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Significant Developments

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This practice note will be treated as a live document and updated when developments arise.

There are some upcoming changes to the CPR in relation to significant developments. This practice note aims to set out the current rules and case law regarding this issue.

Current Civil Procedure Rules

“CPR 3 PD 3E

7.6 Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions. Such amended budgets shall be submitted to the other parties for agreement. In default of agreement, the amended budgets shall be submitted to the court, together with a note of (a) the changes made and the reasons for those changes and (b) the objections of any other party. The court may approve, vary or disapprove the revisions, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed.”

The intentions of the rules are obvious, where there is a significant development, each party shall revise their budget either upwards or downwards. It is important to remember to try and agree any change to the budget between the parties before applying to the court. If this approach is not taken the court will dismiss the application.

There are however many unanswered questions: what constitutes a significant development? When should you apply? What happens to incurred costs? and more. I will be touching on these below.

The Approach to Incurred Costs

If a significant development arises during the course of a claim, a party shall revise their costs budget either upwards or downwards. It is not always possible to seek to have the budget revised before work is incurred in relation to significant development and the approach to take in relation to the incurred costs has led to a clash of approach in the courts and in practice.

Yeo v Times News Papers [2015] EWHC 2132 (QB)

Warby J held that CPR PD 3E 7.6 confirms that any revision to the costs budget due to a significant development is in respect of future costs. Therefore, any incurred costs could not be approved by the court or included in the revised budget.

Sharp v Lloyds Banking Group [2017] EWHC 3390 (Ch)

Chief Master Marsh was off the opinion that all costs incurred after the CMO (Costs Management Order) could be treated as future costs to satisfy CPR PD 3E 7.6 and therefore any costs incurred in relation to the significant development could be treated as future costs and could be considered when revising the budget.

Yeo is often considered to be more in line with the rules, especially following the changes to CPR PD 3E 7.4:

As part of the costs management process the court may not approve costs incurred up to and including the date of the costs management hearing. The court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all subsequent budgeted costs.”

This suggests that the court should not approve any incurred costs before the CMO and, ergo, should not approve costs incurred before a revised CMO. This approach, however, is less practical than Sharp as it could mean that no costs can be approved as all work may have been incurred before any hearing; this can complicate bill drafting and lead to further arguments at detailed assessment.

Future Civil Procedure Rules

As of 1 October 2020 the CPR is being updated to clarify the approach to be taken when seeking to revise your budget. In addition to this revision a new Precedent document is coming into force, a Precedent T. It is apparent from the below that the Sharp approach was correct, and the court are able to approve or vary costs incurred prior to the order for the variation as long as they have been incurred after the CMO.

3.15A Revision and variation of costs budgets on account of significant developments (“variation costs”)

(1) A party (“the revising party”) must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions.

(2) Any budgets revised in accordance with paragraph (1) must be submitted promptly by the revising party to the other parties for agreement, and subsequently to the court, in accordance with paragraphs (3) to (5).

(3) The revising party must—

(a) serve particulars of the variation proposed on every other party, using the form prescribed by Practice Direction 3E;

(b) confine the particulars to the additional costs occasioned by the significant development; and

(c) certify, in the form prescribed by Practice Direction 3E, that the additional costs are not included in any previous budgeted costs or variation.

(4) The revising party must submit the particulars of variation promptly to the court, together with the last approved or agreed budget, and with an explanation of the points of difference if they have not been agreed.

(5) The court may approve, vary or disallow the proposed variations, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed, or may list a further costs management hearing.

(6)     Where the court makes an order for variation, it may vary the budget for costs related to that variation which have been incurred prior to the order for variation but after the costs management order.”

The test for a Significant Development

Al-Najar & Ors v The Cumberland Hotel (London) Ltd [2018] EWHC 3532 (QB)

The approach of Master Davision has been adopted as a sensible test when establishing if something is a significant development. He sets out the following principles:

“a) Whether a development is “significant” is a question of fact which depends primarily on the scale and complexity of what has occurred.

(b) If what has occurred is something that should reasonably have been anticipated by the party seeking to revise its budget, then that party will probably be unable to label it significant or, for that matter, a development.

(c) However, there is no requirement that the development must have occurred other than in the normal course of the litigation. That is clear from the final sentence of para.37 of Master Marsh's decision which I have quoted and also from the fact that in that case a revision of the trial estimate, the disclosure of 984 documents and the service of an expert report were all characterised as significant developments.

(d) As a matter of policy, it seems to me that the bar for what constitutes a significant development should not be set too high because, otherwise, parties preparing a budget would always err on the side of caution by making over-generous (to them) assessments of what was to be anticipated.

