Yeo v Times Newspapers Ltd  EWHC 2132 (QB) (22 July 2015)
Following his informative judgment on the correct use of contingencies in the Precedent H back in February 2015, Mr Justice Warby has provided some guidance on when parties should seek the court’s approval of a revised costs budget.
In February Mr Justice Warby approved the costs budgets filed in the matter of Yeo v Times Newspapers Ltd after making some significant amendments to the original Precedent H forms of each party. His decision provided the costs world with a useful definition of contingency costs, and a clear explanation of when these costs should be included in a costs budget. On 22 July 2015, at the pre-trial review for the same matter, Mr Justice Warby was asked to consider the Claimant’s application to approve a revised version of their approved Precedent H.
The most significant revision made by the Claimant was the addition of a contingency phase for 'Considering impact of parliamentary privilege and considering and making amendments to statements of case and witness evidence of both parties.' The Claimant asked the court to approve this new phase which included £21,000 of incurred costs and an estimated £15,400 of future costs. These costs related to additional work that was required following an issue that had arisen on 6 July 2015 when the Claimant became aware of the need to address issues relating to Parliamentary Privilege following the repeal of s. 13 of the Defamation Act 1996 in May 2015. The Claimant filed a revised Precedent H on 10 July 2015.
The Claimant submitted that these costs were necessitated by a 'significant development in the litigation’, which allowed the parties to file revised costs budgets that the court may consider and approve under PD3E 7.6.
The Defendant challenged this submission arguing that the practice direction does not allow the court to approve any incurred costs. Furthermore, no 'significant development’ had occurred in any event. The Defendant also asked the court to consider whether another mechanism should be applied to the revised budget in the event that the additional costs were deemed necessary, and suggested that the Claimant should seek to rely on PD3E 7.9 to show that the costs should be treated in addition to the approved costs budget at the conclusion of the claim; or ask the court to depart from the budget on assessment if there was ‘good reason' to do so under CPR 3.18(b).
When to revise a costs budget
Mr Justice Warby considered the submissions of each party and also his own previous comments in relation to contingency costs. He firstly reaffirmed that the Court cannot approve incurred costs when considering an amended budget under PD3E 7.6. If parties want the court to approve a revised budget under PD3E 7.6, the budget must be filed as soon as the ‘significant development’ arises and before any costs are incurred in relation to that development. This will allow the court to consider and approve all of those estimated future costs.
He acknowledged that this puts a lot of pressure on a party to act swiftly when revising the costs budget, but advised that it would provide certainty of knowing whether those costs would be recoverable before they are incurred. The alternative option is to incur the costs and hope that the court will allow the costs in addition to the budget at assessment pursuant to PD3E 7.9. Interestingly, Mr Justice Warby did not see a clear reason for the delay of 4 days between the alleged ‘significant development' and the date of the revised costs budget in this claim.
In relation to the ‘significant development’, Mr Justice Warby stated that this must be a development in the litigation, and not separate to the litigation. He also suggested that it must be clear that the additional work and costs that a party is seeking to add into an approved budget only became necessary because of the 'significant development'. It is not acceptable to use a development as an excuse to shoe-horn costs of work that had previously been necessary but that had either been disallowed from the approved budget or had not been properly considered by the party in the first instance.
Applying the reasoning to the instant case, Mr Justice Warby did not allow any revision to the Claimant’s costs budget on the basis that he did not consider the repeal of s. 13 of the Defamation Act 1996 to be a significant development in this litigation. He also considered the additional work and costs claimed in the revised costs budget to have been necessitated not by the repeal of that section, but by evidence presented in the Defendant’s witness statements and pleadings which the Claimant had not properly budgeted for in the first instance.
What should you do?
Mr Justice Warby's decision and reasoning should act as guidance for litigants who are running costs-budgeted claims. The key points to note are:
Keep assessing your incurred costs against the approved or agreed Precedent H.
If there is a ‘significant development’ in the litigation, revise your Precedent H and apply to have it approved before incurring any costs that were not included in the original costs budget. The development must be in the litigation, and not separate to it.
Only include additional costs that will genuinely arise out of the 'significant development' in the revision to your Precedent H. You will not be allowed costs that should have been included in the original budget.
Alternatively, don’t revise the budget and seek to rely on PD3E 7.9 when your costs are assessed. This may be your only option if there isn't enough time between the 'significant development' and the need to incur costs in relation to that development.