SIGNIFICANT DEVELOPMENTS IMMEDIATELY BEFORE THE CASE IS COSTS BUDGETED? WHEN IS THE SOLICITOR EXPECTED TO JUMP?
In Thompson -v- NSL Limited  EWHC 679 (QB) Master McCloud considered the issue of whether there had been significant developments sufficient to allow a revision of the costs budget when it was known at the time the budget was made that the claim had a significantly increased budget. The Master stressed that this was an unusual case and there had been significant developments sufficient to allow revision of the budget.
“there will be cases, and I think this is in part one of those, where the nature of the claim evolves and a time comes when it is reasonably appreciated that it is a different type of beast from the claim which was initially pursued, and that one may not be able to point to one specific event which led to that so much as a collection of factors. A change of value may not alone be enough. If a solicitor was to be expected to ‘jump’ at the earliest possible date when some development takes place but before it is reasonably clear what the effect will be, then one would see inflated, precautionary budgets of the sort which Master Davison I think rightly saw as something to be avoided. I agree with his general point that setting the bar too high in budget variation cases could as a matter of policy be undesirable.”
WEBINAR ON REVISING COSTS BUDGETS
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This case is considered alongside the new rules and associated case law relating to “significant developments”.
THE FACTS IN THOMPSON
The claimant brings a claim for damages for personal injury. This was initially valued at £150,000 and was issued in the county court. The case was costs budgeted in the county court. At the time the budgeting took place the parties were aware that the value of the case had increased to £3.9 million. The matter was budgeted, except the trial preparation and trial stage, and the action transferred to the High Court.
THE CLAIMANT’S APPLICATION TO REVISE THE BUDGET
After transfer to the High Court the claimant applied to revise the budget, arguing that it was not feasible to revise the budget in the county court because the impact of the new evidence, other than on value, was not yet clear.
HAD THERE BEEN “SIGNIFICANT DEVELOPMENTS”?
The Master considered whether there had been significant developments.
6. Mr Grant for the claimant took me to the relevant test which currently appears in CPR 3.15A which states “(1) A party (“the revising party”) must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions.”
7. The rules provide no particular guidance and I was referred to a note in the White Book 2020 to the effect that a significant development is any event circumstance or step which is of such a size and nature as to go beyond the circumstances which were taken into account
expressly or impliedly in the budget previously approved. The note suggests that a development is taken into account impliedly if it was or should have been (reasonably) anticipated by the applicant.
SIGNIFICANT DEVELOPMENTS IN THE CURRENT CASE
The parties put in evidence as to how the case had developed
“The solicitors in the case produced witness statements as to how matters had developed since the matter had been budgeted.
An application to revise the budget had been made in September 2019.
By the date of the application the approved budget had been exceeded significantly.
In the decision of Judge Davison (mentioned above) the policy point was that one must not set the bar too high for a revision to be permitted lest the effect be over-estimated budgets so as to err on the side of caution. In that case there were about 3250 disclosure documents, about double what had been expected. He accepted that that was a development of significance and that it was not an answer to say (see para. 9) that disclosure on that scale ‘could’ have been foreseen. That would be to encourage bloated budgets. Similarly it was said to be unreasonable in this case to expect a claimant to effectively inflate a budget by not projecting ahead for large levels of disclosure merely because the case in a general sense was a case involving possibly psychological issues. There was confidence from the relevant expert at the outset that the prognosis was good, but that had changed with receipt of the subsequent care and neuropsychiatry reports.
22. I should not therefore set the bar too high and allow the Defendant to use a ‘retrospectoscope’ expecting the Claimant to have treated the case as larger and more extensive than she reasonably appeared it to be at the time. Notably for example the figures for the trial costs on the Defendant’s side which were not budgeted by the District Judge had been estimated by the Defendant to amount for junior counsel to £16,000 despite the new value of the case being known before the District Judge, yet now they were put forward in terms of leading counsel at £80,000. That was a suitable comparator with the Claimant’s outlook on the case, and an indicator of the reality that the case had become more extensive than before.
THE ASSUMPTIONS MADE AT THE ORIGINAL CCMC
There was at the CCMC the revised schedule of loss which was for £3.9m and very detailed. It was before the District judge at the CCMC. There had also been a case summary filed before that hearing, and hence known to the District Judge. The Defendant had put the
Claimant on notice that there would be a long wait for their own experts. The court gave permission for those reports despite the delays, at the time of budgeting, and gave the Claimant permission to update theirs later. Yet at no point in the budgeting hearing did the
Claimant apply to vary the budget or ask for a recital that the budget could be updated at a later date, or propose figures on an estimated basis at the hearing, or apply to come back to the District Judge.
