Amending budgets by Nishma Shah
Although currently there is a 3 month reprieve in submitting Precedent H budgets, there are a number of ongoing cases where a budget has been prepared but matters have arisen which require the budget to be amended.
The preparation of budgets is still a huge cause of contention for all parties involved. Often there are considerable variables to consider and one must often hazard a guess at the other side’s tactics. In addition, one must also tailor budgets to the Court that is hearing the matter, with specific Courts often having specific requirements.
Providing the Court with an accurate budget is important, as the case of CIP Properties (AIPT) Ltd v Galliford Try Infrastructure & others  EWHC 481 (TCC) demonstrated. The claim was worth over £10 million pounds, but Coulson J held that the Claimant’s budget was ‘entirely unreliable’ and the costs set out were ‘wholly disproportionate’. Ultimately, the budget was reduced from £9.2 million to £4.3 million.
However, there are also occasions when the budget will need to be amended. PD 3E 7.6 allows for each party to revise its budget in respect of future costs upwards or downwards, if significant developments in litigation warrant such revisions. The amended budget should be submitted to all other parties for agreement in the first instance.
If the parties cannot agree the revised budget, it must be submitted to the Court together with (a) the changes made and reasons for those changes and (b) the objections of any other party.
Thereafter the Court may approve, vary or disapprove the revisions, having regard to any significant developments in litigation which have occurred after the previous budget was approved or agreed.
It is important to remember that the Court does require reasons for the changes made. The changes cannot be made simply because there were errors in preparing the initial budget. In the case of Murray & anor v Neil Dowlman Architecture Limited EWHC 872 (TCC), permission to revise the budget was granted but the Court gave a strong indication that permission to revise a costs budget will not be readily available in order to correct errors or inadequacies in the budget originally filed. Coulson J stated that ‘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…it is said that particular items had been omitted or under-valued.’
It is equally important that a revised budget is prepared as soon as one party realises that an amendment will be required. There can be serious consequences for the receiving party, if they fail to file an updated budget. In the case of Henry v NGN  EWCA Civ 19 (a case under the defamation pilot), the budgets of both parties had been approved at the outset. The Claimant’s solicitors had not complied with the Practice Directions at all and the Defendant’s solicitors had only slightly complied with the Practice Directions. The Claimant won the claim and a Bill was prepared. The Bill contained two phases which contained costs that exceeded the budgeted figure. The Senior Costs Judge held that the costs probably had been reasonably incurred but disallowed the excess costs for failure to comply with the Practice Directions. Although this was later reversed on appeal, it is a good idea to keep in mind the fact that if a party does not file an amended budget there must be ‘a good reason’ for departing from the last approved budget. There is no definition or guidance as to what the Court would consider ‘a good reason’ and therefore it would seem a little bit of a gamble.
It is important not to delay in preparing an amended budget, as the Court does not consider budgets filed at the conclusion of a trial to be sufficient. In the case of Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd  EWHC 1643 (TCC), the Defendant’s last approved budget was £268,488. The Defendant won the case and then disclosed that their costs had risen to £531,946. No application to increase the budget was made until after the trial. Coulson J refused to vary the budget and made the following observations:
- Unless the party can amend/revise upwards the budget or persuade the assessing judge that there are good reasons to depart from the last approved budget then the assessment will be by reference to the last budget.
- The party had to do more than simply file and serve an amended budget, they had to get approval from the court.
- Any application to vary should be made immediately if it becomes apparent that the original budget costs have been exceeded by more than a minimal amount
- An application to amend an approved budget after judgment is a contradiction in terms; it would not be a budgeting exercise because the costs have been incurred. It would encourage a wait-and-see approach and would make a nonsense of the costs management regime, destroying certainty.
The judgment also touched on the impact of indemnity costs on a costs management order. In this case, although Coulson J declined to make an order for indemnity costs, he considered whether the order would have been rendered irrelevant if he had.
‘Prima facie, whether under PD 51G paragraph 8, or CPR 3.18, the costs management order (with its approval of the costs budget) is expressed to be relevant only to an assessment of costs on a standard basis. However, as a matter of logical analysis, it seems to me that the costs management order should also be the starting point of an assessment of costs on an indemnity basis, even if the ‘good reasons’ to depart from it are likely to be more numerous and extensive if the indemnity basis is applied.’
In the recent case of Excelerate Technology Ltd v Cumberbatch and others  EWHC 204 (QB) Simon Brown QC sitting as a Deputy High Court Judge held that the court could not increase an approved costs budget once the costs had been incurred and there had been no provision for contingencies and no application for variance. However, in a case in which the additional costs were judged to be reasonable and proportionate, the court recorded a note to that effect for the purposes of any detailed assessment. He said:
‘I cannot increase a ‘budget’ once the costs have already been ‘incurred’ (as they have been), no application for variance has been made and no contingencies have been provided for such items of increase; it is too late to do that (see Elvanite Full Circle Ltd v. AMEC Earth & Environmental (UK) Ltd  4 Costs LR 612.) However, I accept that each of these three items of costs were quite properly incurred and were not remotely foreseeable in ordinary breach of covenant litigation. It was also not practicable or viable to make applications for variance or agree them with litigants in person as the first two Defendants became shortly before trial. What I can do upon this application, and do so, is to ‘record’ a note upon the ‘reasonableness’ and ‘proportionality’ of such ‘additional’ costs incurred for the purposes of any Detailed Assessment of them.’
In conclusion, as you can see from the examples above, it is prudent for all parties to file an amended budget as soon as possible. Thereby minimising the risk of not being able to recover the costs. A detailed explanation as to why the budget would need to be revised would also be very helpful to the Court when determining whether to allow the revised budget.