Costs News

20 December 2018
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Bar for ‘significant development’ affecting budget “should not be set too high”

The bar for what constitutes a ‘significant development’ requiring revisions to a budget “should not be set too high”, a master has said.

Master Davison said that, otherwise, parties preparing a budget “would always err on the side of caution” by making over-generous assessments of what was to be anticipated.

The claim in Al-Najar and Ors v The Cumberland Hotel (London) Ltd [2018] EWHC 3532 (QB) – decided in October but only published this week – arose from an attack carried out on guests in London’s Cumberland Hotel, causing serious injuries to three members of the same family.

There is to be a trial on liability only. “Liability is complex,” noted the master, and last year the court approved the claimants' budget at just over £1m.

The claimants sought to revise the disclosure phase, which had been approved at £62,626; at the time their solicitors were expecting somewhere between 1,000 and 1,500 documents. “I will say that it is perhaps not only with the benefit of hindsight that it might have been prudent to have recorded that in the assumptions,” the master observed.

However, 3,250 documents were in fact disclosed and the claimants sought to increase their budget by 78% to £112,000. Most of the increase was in the solicitor hours but the figure allowed for counsel was doubled while the figure allowed for the expert increased eightfold to £9,000.

Citing the practice direction and the decision of Chief Master Marsh last year in Sharp v Blank, Master Davison derived five broad principles on the question of what amounted to a ‘significant development’ justifying a budget revision:

(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 – he noted that in Sharp, 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) If there has been a significant development, then the question is whether the figures in the revised budget are reasonable and proportionate in light of the development.

Master Davison said his “clear conclusion” was that there had been a significant development. “The disclosure has been of a scale and complexity that is much larger than was actually budgeted for, which was not, in fact, envisaged and which could not reasonably have been envisaged.

“In coming to that last conclusion I ask the question: was the assessment in the original budget a reasonable one? If it was, then ex hypothesi, what has occurred is something that falls outside that reasonable assessment.

“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.

“I find that the assessment of the disclosure phase in the original budget was a reasonable one. It follows that disclosure that has come in at approximately double what was then anticipated amounts to a significant development in the litigation.”

He allowed the revision of the fees for solicitors and counsel – and in fact suggested that at around three hours per ringbinder of documents may have been an underestimate – but found the increase in the expert's costs unexplained. “That figure, at the risk of tinkering, I will not approve. I would allow a doubling in the expert's costs but no more than that.”

Mr R Viney (instructed by Hodge Jones & Allen) appeared on behalf of the claimants; Miss C Church (instructed by Clyde & Co) appeared on behalf of the defendant. 

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