Sharp v Blank & Ors  EWHC 3390 (ch)
Chief Master Marsh was considering an application by the Defendants to revise a costs budget on the basis that there had been “significant developments”.
This was a significant and complex piece of litigation involving seven claims and 58,800 Claimants who were making serious allegations against five former directors of Lloyds TSB Group Plc.
The Claimants' budget had been set at a total of £17,601,025.49 and the Defendant’s at £19,141,377.54. Both budgets had been agreed between the parties.
The seven significant developments
The Defendants relied on the following significant developments:
- The length of trial had been extended from 59 days to 107 days;
- The provision for 984 additional documents resulting from an application for specific disclosure;
- The need for a supplementary report from Dr Unni in response to evidence from Mr Torchio;
- The costs of an application for permission to serve Dr Unni’s supplemental report;
- The Claimants’ application for third-party disclosure and the resulting 71 additional documents produced;
- The extent of questions put to their experts were beyond that which could have been reasonably foreseen; and
- The requirement for further expert evidence to respond to new evidence created by Mr Ellerton.
The Claimants opposed the application on three main grounds:
- The application had been made too late;
- The application was intended to be oppressive to the Claimants due to the precarious funding position; and
- Jurisdiction. Firstly there were not any significant developments. Secondly the Court cannot deal with costs which have been incurred. Thirdly interim applications were not significant developments.
It is worth noting the observation at paragraph 32 that a failure to apply when there has been a significant development may be relevant when the Court is considering whether there is good reason to depart from an approved or agreed budget (a point I have laboured in many client training sessions). The requirement to amend the budget is mandatory.
Setting a budget for costs which have already been incurred
There was an issue as to whether the Master could approve costs which had been incurred since the making of the Costs Management Order which formed part of the additional costs sought by virtue of the significant development.
In other words they had not been budgeted, but they were incurred. Do they form part of a revised "budget" or subject to assessment as incurred costs?
Chief Master Marsh concluded that costs which have been incurred since the date of the last agreed or approved budget that relate to significant developments are, for the purpose of revision, placed in the estimated columns of the revised Precedent H. In other words they come “budgeted costs” even though they had been incurred.
Chief Master Marsh concluded that interim applications may be significant developments as may the consequences that flow from an interim application.
Was the application made unreasonably late?
The Claimants took issue with the fact that the application was made during the course of the trial. The Court noted that the Defendants first raised with the Claimants the need to revised budgets on 21 July 2017 and chased in August and September before making the application on 19 October 2017. The Master found that the Defendants had taken reasonable steps to ensure that their application was made in a timely fashion.
Inequality of arms
The Master rejected the criticisms of the manner in which the application was made, acknowledging that the five lever arch files were helpfully provided to assist the Court. On the issue of oppression, the Court acknowledged the mandatory requirement to revise a costs budget in the event of a significant development. By contrast, if a significant development exists, the Claimants will have failed to comply with their obligations and lost the opportunity to level the playing field.
The seven significant developments
- The Judge was satisfied that the extension to the trial timetable was a significant development. He found that the evidence submitted by the Defendants was cogent and reliable.
- The Judge concluded that if an application for specific disclosure results in a large number of documents that must be reviewed and assimilated, that may be a significant development in the litigation. In this case it was described as a major task reviewing nearly 1000 documents. Accordingly he was satisfied that this was a significant development.
- The Defendants could not have predicted that the Claimants would serve a report from Mr Torchio. That alone was a significant development and was a change from the agreed basis upon which expert evidence was to be provided.
- As above.
- The Judge found that the application for third-party disclosure was not a significant development. Such applications are common and the Defendants knew of the likelihood of such an application before they prepared their budget.
- By way of context, the Defendants sought an additional £44,000 as against a budget of £4,787,812. The Judge highlighted that there are inherent uncertainties and inaccuracies in the preparation of a budget. Allowance has to be made for future events and there will be pluses and minuses. There must be something more than a modest increase in the anticipated costs of the work to amount to a significant development.
- Whilst the new approach adopted by Mr Eillison was a development, it was more difficult to characterise this as significant. In the context of the claim, a modest adjustment cannot be characterised as being significant.
Some very helpful and logical guidance from Chief Master Marsh as to the timing and merits of applying to revise a budget when there have been developments.