purported ‘significant developments’ should have been anticipated when the budget was drafted, had been caused by the defendant’s own poor conduct, and/or led to costs being incurred which were the subject of costs orders which had already been made. The defendant’s application to revise his budget therefore failed. Written by Alex Bagnall, technical manager at Total Legal Solutions.

Seekings and others v Moores and others; Moores v Seekings and another [2019] EWHC 1476 (Comm) (07 June 2019)

What are the practical implications of this case? 

This case adds to the growing body of jurisprudence which relates to applications to revise costs budgets made under CPR PD 3E, para 7.6.

The judgment makes it clear that ‘significant developments’ are necessarily fact-sensitive. However, some broader principles can be identified:

  1. it is essential that costs budgets are prepared with care
  2. if work should reasonably have been anticipated but was not included in a budget, the later identification that such work has to be done will not justify a revision
  3. the court will be more circumspect about applications for revisions when the original costs budgets were agreed rather than being revised and/or approved by the court
  4. additional work which is caused by the conduct of the party seeking to amend their budget will not justify a revision
  5. the making of unanticipated applications can represent a significant development. However, if the costs of those applications have already been determined, it will not be appropriate to revise the budget

What was the background? 

The parties were engaged in litigation arising from their involvement in business together. The costs budgets had been directed.

Before the parties completed their costs budgets, Mr Seekings served a Part 18 request on Mr Moores.

Precedents H were exchanged. Mr Moores’ budget made it clear that his anticipated costs included work ‘dealing with replies to request for further information’. The parties agreed each other’s budgets as follows:

  • Mr Seekings—£510,493, of which £329,795 were estimated costs
  • Mr Moores—£396,327 of which £254,167 were estimated costs

Because the Precedents H had been agreed, the court had not undertaken any costs management exercise—it had simply recorded the parties’ agreement in accordance with CPR 3.15(2)(a).

Mr Moores had responded to the Part 18 request in an unsatisfactory manner. A hearing had taken place and Mr Moores had been directed to respond to the request properly. Mr Moores had failed to comply with this order and an application for an unless order compelling him to do so had been made by Mr Seekings. Mr Moores had been ordered to pay the costs of both of those hearings.

Shortly before the unless order application was heard, Mr Moores indicated that he intended to apply to revise his budget. He sought an additional £130,009 across the issue/pleadings, disclosure, expert reports and Contingency A phases. The majority of these additional costs had been incurred before the application to revise had been made.

Two issues were before the court:

1.  does the court have jurisdiction to manage costs which have already been incurred (the jurisdiction point)?

2.  have there been any ‘significant developments’ which justify a revision to Mr Moores’ budget (the significant development point)?

What did the court decide?

The court described the jurisdiction point as being a ‘difficult question’. It therefore dealt first with the significant development point on the basis that, if there were no ‘significant developments’ and/or any ‘significant developments’ did not justify the revision of the budget, there was no requirement to attempt to resolve the jurisdiction point.

What is a significant development?

The court may only revise costs budget where there has been a ‘significant development’ in the litigation (CPR PD 3E, para 7.6). ‘Significant development’ is not defined in CPR. The court therefore reviewed commentary in practitioner textbooks and various authorities in order to ascertain what a ‘significant development’ could be.

It was held that matters which arise which were known about or should have been considered at the time of the costs management order will not represent a ‘significant development’ (see Churchill v Boot [2016] EWHC 1322 (QB)).

Where far more documents are produced as part of a disclosure exercise than were anticipated, that can represent a ‘significant development’ (see Sharp v Blank [2017] EWHC 3390 (Ch)). However, ‘it is not open to a party to rely upon its own failure to reasonably anticipate what the litigation will involve and then ask for a second bite at the cherry’.

If a mistake is made when preparing a budget, or if the drafter of the budget failed to appreciate what the litigation actually entailed, this will not usually permit a party to claim later that there has been a ‘significant development’ (see Sharp v Blank [2017] EWHC 3390 (Ch)Murray v Dowlman [2013] EWHC 872 (TCC) and Elvanite v AMEC Earth [2013] EWHC 1643 (TCC)[2013] 4 All ER 765).

