Persimmon Homes Ltd & Anor v Osborne Clark LLP & Anor

An application to vary an approved costs budget involves a mandatory two-stage threshold. The applicant must establish a significant development since the last approved or agreed budget which warrants revision, and must submit the proposed variation promptly to the other parties and the court. Only then does the court consider whether to approve, vary or disallow the revision.

Costs budgeting is primarily prospective and concerned with reasonable and proportionate phase totals. It is not a retrospective detailed assessment or a mechanism for correcting an earlier omission, miscalculation or overspend. A variation cannot ordinarily be based on a development known, or which should reasonably have been taken into account, when the budget was approved.

The Developers alleged professional negligence against Osborne Clark LLP and Osborne Clark in relation to option agreements and related advice concerning land at Grove Airfield, Oxfordshire. Osborne Clark brought a related claim for unpaid fees. The claims were case managed together.

The Developers sought to increase their approved costs budget by approximately £1.339 million. They relied on the adoption of Model C disclosure, requests for further information, and two further case management conferences. The central issues were whether those matters were significant developments since the approved budget and whether the application had been made promptly.

1. Application dismissed. The Developers failed to satisfy the threshold for variation under CPR 3.15A.
2. The threshold has two mandatory elements. First, there must be a significant development in the litigation since the last approved or agreed budget which warrants revision. Secondly, the proposed particulars must be submitted promptly both to the other parties and to the court. Only if both elements are established does the court exercise its discretion under CPR 3.15A(5) and, where relevant, CPR 3.15A(6).
3. Costs budgeting is principally prospective. It is a high-level exercise fixing reasonable and proportionate totals for future costs in each phase. It is not a prospective detailed assessment and does not involve line-by-line scrutiny or control of the way in which a phase total is spent: CPR 3.15(8). The court must consider the case and costs management exercise together.
4. The change to Model C disclosure was known before the December 2019 costs budget was approved. The Developers knew its significance, had indicated that the budget needed revision, but allowed the costs management exercise to proceed without informing the Deputy Master that their budget allegedly remained based on different assumptions. The change was therefore not a significant development since the last approved budget. The available procedural mechanisms, including deferring disclosure budgeting under PD51U para 22, had not been used.
5. The later clarification of the disclosure exercise and problems in its execution did not constitute separate significant developments. They formed part of the same disclosure development or concerned the conduct of the exercise. The requests for further information and the first further CMC were addressed too late. The second further CMC was not anticipated originally, but the application was still not submitted promptly.
6. The court adopted the pragmatic and purposive approach to costs-budget revisions identified in Sharp v Blank [2017] EWHC 3390 (Ch). That approach did not permit retrospective correction of costs after substantial expenditure. Although CPR 3.15A(6) can accommodate incurred costs arising between identification of a qualifying development and a prompt variation application, it does not create an unrestricted retrospective power.
7. Alternatively, the discretion would not have been exercised in the Developers’ favour. The need for prospective predictability and control of recoverable costs outweighed retrospective correction of the alleged overspend. The parties were invited to agree an order, including costs.