Sharp v Blank & Ors

Factual and Procedural Background

The Defendants applied on 19 October 2017 for the court's approval to revise their Precedent H costs budget, citing seven significant developments in ongoing litigation. The litigation involves approximately 5,800 claimants grouped under a group litigation order, alleging serious claims against five former directors and Company A regarding the acquisition of Company B and participation in a government recapitalisation scheme in 2008 and 2009. The claimants allege omissions, misstatements, and breaches of duty by the Defendants relating to the acquisition and the recapitalisation scheme, seeking damages of approximately £600 million. The Defendants deny these allegations.

The litigation is complex, involving lengthy pleadings, tens of thousands of disclosed documents, numerous witness and expert statements, and a trial initially estimated at 12 weeks. Costs management was introduced relatively late in the proceedings, with budgets exchanged and a costs management order made in January 2017. The costs budgets were prepared on the basis of a trial commencing 2 October 2017 and concluding 21 December 2017, but the trial timetable was subsequently extended to 2 March 2018.

The Defendants seek revision of their costs budget under paragraph 7.6 of Practice Direction 3E (PD3E), arguing that significant developments since the last approved budget justify an upward revision. The claimants oppose this application on grounds including lateness, oppression due to funding imbalance, and jurisdictional arguments.

Legal Issues Presented

1. Whether the court has jurisdiction under PD3E paragraph 7.6 to approve revisions to a costs budget based on significant developments in litigation.
2. Whether the court can approve costs that have already been incurred at the date of the costs management hearing or only prospective costs.
3. What constitutes a "significant development" sufficient to warrant revision of a costs budget.
4. Whether interim applications can be treated as significant developments within the costs management regime.
5. Whether the Defendants’ application was made in a timely and non-oppressive manner consistent with the overriding objective.

Arguments of the Parties

Defendants' Arguments

• The trial timetable has been extended by 48 business days, nearly doubling the trial length, representing a significant development justifying increased costs.
• Specific disclosure applications led to additional documents requiring review, constituting a significant development.
• The service of an unanticipated expert report by the claimants necessitated additional expert and legal work.
• Permission to serve a supplemental expert report, initially contested by the claimants, also added to costs.
• Questions posed by the claimants to Defendants’ experts exceeded reasonable scope, increasing costs.
• A response from a claimants’ expert introduced new evidence, requiring further expert and factual responses from the Defendants.
• The court has jurisdiction to revise budgets retrospectively to a specified date and treat incurred costs as estimated for revision purposes.
• The application was timely, and the Defendants took reasonable steps to bring it on for hearing promptly.
• The costs management regime aims to provide certainty and predictability of costs exposure, which supports revising budgets to reflect significant developments.

Claimants' Arguments

• The application was made too late and should not be entertained.
• The application is oppressive given the claimants’ limited funding and the Defendants’ greater resources.
• None of the matters relied upon constitute significant developments under PD3E paragraph 7.6.
• The court lacks jurisdiction to approve costs incurred before the hearing; such costs must be dealt with at detailed assessment.
• Interim applications are outside the costs management regime and cannot be significant developments for budget revision.
• The Defendants’ application is heavy-handed and should have been limited to future costs.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
SARPD Oil International Limited v Addax Energy SA and another [2016] EWCA Civ 120	Clarification of costs management and budgeting operation under CPR amendments.	Used to contextualize amendments to CPR 3.15 and 3.18 and PD3E.
Merrix v Heart of England NHS Trust Foundation [2017] 1 WLR 3399	Costs management is prospective; detailed assessment is for incurred costs.	Referenced for legal construction of costs management rules and the prospective nature of budgeting.
Yeo v Times Newspapers Limited [2015] EWHC 2132 (QB)	PD3E 7.6 not suitable for approval of costs already incurred; interim applications governed by PD3E 7.9.	Followed in assessing whether costs incurred before budget approval can be included in revisions.
Venus Asset Management Ltd v Matthews & Goodman LLP [2015] EWHC 2896 (Ch)	Consideration of retrospective variation of budgets and significant developments.	Supported a flexible approach to timing of incurred costs in budgeting revisions.
Churchill v Boot [2016] EWHC 1322 (QB)	Whether adjournment can be a significant development.	Referenced to reject the claimants’ argument that delayed trial start is merely an adjournment.
Asghar and another v Bhatti and another [2017] 4 Costs LD 427	Lengthening of trial is a significant development warranting budget revision.	Supported the court’s finding that trial extension is a significant development.
Murray and Stokes v Neil Dowlman Architecture Ltd [2013] 3 Costs LR 460	Preparation mistakes do not constitute significant developments; developments must be changes since budget preparation.	Used to emphasize that only changes post-budget preparation qualify as significant developments.
Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd [2013] EWHC 1643 (TCC)	Similar to Murray and Stokes on pilot scheme budgeting and significant developments.	Supported principles regarding significant developments and budgeting.