(e) Lastly, and I think this is uncontentious, if there has been a significant development, then the question is whether the figures in the revised budget are reasonable and proportionate in the light of the development.”

This is further clarified in the judgement as follows:

“What is required is a standard of reasonableness. It is no answer to the application to say that disclosure on the scale that has occurred could have been foreseen or anticipated. That would be to impose an altogether unrealistic burden and encourage the sort of bloated, defensive budgets which are to be deprecated.”

Seekings and another v Moores and others [2019] EWHC 1476 (Comm) (7 June 2019)

Prior to the budgets being agreed, the claimant had made a Part 18 request, the costs of this had been claimed within the defendant’s costs budget. The replies were unsatisfactory and the claimant made a further request. The replies were again unsatisfactory and the claimant made an application to the court and were awarded costs. The response was again unsatisfactory and the claimant made an application for an unless order. The defendant made an application to revise their budget due to the increased costs resulting from the Part 18 requests and further disclosure. The court ordered that the Part 18 request was reasonably foreseeable as costs of the same had been included in the defendant’s budget. The additional disclosure was the defendant’s and they should have been aware of the same when setting the budget. The application failed on both counts.

What Constitutes a Significant Development?

Sharp v Blank & Ors [2017] EWHC 3390 (ch)

This case provides multiple examples of what constitutes a significant development. This is a group litigation claim with 58,800 claimants. The defendant’s sought to vary the agreed budget due to the following significant developments:

  1. The length of trial had been extended from 59 days to 107 days;
  2. The provision for 984 additional documents resulting from an application for specific disclosure;
  3. The need for a supplementary report from Dr Unni in response to unexpected  evidence from Mr Torchio;
  4. The costs of an application for permission to serve Dr Unni’s supplemental report;
  5. The claimants’ application for third-party disclosure and the resulting 71 additional documents produced;
  6. The extent of questions put to their experts; and
  7. The requirement for further expert evidence to respond to a new approach adopted by Mr Ellerton.

The court decided the following:

  1. The Judge was satisfied that the extension to the trial timetable was a significant development.
  2. If an application for specific disclosure resulted 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.
  3. 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.
  4. As above.
  5. 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.
  6. 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.
  7. 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.

It is clear from the above that a development in the litigation must be significant in the context of the current litigation in terms of both scope and value. If the development could have easily been foreseen it will not be considered a significant development.

Increased Disclosure

Al-Najar & Ors v The Cumberland Hotel (London) Ltd [2018] EWHC 3532 (QB)

The claimant expected 20-30 lever arch files of disclosure, they received 55 lever arch files of disclosure. It was held that the level of anticipated disclosure was a reasonable assumption and the level of disclosure received was of a scale and complexity that was larger than originally budgeted for. It was found to be a significant development.

Changes to Legislation and Issues External to the Proceedings

Yeo v Times News Papers [2015] EWHC 2132 (QB)

The claimant made an application to revise their costs budget following the repeal of legislation in order to consider the impact of parliamentary privilege and considering and making amendments to statements of case and witness evidence of both parties. It was held that the repeal was external to the litigation and therefore could only be considered a significant development if the parties had relied on the same prior to the development. The claimant had not relied on this and therefore the application was unsuccessful.

Changes the Value, Adjournment of Trial and Further Disclosure

Churchill v Boot [2016] EWHC 1322 (QB)

The claimant sought to increase their budget on the basis that the claim value had doubled, the trial had been delayed and there had been further disclosure. The claimant was unsuccessful on all counts and subsequently appealed the decision. The court held that an increase in claim value could be considered a significant development, however as it would have no material impact on the running of the claim, it would not be in this case, the same was said of the delayed trial. The court held that the additional disclosure was foreseeable and therefore not a significant development.

Practical Advice

Where there is a significant development in a claim the parties must revise their budget accordingly. It is important to attempt to agree any developments between the parties before making an application to the court. From the 1 October 2020 it will be necessary to use the Precedent T and follow the CPR as detailed above.

When deciding if a development is significant or not one must to consider if it was reasonably foreseeable when the budget was set. It is important when setting the budget to include clear assumptions and have them recorded on the CMO if possible, this will help evidence what was foreseeable or not. 

Further the development must have a material impact on the claim and the costs incurred. This impact itself needs to be significant and not merely a minor increase in costs as this would be taken into account when the budget was set.

It is important to try and vary the budget at the earliest point and if possible before the work is undertaken, you do not want to undertake the work only to be informed by the court that it is not a significant development.

Finally if in doubt it is recommended to seek a revision to the budget and not just hope to convince a costs judge that there is good reason to depart. Anecdotally I have heard of costs judges refusing good reason on the basis that the receiving party was aware of the development and should have applied to vary the budget during the lifetime of the claim.