Why Costs Budgets Need to Change

A costs budget is prepared at the outset of costs-managed proceedings, but litigation rarely follows the path originally anticipated. Witness statements multiply, expert evidence expands, disclosure becomes more complex, or a new issue emerges that fundamentally alters the scope of the case.

When that happens, a party’s approved budget can quickly become detached from the reality of what the litigation actually requires. The costs management order that once reflected a proportionate approach to the claim may no longer do so, and a party that simply incurs costs beyond its approved budget without taking any steps to vary it risks finding that those additional costs are irrecoverable.

CPR 3.15A and the Precedent T process exist precisely for this situation. Understanding when to apply, how to apply, and what the court will expect is essential for any solicitor working within a costs management order.

 

What CPR 3.15A Says

CPR 3.15A sets out the procedure for applying to vary a costs management order. A party wishing to vary their costs budget must file a Precedent T, the prescribed budget variation form, setting out the phase or phases they wish to vary, the revised figures sought, and, critically, the significant development that justifies the variation.

The rule is clear that a party should apply to vary their costs budget as soon as it becomes apparent that the approved budget is no longer an accurate reflection of the anticipated costs. Acting promptly is not simply good practice, it is a requirement that courts take seriously. A party that delays, continues to incur costs beyond its approved budget, and then seeks retrospective variation is likely to face a much harder task than one that flags the issue early and applies without delay.

The variation application is supported by a budget discussion report where required, and the court will consider the revised figures in the same way it would approach an initial costs management hearing, with proportionate costs and the overall value and complexity of the claim firmly in mind.

 

What Counts as a Significant Development?

The threshold question in any CPR 3.15A application is whether there has been a significant development in the litigation that was not anticipated when the costs budget was filed and approved.

This is not a low bar. Courts have consistently made clear that a budget variation is not an opportunity to revisit figures that were simply set too low at the outset, or to recover costs that should have been anticipated with reasonable care when the original budget was prepared.

The leading case in this area is Persimmon Homes Ltd v Osborne Clarke LLP [2021] EWHC 831 (Ch), which provided important guidance on what does and does not qualify as a significant development warranting a revision of an approved budget. The court confirmed that the development must be genuinely unanticipated, not merely inconvenient or greater in scale than hoped, and that it must have a material impact on the previously budgeted costs.

Examples of developments that courts have accepted as justifying variation include:

• Significant expansion of the issues following amended pleadings
• Substantial increases in the volume of disclosure not anticipated at the costs management stage
• The introduction of new expert evidence in disciplines not covered by the original budget
• A change in the nature or scope of witness statements required following developments in the case
• Case management decisions made after the costs management order that materially alter the shape of the litigation

By contrast, costs that simply exceeded the originally anticipated costs because the work took longer than expected, or because the case proved more complex in ways that were foreseeable, are unlikely to satisfy the threshold.

 

The October 2020 Rule Changes and Their Legacy

The current CPR 3.15A framework was introduced in October 2020, replacing the previous practice of bringing budget variation applications under the general case management powers of the court. The October 2020 reforms were intended to provide a clearer, more structured route for parties seeking to vary their costs budgets – and to discourage the practice of parties simply running over budget and seeking to justify the excess at detailed assessment.

Since October 2020, the courts have applied the significant development test with reasonable consistency, and the body of case law has grown steadily. The message from the judiciary has been clear: costs budgets are intended to be meaningful constraints on litigation costs, not aspirational figures to be exceeded whenever a case becomes more complex than anticipated.

For solicitors, the legacy of the October 2020 changes is a litigation environment in which costs budget management is an active, ongoing obligation – not a one-off exercise at the start of proceedings.

 

How to Make a Successful Precedent T Application

A well-prepared Precedent T application requires more than simply filling in the revised figures and filing the form. Courts expect a clear, evidence-based explanation of what has changed, why it was not anticipated, and why the revised figures are proportionate to the claim.

