Hey Big Spender! - Dealing with Costs Budget Overspends

The judgement in Elvanite Full Circle Ltd v Amec Earth & Environmental (UK) Ltd (2013) is now over three years old and established the importance that an application to revise or amend a costs management order “ought to be made immediately it becomes apparent that the original budget costs have been exceeded by a more than minimal amount”.

If the revision of the Costs Budget is only sought after significant costs have been incurred then, as indicated in paragraph 39, “the exercise would no longer be a budgeting exercise and would instead be based on the actual costs that have been incurred”.

If an application to amend the costs management order is made after significant costs have been incurred it will be necessary to show good reason why the application was made so late. In Elvanite, the Judge concluded that being consumed with the preparations for Trial was not a good reason for not making the application.

If an overspend is not dealt with then the receiving party is left with seeking to rely on ‘good reason’ to depart from the approved Costs Budget as detailed in CPR Part 3.18. As confirmed in Elvanite, this is primarily a matter for the Costs Judge as detailed/provisional assessment.

The issue of Costs Budget overspends was considered more recently in Excelerate Technology Ltd v Lindsay Cumberbatch and others [2015] EWHC 204 (QB) where the Judge confirmed that a Budget cannot be increased once the costs have already been incurred. The Judge however did proceed to make a record about the ‘reasonableness and proportionality’ of such additional costs incurred for the purpose of any Detailed Assessment of them.

However, in Capital For Enterprise Fund A LP and Maven Capital Partners UK LLP v Bibby Financial Services Ltd [2015] 6 Costs LR 1059 the Judge stated it was inappropriate to give an indication and, if such a jurisdiction exists, “it is a jurisdiction that should be exercised only in exceptional circumstances since (i) it amounts to an interference with the decision making of the costs judge; (ii) it undermines the costs code that now applies - if such indications were given on a routine basis then it would undermine the costs management regime”.

These cases highlight the importance of:

(a) Knowing your Budget

It is important to know what your Budget does and does not include. Reviewing the Costs Budget regularly is essential.

(b) Taking steps as soon as a potential overspend is likely

If the case requires steps not provided for in the approved Costs Budget then you must immediately revise and amend your Costs Budget to include the estimated costs for taking these steps. Submit this to the opposing party immediately with a note of the changes and allow only a short specified period for the opposing party to respond. If no response is received by the deadline stated or if objections are forthcoming, submit your amended Costs Budget to the Court and seek the Court’s approval of the same. Courts do differ as to whether a formal Application is required so it is always advisable to contact the Court to ascertain their requirements.

Written by Jennifer Garbutt - Solicitor and Associate