Budget Variation disallowed where not sought promptly
Posted on 8th April 2025 at 16:57
The case of Barry & Anor v Barry [2025] EWHC 819 (KB) (08 April 2025) is a reminder of the need to act promptly when applying to vary a Costs Budget. Here the Claimants sought to vary their Costs Budget after the start of trial. The court considered the need for promptness when seeking to vary and also looked at what a significant development might be.
The bottom line is if you’re waiting a year to amend the budget expect to have your application refused. That said the court did allow some variations to the Trial Preparation and Trial phases where it was considered these variations had been sought promptly.
For Trial Preparation, the Defendant’s sought last minute additions of substantial documentation to the trial bundle. It was accepted that this was a significant development. For the Trial phase it was accepted that a significant increase in the trial length due to the amended defence justified budget variation.
The judgment also addresses the approach to the level of interim payment to be awarded where there are both budgeted costs and varied costs in play.
Varying the Claimants' Costs Budget
The court noted that “the revising party must submit the particulars of variation promptly to the court” as per CPR 3.15A.
Firstly the court considered a variation sought to the disclosure phase. Mr Justice Dexter Dias stated that:
“17. Disclosure took place in October 2022. It is hard to conceive how the claimant can be said to have acted “promptly” as required under the rule when making an application over a year later. I accept the defendant’s submission on this point and reject the application to vary this budget item on this basis.”
This pattern continued when considering the variation sought under Witness Statements:
“20. The first-round witness statements were exchanged on 27 March 2023. The second round took place on 7 July 2023. While the delay in applying for variation was less pronounced than for disclosure, nevertheless there is no adequate reason provided by Ms Lane to justify the delay in applying for variation until November 2023. The management of costs is integral to the effective working of the modern costs regime. Here there is an unjustified lack of promptness. There is no good or sufficient reason for the budget variation not to have been made promptly and certainly far more proximate to the significant developments and before trial. I accept the defendant’s submission and refuse the variation due to lack of promptness.”
The court did, however, accept that the variation sought for Trial Preparation was made promptly:
"22. There is no doubt that the claimants received the defendant’s proposals for the trial bundles very close to the deadline. As the Form T notes, the defendant made “extensive criticisms and requests for further searches”. This is entirely plausible given the nature of the correspondence. It is also credible and reasonable for a significant body of work to have been necessitated by the further disclosure, including “extensive documentation”. The defendant sought the addition of a substantial array of documents. The index alone was extended to 39 pages.
23. This was a prompt variation application by the claimants. The variation is in respect of what is a qualifying significant development, being one not reasonably anticipated. I reject the defendant’s submission that the claimant “always knew they would be looking at 20 years of transactions”. As the trial approached, the scope of the defence widened significantly, including the application to amend the defence on the very eve of the trial, and pursued over the first two days, to add what would become the main plank of the defence, or near the top of the list: the lack of intention to create legal relations. Indeed, I dealt with this matter first in my trial judgment as it became Issue 1, the parties having addressed the question first in closing submissions, and rightly so, such was its significance and far-reaching, potentially terminatory, implications. In oral argument, the defendant accepts that the developments “could amount to a significant development”. I judge that unquestionably they do. The next question is to what extent the budget should be varied upwards.
24. Having reflected carefully on this after the hearing, and gone back through all the documentation, and while I am satisfied that there was intense last-minute work to ensure the case was trial-ready, I am unpersuaded that the scope variation is reasonably justified to the extent sought. I accept the defendant’s submission that there was the overuse of “partner time” for some of the more routine aspects of the work entailed. I cannot think that 60 hours of partner time was the right balance and more of the work could have been delegated to more junior members under supervision. That said, I cannot accede to the defendant’s submission that the court should reject “all the time claimed”. That is clearly unrealistic. I approve, therefore, an upward variation by £18,000 under this head."
The variation sought arising to Trial Preparation / Application to Vary the Defence was also accepted by the court:
25. I address heads (4) and (5) together, as the parties did in their Form T annotations. In his skeleton argument, the defendant accepts a variation by £11,000 for the “trial phase”. It appears that again this includes both heads (4) and (5). On the Form T, the claimants seek a variation of £37,500.
26. First, there can be no doubt that there was a significant increase in trial length due to the altered nature of the defence, where late amendment was granted exceptionally to the defendant as a matter of fairness and in the interests of justice. This undoubtedly entailed significant extra work. Thus, there is a significant development justifying a budget variation. In the defendant’s response to the Form T, there is criticism of the second claimant Mrs Barry’s evidence as being “evasive” and “cantankerous”. While the submission was not pursued orally, it tellingly demonstrates how unbalanced and unrealistically partial the submission is. The £15,000 increase of budget for counsel’s fees sought by the claimants seems entirely reasonable. Once more, however, a very high proportion of the solicitor costs were incurred by the “partner with conduct”. While I appreciate the nature of the case required close involvement by the partner, a significant portion of the 50 hours work could have been undertaken by a more junior fee earner. The claimants seek a variation of £37,500 “in addition to the budgeted costs of £34,840”. This is a substantial increase. While the developments were significant, a sense of balance and proportion must be maintained.
27. Therefore, the court is prepared to vary the budget upwards by £27,500 under this head.
What is a reasonable interim payment on account of costs?
The court also considered what a reasonable payment on account of costs would be. The Claimants had sought 60% of their incurred and non-budgeted costs and 90% of the budgeted costs. The Defendant contended any interim payment should be 50% of the incurred costs & non-budgeted costs and 90% of the budgeted costs but 50% of the varied costs.
The court ordered 55% of the incurred and non-budgeted costs and 90% of the budgeted costs and 80% of the varied costs. The court had regard to the fact that an indemnity costs award had been made.
Mr Justice Dexter Dias stated that:
"The payment of less than the full budgeted costs reflects the possibility that there may be “good reason” in accordance with CPR 3.18 to depart from the budgeted amount (see Cleveland Bridge, para 9, citing Coulson J in MacInnes v Gross). A budget is not a guarantee. Nor is a varied budget. For the varied budget, I make a further reduction from 90 per cent in recognition of the fact that these budgeted amounts did not receive the same degree of scrutiny that would occur at a CCMC. Thus the costs subject to the variation do not have the same level of “approval”, to borrow a term from Coulson J, and thus the “degree of confidence” (Cleveland Bridge, para 16) is correspondingly reduced."
The case highlights two important issues:
1. That where a significant development arises costs budget should be varied promptly.
2. That where there is an approved Costs Budget the budgeted costs, including those from variation should be subject to a higher level of interim though it is open to the court to treat the varied sums to a lower amount than the originally budgeted sums.
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