The court went on to observe:

‘The court expects parties to prepare costs budgets with care. It is not consistent with the overriding objective to allow parties to amend their budgets because they have overlooked something or made some careless mistake...

‘The process of revision can be a costly and sometimes lengthy one, and whilst costs budgeting is not there to impose some de facto costs cap, allowing a party a “second bite” at a costs budget when the case develops in a way which should have been foreseen does not further the overriding objective. Hence the requirement for there to be a ‘significant development’ which warrants revision.’

The court concluded that the judgment of Master Davison in Al-Najar v The Cumberland Hotel [2018] EWHC 3532 (QB) at para [8] was a ‘most helpful summary’ of the broad principles to be applied when dealing with an application to revise a costs budget:

‘(a) Whether a development is "significant" is a question of fact which depends primarily on the scale and complexity of what has occurred.

(b) If what has occurred is something that should reasonably have been anticipated by the party seeking to revise its budget, then that party will probably be unable to label it significant or, for that matter, a development.

(c) However, there is no requirement that the development must have occurred other than in the normal course of the litigation. That is clear from the final sentence of para. 37 of Master Marsh's decision which I have quoted and also from the fact that in that case a revision of the trial estimate, the disclosure of 984 documents and the service of an expert report were all characterised as significant developments.

(d) As a matter of policy, it seems to me that the bar for what constitutes a significant development should not be set too high because, otherwise, parties preparing a budget would always err on the side of caution by making over-generous (to them) assessments of what was to be anticipated.

(e) Lastly, and I think this is uncontentious, if there has been a significant development, then the question is whether the figures in the revised budget are reasonable and proportionate in the light of the development.’

So, were the purported developments significant?

Disclosure

The evidence in support of the application suggested that the disclosure timetable had been extended because of Mr Seekings’ Part 18 request. This had led to documents being stored on the disclosure platform for longer than had been anticipated.

In submissions, it was said that more keywords than had been anticipated were being used which led to more documents needing to be reviewed.

The court refused the increase on the basis that:

1.   the continuing cost of the disclosure platform should have been anticipated. In the alternative, the additional costs were relatively minor

2.   the Part 18 requests had been made before Mr Moores prepared his budget. Those questions had not changed. The work required should therefore have been anticipated

3.  Mr Moores should not be entitled to increase his budget due to his failure properly to clarify his case or to provide further information when ordered to do so

4.  an increase in the defendant’s costs flowing from his failure to answer the requests properly will not warrant a revision to his budget

5.  the documents which were said to justify the increase were Mr Moores’ documents. He should have been able to anticipate the volume of those documents

Expert evidence

Mr Moores had changed his expert. The new expert had originally agreed to act for the fee agreed in the budget, but his fee had subsequently significantly increased because of the additional disclosure documents and Mr Seekings’ Part 18 request.

The court held that the reasons for the increases were an amalgam of matters which should reasonably have been anticipated and matters which did not warrant an increase. The increase was refused.

Issues and pleadings

The increase in this phase was originally said to be due to Mr Seekings’ Part 18 request. However, the evidence in support of the application indicated that the increase arose out of the direction for a list of issues and Mr Seekings’ approach to Mr Moores’ attempts to agree that list of issues.

The court held that lists of issues are common in litigation of this sort and should have been anticipated. In any event, it was not proportionate to allow more for this phase than had already been budgeted. The request was refused.

Contingency A - replies to Part 18 requests

Mr Moores relied on the fact that there had been two hearings in relation to the Part 18 requests which had not been anticipated when the budget was drafted.

The court observed that, even if the additional hearings did represent ‘significant developments’, it had already made costs orders against Mr Moores in respect of those hearings. As such, the hearings did not justify a revision to the budget.

The jurisdiction point

Because the significant development point was decided against Mr Moores in respect of every request to revise his budget, it was not necessary for the court to address the jurisdiction point.

Case details 

  • Court: High Court, Business and Property Courts, Circuit Commercial Court (QBD)
  • Judge: HHJ Worster (sitting as a judge of the High Court)
  • Date of judgment: 07/06/2019

 

Alex Bagnall is a technical manager at Total Legal Solutions and this analysis was first published on Lexis®PSL Dispute Resolution on 14 June 2019.  For a free trial, click  here.

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