29. As to disclosure it was not helpful to refer to ’20 lever arch files’ since those could contain for example the extensive expert reports and so on and not be a useful figure. This was not a case which in many respects went beyond normal disclosure in such cases, save perhaps the
fact that disclosure was sought and given in relation to the assault on the Claimant and in relation to the fact that the claimant had been an ear witness in a murder case. Hence the disclosure had been, mostly, predictable.
30. Returning to what the Claimant reasonably should have expected, and framing the point as being one to be looked at on the date of the hearing, the budget assumptions before the District Judge foresaw extensive disclosure and disclosure requests which would be reviewed by the experts. That was before the District Judge, and it was also stated that benefits records would be needed. There were no surprises and nothing had changed as at the hearing before me from what was anticipated as at the time of the budgeting hearing. It was suggested that this was a case of dissatisfaction with the budget approved by the District Judge. The updated medical appointments were known to be needed at the hearing, and the disclosure was anticipated at the time per the budget assumptions, and the revised claim value was known.
THE RULES AS TO REVISING BUDGET IN FORCE AT THE TIME
The rules in relation to applying to revise a budget were amended in October 2020. This case was subject to the previous rules.
I interjected to check with the parties what the rules were as to budget revisions as at the time of the CCMC before the District Judge. The rules then required revision to the budget to be made if there was a significant development, as is still the case in the amended rules now in force. The express requirement now in the rules that an application must be made ‘promptly’ was added subsequently to the CCMC in a rule amendment not then applicable, and it appeared from guidance in Blackstones civil practice that the revision had to be done ‘before conclusion of the claim’. Neither side however argued that the change made a difference in this case.
WHY THIS CASE WAS DIFFERENT AND REVISION OF THE BUDGET WAS ALLOWED
The Master observed that this case was different to other cases that had been considered by the court.
33. This case differs from previous decisions in the available case law, in that it is said the significant developments in this case took place in the period between the last date for submitting the proposed budgets (a deadline which was complied with) and the date of the budgeting hearing which was later in the same month. Hence we see in the case law some inconsistency about whether the significant development in the case must be one not reasonably anticipated at the date of the budget, or whether the operative date is the date
of the budgeting hearing. That is unsurprising in that the point has not been one under consideration.
34. Was there a significant development which was not one which ought to have been reasonably anticipated before it happened? I think first a point needs to be made about the concept of ‘a development’. The term perhaps unfortunately might be taken to mean that one has to point to a specific event, at (in principle) a specific date so as to establish a ‘development’, and counsel for the Claimant did seek to point for example to the receipt of the Care and Neuropsychiatric reports on a date after the drafting of the budget, and to the fact that at the hearing the timetable for experts from the Defendant was set at a lengthy duration which could not have been anticipated when drafting the budget.
35. However there will be cases, and I think this is in part one of those, where the nature of the claim evolves and a time comes when it is reasonably appreciated that it is a different type of beast from the claim which was initially pursued, and that one may not be able to point to one specific event which led to that so much as a collection of factors. A change of value may not alone be enough. If a solicitor was to be expected to ‘jump’ at the earliest possible date when some development takes place but before it is reasonably clear what the effect will be, then one would see inflated, precautionary budgets of the sort which Master Davison I think rightly saw as something to be avoided. I agree with his general point that setting the bar too high in budget variation cases could as a matter of policy be undesirable.
36. In this case I do not think it can fairly be said that the solicitors for the Claimant ought reasonably to have foreseen the fact that the value of the claim would increase as much as it did, after the budget was drafted, to £3.9m from an initial value of £150,000: rather they could reasonably be expected to anticipate that such was possible but to an unknown extent, depending on the expert evidence later to be obtained the content of which was not known. Mere possibility I think would be to set the bar too high and to encourage inflated, precautionary budgets. In this the content of the expert reports in care and neuropsychiatry set in motion, first, an immediate need (but after the date of the budget) to re-plead and increase the value of the claim, and second, a less immediate process by which the impact of the expert evidence on the nature of the case would become apparent in a relatively short period of time as the matter was considered, but not immediately. I accept also that, though less significant, the unexpected fact that the defendant’s experts would not be able to
report for a very considerably longer period than expected was also a significant development.
37. In terms of the point in time at which a significant development takes place, in my judgment if a development requiring a revised budget takes place before the date by which the budget has to be filed and served then it must be taken into account in the budget. There may be cases where the development takes place or is realised so closely before the budget deadline as to need an application for an extension of time which one would expect to be agreed and/or granted if reasonably required.
