Costs Budgets: High Court has clarified the approach to revising costs Budgets and provided the guidance on the meaning of “significant developments”
Sharp v Blank and others [2017] EWHC 3390 (Ch)
The recent judgment on revising costs budgets handed down by Chief Master Marsh in the HBOS acquisition litigation sets out in great detail the principles of costs management and especially the process of revising costs budgets where there are “significant developments” in the litigation and contains a detailed consideration of what is meant by a “significant development” such that a budget should be revised.
This case involves 7 claims that are subject to a GLO (group litigation order), with approximately 5800 claimants making serious allegations against 5 former directors of Lloyds TSB and Lloyds TSB itself, in relation to the acquisition by Lloyds of Halifax Bank of Scotland plc and its participation in the UK Government’s Recapitalisation Scheme in 2008 and 2009. The case is currently in trial, which began in October 2017 and is due to conclude on 2 March 2018.
The background of this case is that on 27 January 2017, on the Claimants’ application, the Court made a CMO (costs management order) which directed the parties to file and serve costs budgets “calculated to today’s date for incurred costs and estimated costs thereafter through to the end of the trial”. The subsequent case management conference that was listed on 3 May 2017 did not take place as budgets had been agreed. A Consent Order was approved on 2 May 2017. It recorded that the budgets had been calculated in respect of the parties’ incurred and estimated costs as at 27 January 2017. The order, in addition, recorded that neither party had agreed to the other parties’ incurred costs and that the Court made no comments about incurred costs. The incurred costs to which reference is made are those incurred up to and including 27 January 2017.
In October 2017 the Defendants issued an application to revise their budget under the provision of Paragraph 7.6 PD3E on the basis that there had been seven developments which they said were significant.
The Claimants objected on a number of grounds including an argument that none of the matters relied upon can properly be classified as significant developments, that the Court has no jurisdiction to deal under the costs management regime with any costs that were incurred by the Defendants prior to the date of the hearing of their application and that the Court has no power, in any event, to treat interim applications as being significant developments as interim applications are altogether outside the costs management regime.
Chief Master Marsh considered the rules relating to budgeting and after outlining his reasoning in detail within paragraphs 45-61 of the judgment concluded on the legal issues, in summary, as follows:
1. “The Court has jurisdiction when revising a budget under PD3E 7.6 to revise a budget taking the last agreed or approved budget as the base reference point.
2. Where, as in this case, the budgets were directed to be prepared to an antecedent date, the relevant date is the date set by the court.
3. Costs which have been incurred since the date of the last agreed or approved budget (or the antecedent date) that relate to significant developments are, for the purposes of revision, placed in the estimated columns of the revised Precedent H in one or more phase. In some cases, it may not be obvious where they go (for example a late application for security for costs) but I can see no reason why Precedent H may not be adapted as necessary to accommodate work that does not easily fit in.
4. Interim applications may be significant developments as may the consequences that flow from an interim application.”
Thereafter Chief Master Marsh considered each “significant development” put forward by the Defendants and found that four of the seven extra elements were indeed “significant developments” that justified increasing the budget. An extension to the trial timetable by 48 days, substantial specific disclosure and service of a report by the Claimant from an expert that it was not anticipated the Claimant would instruct and was therefore not budgeted for in either party’s agreed budgets were all considered to be significant developments justifying revisions to the Defendants’ budget. However, the Defendants’ limited involvement in a third party disclosure application brought by the Claimants and the introduction of additional evidence by an expert after the joint expert meeting had taken place were not considered to be a significant development and the revision was refused. It was found that the adjustment to the evidence was “modest” and could therefore not be described as “significant” and therefore this revision was not permitted.
The outcome of this case is important for Claimants and for Defendants. The judgment provides a comprehensive overview of how the whole costs management process should work in practice. It is also reminds the parties that paragraph 7.6 PD3E is not optional, but “it is a requirement placed on the parties”. If there have been significant developments, the budgets should be revised. A claim for additional costs should not be left until a detailed assessment because the parties need to know what is their exposure to costs and the costs of detailed assessment should be minimised.
Tanya Bland