Thomas Barry & Anor v Denis Barry

The court’s power to vary an approved costs budget requires a significant development and a prompt application. A development is assessed by reference to reasonable anticipation when the budget was approved. Oppressive behaviour under Practice Direction 3D requires intentional causation of disproportionate costs, not merely vigorous or extensive litigation.

Where a claimant beats a valid Part 36 offer, the prescribed consequences are mandatory unless the defendant proves that they would be unjust. The additional amount is an all-or-nothing entitlement. Enhanced interest remains discretionary and must reflect overall proportionality. Payments on account should reflect the differing levels of scrutiny applied to incurred, approved budgeted and varied budgeted costs.

The claimants succeeded at trial in a contract dispute against their son concerning substantial loans. The trial judgment was [2024] EWHC 1661 (KB). This judgment determined consequential costs issues.

The claimants sought variation of their approved costs budget, the consequences of beating two Part 36 offers, and payments on account of costs. The issues included whether developments justified variation, whether the applications were prompt, whether the defendant had behaved oppressively, whether the Part 36 consequences would be unjust, the appropriate enhanced interest rate, and the proper percentages for payments on account.

1. Costs budget. Under CPR rule 3.15A, the revising party had to establish a significant development and promptness. The relevant standard for significant development was reasonable anticipation: an event falls outside the approved budget only if it was not, and should not reasonably have been, anticipated when the budget was approved. The applications concerning disclosure and witness evidence were refused for lack of promptness. Variations were allowed for trial preparation and increased trial length caused by the late amendment of the defence, but only in reduced amounts because work had been allocated excessively to the partner with conduct. (paras [11]–[27])
2. Oppressive behaviour. Paragraph 13 of Practice Direction 3D requires intentional causation of disproportionate spending. Firm, heated or exhaustive litigation did not establish the necessary causative intent. The defendant’s conduct therefore did not qualify as oppressive behaviour. (paras [18]–[21])
3. Part 36. The claimants had beaten valid offers. The four entitlements under CPR rule 36.17(4) applied unless the defendant established injustice. The additional amount was an all-or-nothing entitlement and was mandatory here. The offers were made early, represented substantial discounts, followed failed mediation, and were genuine attempts to settle. An additional amount of £75,000 was awarded. (paras [28]–[36])
4. Interest. The court retained discretion over the enhanced interest rate. It had to consider the global effect of the costs orders and proportionality. Interest was ordered at 8 per cent above base rate on the principal sum and costs. Costs were awarded on the indemnity basis from 15 October 2021. (paras [37]–[41])
5. Payment on account. Incurred costs warranted payment of 55 per cent. The July 2022 budgeted costs warranted 90 per cent, reflecting prior costs management scrutiny. Costs allowed by the later variation warranted 80 per cent because they had received less extensive scrutiny. (paras [42]–[55])