Practically, a strong application will:

1. Identify the significant development precisely. Vague references to the case becoming more complex are unlikely to persuade the court. The application should pinpoint the specific event – an order, a disclosure exercise, an amended pleading, a new expert direction – that triggered the need for variation.
2. Explain why it was not anticipated. The court will scrutinise whether a reasonably competent costs lawyer, preparing the original budget with proper care, should have foreseen the development. Where the answer is yes, the variation is unlikely to succeed.
3. Provide revised figures that are proportionate. The court is not simply approving whatever figures the applying party puts forward. Revised anticipated costs must be proportionate to the claim and will be subject to the same scrutiny as the original approved budget.
4. Act promptly. The application should be made as soon as the significant development becomes apparent – not after the costs have already been incurred. Courts have shown little sympathy for parties who continue to incur costs well beyond their approved budget and then seek to retrospectively justify the excess.
5. Consider the budget discussion report. Where the parties can reach an agreement on the revised figures before the hearing, a budget discussion report reflecting that agreement can significantly streamline the process and avoid unnecessary costs of the variation application itself.

 

What Happens if You Don’t Apply

The consequences of failing to apply to vary a costs budget under CPR 3.15A – and simply incurring costs beyond the approved budget – are serious. Under CPR 3.18, when the court is assessing costs on the standard basis, it will not depart from the approved budget without good reason.

In practice, this means that costs incurred beyond the approved budget in a phase that has not been varied are likely to be assessed at or close to the budgeted figure, leaving the receiving party unable to recover the actual costs incurred. In high-value litigation, the shortfall can be substantial.

The only realistic protection is to apply to vary the costs budget promptly, under CPR 3.15A, as soon as a significant development arises. A Precedent T application made at the right time, with the right evidence, is significantly more likely to succeed than an attempt to justify excess costs at detailed assessment after the event.

 

Key Takeaways

• CPR 3.15A sets out the procedure for varying a costs management order using a Precedent T application
• The threshold test is whether there has been a significant development in the litigation that was not anticipated when the costs budget was filed
• Acting promptly is essential – courts take a dim view of parties who incur costs beyond their approved budget before seeking variation
• The development must be genuinely unanticipated, not merely inconvenient or larger in scale than hoped
• Revised figures must be proportionate and will be scrutinised by the court in the same way as the original budget
• Failure to apply under CPR 3.15A can result in costs beyond the approved budget being irrecoverable at assessment

 

Frequently Asked Questions

What is a Precedent T application?

A Precedent T is the prescribed form used to apply to vary a costs management order under CPR 3.15A. It sets out the phase or phases the party wishes to vary, the revised figures sought, and the significant development that justifies the variation. It must be filed promptly once the need for variation becomes apparent.

What counts as a significant development under CPR 3.15A?

A significant development is a genuine, unanticipated change in the litigation that materially affects the previously budgeted costs. Examples include substantial increases in disclosure, new expert evidence, amended pleadings that expand the issues, or case management decisions that alter the shape of the proceedings. Costs simply exceeding the budget because work took longer than expected will not generally qualify.

When should a CPR 3.15A application be made?

As soon as the significant development becomes apparent. The rules require prompt action, and courts are unsympathetic to parties that continue to incur costs well beyond their approved budget before seeking variation. Early application gives the best prospect of success and avoids the risk of irrecoverable costs at assessment.

What happens if costs exceed the approved budget without a variation?

Under CPR 3.18, the court will not depart from the approved costs budget without good reason when assessing costs on the standard basis. Costs incurred beyond the approved budget in a phase that has not been varied are likely to be assessed at or near the budgeted figure, leaving a potentially significant shortfall in recovery.

Can parties agree a budget variation without a court hearing?

Yes. Where parties can reach agreement on the revised figures, that agreement should be recorded in a budget discussion report and submitted to the court. An agreed variation is significantly more straightforward than a contested application and avoids the additional costs of a hearing.

 

Speak to Greener Costs Today

Costs budget management is one of the most technically demanding areas of modern civil litigation practice. Getting the timing wrong, failing to identify a significant development, or submitting revised figures that the court considers disproportionate can all result in costs that are simply unrecoverable.

At Greener Costs, our specialist costs lawyers advise solicitors on costs budget strategy, prepare and review Precedent H budgets, and assist with Precedent T variation applications at every stage. We understand what courts expect and how to present a variation application that gives your client the best possible prospect of recovery.

If you have a matter where the approved budget no longer reflects the reality of the litigation, speak to us today on 01204 263047 or email info@greenercosts.co.uk.