Out-Law / Your Daily Need-To-Know

Cost budget revisions to fix mistakes unlikely to be allowed, says judge

Out-Law News | 22 Apr 2013 | 4:05 pm | 2 min. read

Parties to civil litigation must be able to properly justify the need to make any changes to an approved costs budget, a High Court judge has warned.

In a recent ruling, Mr Justice Coulson said that it would usually be "extremely difficult" for parties to be able to persuade a court to be allowed to make changes to their costs budget because of "inadequacies or mistakes" in the original.

Litigation costs expert Keith Levene of Pinsent Masons, the law firm behind Out-Law.com, said that the judge's comments showed that courts were increasingly taking a "tougher stance" on budgeting issues. A new costs management regime was introduced in the majority of civil cases at the start of this month, although the decision related to an earlier pilot scheme run by the Technology and Construction Court (TCC).

"The case is an example of the court with the most experience of costs budgeting, as a result of the pilot, making it clear that courts will not tolerate inadequacy or mistakes as an excuse to make changes to an approved costs budget," Levene said.

"Although there is nothing stopping parties from making an application to the court to amend their budget at any time, they must be able to justify any increase based on a material change in the circumstances of a case and not simply because they 'got it wrong'," he said.

The new costs management regime requires most parties in civil court actions to prepare and exchange costs budgets for agreement by the court. Parties that do not file a budget will be heavily penalised. Parties can submit amendments to the budget at any time; however, approval will be at the discretion of the court. Costs recoverable by the winning party will be linked to the court-approved budget.

In this case, the claimants' solicitors had not been clear that an approved budget excluded a success fee and after the event (ATE) insurance premium. The defendant was aware that both of these would be included in any award, so had not been "misled or confused". Mr Justice Coulson allowed the amendment as the solicitors had not filled out the correct form, which would have included a box to be ticked to indicate that any success fee or ATE premium was excluded. However, he said that it would likely be "extremely difficult" to persuade a court to allow the same under the new regime.

"The whole basis of the recent amendments to the CPR is the emphasis on the need for parties to comply with the CPR, and the court orders made under it," he said. "It will, I think, no longer be possible in the ordinary case for parties to avoid the consequences of their own mistakes simply by saying that the other side has not suffered any prejudice as a result."

He added that there was "considerable force" in the suggestion that, if an approved costs budget could be revised at a later date because of "mistakes or self-induced inadequacies" in the original, "the whole purpose and effect of the new costs management regime may be thwarted".

"The courts will expect parties to undertake the costs budgeting exercise properly first time around, and will be slow to revise approved budgets merely because, after the event, it is said that particular items had been omitted or under-valued," he said. "I also agree that any other approach could make a nonsense of the whole costs management regime."