38. But what of the position where, as I accept, significant developments take place after the budget is filed and served and before the CCMC, and where the CCMC is held quite swiftly after that date (in this case, the same month and only a couple of weeks after the revised draft schedule of loss was produced in the light of the new expert evidence)?
39. In my judgment best practice if possible would be for the party needing a revision (where the significant development threshold is crossed after after service of the budget and after the deadline has passed) to competently draft a revised budget, with access to the necessary costing expertise, and to provide it in proposed form first (as the rules currently require before an application is made to the court) to the other side with a view to agreement. That takes time to do properly especially where a change is a very significant one: it is unhelpful to do it less than competently. If it is not agreed – and the other party has been given a fair time to consider it – only then should application be made to revise the budget (and that, as the rules now say, must be done promptly once it is needed).
40. In this instance in my judgment to do that in this case would not have been reasonably practicable in part simply because of the shortage of time from the point where expert counsel had considered the apparent impact (drafting the revised schedule on 11 February) and in part because this was not merely a case of increased value but a case where the actual practical impact was something still ‘bedding in’ even at the date of the CCMC.
41. An application here was made after transfer to the High Court but in my judgment was made without undue delay. The delay in holding this hearing since that application was made is no fault of the Claimant. Furthermore I think that it would have been unwise, even if theoretically possible, for claimant’s counsel to guess at suitable figures on the day at the County Court CCMC in the light either of the unexpected delays in the defendant’s experts or in the light of the then relatively recently received expert evidence (even though in the latter case it was at least known that the value of the claim and its complexity was increasing).
42. The situation in this case is presumably relatively rare: significant developments increasing value enormously and having an impact on complexity in a short period between budget and CCMC are likely not to be common, and I suggest that if this happens parties can only do their best in their professional judgment, keeping the relevant court informed, and that requiring something too close to perfection would turn the budget revision rules into a snare for the unwary.
43. Perhaps it would have been ideal to inform the District judge that it was likely a revision would be sought later, if indeed that was not done, but that does not in my view suffice to defeat this application: the probable response from a judge in that situation would have been to note the point and say it was a bridge to cross in the event that an application was made, and I am now the judge on the bridge.
44. None of this is by way of discouragement to parties to try to vary a budget if it is feasible just before CCMC to avoid a later variation, by agreement, or to deal with modest points of variation ‘on the hoof’ if the judge is willing and able but in a case where the nature of the claim changed along with its value, as here, justifying transfer up to the High Court, that would have been too much to expect either from parties or judge.
45. It is far better in my judgment that a ‘proper job’ of budgeting is done on the basis of properly drafted and served budgets at a CCMC with clear assumptions served in time for the strict CPR deadline (see my and the Court of Appeal’s judgment in the Mitchell case), and that if an intervening event or general evolution of the case means that the budget then before the court may in fact have to be revised later, then unless it is possible (competently) to revise and consider a new budget either budgeting should be deferred or it should be proceeded with but subject to a likely revision later.
46. In my judgment the Claimant’s side acted reasonably in making this application when it did, and the developments which had taken place prior to the CCMC likely made it fairly obvious that one or other side would be likely to consider a revision thereafter, promptly. I must proceed on the basis that the District Judge budgeted on the stated assumptions for the phases which were budgeted, and in the case of the impact of the new expert reports and the delays to Defendant’s reports those were not ‘built in’ to the budget assumptions. I think the Claimant’s case is weaker on the disclosure point since quite extensive disclosure was an assumption on the face of the budget. However it is probable that even relative to the assumptions, the actual level of disclosure will have been and will continue to be affected by the two developments which I accept as being significant on the shape of the case. Likewise I accept that where a case becomes not only higher in value but more complex as this case has done, and where the basis of claim now reasonably has the knock on effect of entitling the defendant to probe all life stressors quite extensively, that is also a knock-on effect on disclosure which was not incorporated within the assumptions and that increased disclosure knocks-on to expert costs.
47. The general complexity of the case having increased I think does have some impact also on the likely cost of evidence and ADR in part because there is more value to settle in terms of schedules of loss but also because the negotiation and advice must be more nuanced and is
likely to be more time consuming.
- Increased disclosure from £6,500 to £16,500
- Witness statements from £8,000 to £18,000.
- Experts from £50,000 to £120,000.
- ADR from £12,000 to £15,000.
- Statements of case from £8,500 to £12,000