Court's Reasoning and Analysis

The court began by situating the application within the costs management regime established by CPR Part 3 and PD3E, emphasizing the distinction between "incurred costs" and "budgeted costs" (costs to be incurred). The court acknowledged the literal wording of PD3E paragraph 7.4 prohibits approval of costs incurred before the date of a costs management hearing but found this impractical and inconsistent with the purpose of costs management.

The court accepted that the last approved or agreed budget should serve as the reference point for revisions under paragraph 7.6. Costs incurred since that date, relating to significant developments, should be treated as estimated costs for the purposes of revision even if they have actually been incurred. This approach avoids fragmentation of detailed assessments and aligns with the overriding objective of managing costs justly and proportionately.

The court considered the seven significant developments identified by the Defendants, examining each in light of the scale and complexity of the litigation:

• Extension to the trial timetable: The trial was extended by 48 business days due to delayed start, judge unavailability, and additional time for submissions. The court found this to be a significant development warranting revision of the budget.
• Specific disclosure: The successful application for specific disclosure led to nearly 1,000 additional documents requiring review. This was deemed a significant development, though the court reduced the claimed additional costs to a rounded figure.
• Service of claimant’s expert report (Mr Torchio) and subsequent supplemental expert report: The introduction of unanticipated expert evidence was significant, necessitating additional expert and legal work.
• Third-party disclosure application: The court found the application and related work did not amount to a significant development warranting budget revision.
• Questions to Defendants’ experts: The court determined the additional work was modest relative to the expert budget and not a significant development.
• Response to claimant expert’s new evidence: The court considered this a marginal development and declined to allow an adjustment.

The court rejected the claimants’ arguments on lateness and oppression, finding the Defendants acted reasonably and the application was consistent with the overriding objective. The court also rejected the claimants’ jurisdictional arguments, affirming the court’s power to revise budgets retrospectively to a specified date and to treat incurred costs as estimated for revision purposes.

The court emphasized that costs management is an impressionistic exercise aimed at producing figures within a reasonable and proportionate range rather than exact calculations. It also held that interim applications and their consequences may constitute significant developments under paragraph 7.6.

Holding and Implications

DISPOSED OF

The court granted the Defendants’ application to revise their costs budget under PD3E paragraph 7.6 in respect of four of the seven identified significant developments: the extension to the trial timetable, the specific disclosure application, and the service and permission of expert reports related to Mr Torchio and Dr Unni. The court approved adjusted additional costs for these items, with some reductions from the amounts claimed.

The court refused to approve revisions relating to the third-party disclosure application, the questions to three of the Defendants’ experts, and the response to the claimant expert’s new evidence, finding these did not amount to significant developments warranting budget revision.

The decision clarifies the court’s jurisdiction to revise costs budgets retrospectively to a court-specified date and confirms that costs incurred since the last approved budget may be treated as estimated costs for revision purposes. It also confirms that interim applications and their consequences may fall within the costs management regime as significant developments.

No new precedent was set beyond the application and interpretation of existing rules and practice directions in the context of a large and complex group litigation.