Costs Budgeting and Late Revisions: Court’s Approach to Post-Trial Amendments | Good Reason To Depart?

Queensgate Place Ltd v Solid Star Ltd & Ors (No. 3) (Consequential Matters) [2024] EWHC 2139 (Ch) involved complex issues related to costs budgeting following the determination of a petition brought by Queensgate Place Ltd (QPL) under section 994 of the Companies Act 2006. The case centered on unfair prejudice proceedings concerning the affairs of Solid Star Ltd (SSL).

The costs budgeting issues arose in the context of a split trial, where liability and remedies were addressed in separate hearings. The key problem stemmed from the fact that the original costs budget, approved at the Costs and Case Management Conference (CCMC) on 12 October 2021, was based on the assumption of a single trial. However, the court had actually ordered a split trial at the CCMC.

The original budget included incurred costs of £95,308 and estimated costs of £731,771, with £87,025 allocated for the trial phase. This discrepancy between the budget’s assumptions and the actual trial structure became problematic when it came time for the Remedies Hearing.

Three weeks before the Remedies Hearing in June 2024, QPL filed a revised costs budget seeking to increase the trial phase budget by £161,964 to cover the costs of this additional hearing. This late filing of the revised budget became a contentious issue, as it came approximately seven months after the Liability Judgment was handed down and six months after directions were given for the Remedies Hearing.

The court had to grapple with several interrelated issues:

• The appropriateness of approving a significantly revised budget so late in the proceedings.
• The impact of the split trial structure on the original budget’s validity.
• The potential prejudice to the respondents if the increased budget was approved.
• The need to ensure that QPL could recover reasonable costs for the necessary Remedies Hearing.

Chronology of relevant events:

12 October 2021: Costs and Case Management Conference (CCMC) where QPL’s costs budget was approved

At this CCMC, QPL’s initial costs budget was approved. The budget included incurred costs of £95,308 and estimated costs of £731,771. Importantly, the judge noted that this budget was based on assumptions for a single 8-day trial, despite the CCMC ordering a split trial. A total of £87,025 was permitted for the trial phase of the case. This discrepancy between the assumption of a single trial and the actual order for a split trial became significant later in the proceedings.

20 September 2023: Liability Judgment handed down

The Liability Judgment was handed down on this date. While this event itself didn’t directly involve costs budgeting issues, it marked the conclusion of the liability phase of the trial and set the stage for the subsequent Remedies Hearing. This split in the trial process highlighted the limitations of the original costs budget, which had been based on a single trial assumption.

23 May 2024: QPL filed revised costs budget seeking increase for Remedies Hearing

Three weeks before the Remedies Hearing, QPL’s solicitors filed a revised costs budget. This updated budget sought to increase the trial phase budget by £161,964 specifically to cover the costs of the Remedies Hearing. The revised budget included £84,514 for the solicitors’ costs for a three-day hearing and £77,450 for counsel.

The timing of this filing became a significant issue. The judge noted that it was “extremely late,” coming approximately seven months after the Liability Judgment and six months after directions were given for the Remedies Hearing on 10 November 2023. No explanation was provided for this delay in filing the updated budget.

June 2024: Remedies Hearing held (exact date not specified)

The Remedies Hearing took place in June 2024. QPL’s revised budget was filed three weeks prior to this hearing. At the start of the Remedies Hearing, QPL’s counsel mentioned their wish to update the budget, but the matter wasn’t addressed further during the hearing.

21 August 2024: Judgment on consequential matters handed down

In this judgment, the court addressed the issue of QPL’s revised costs budget. The judge decided not to approve the amendments to the budget at this late stage, after the conclusion of the Remedies Hearing. However, recognizing the need for a second trial to deal with remedies, the judge determined that there was good reason for the court on assessment to depart from QPL’s approved budget.

The parties’ respective position

Decision

The court’s reasoning: The judge agreed that the filing of QPL’s updated budget was extremely late. Despite the budget not being agreed, no application was made prior to the Remedies Hearing for a Costs Management Hearing to deal with the updated budget. The judge noted:

1. The scope of the Remedies Hearing was apparent to all parties no later than 10 November 2023 when directions were given for that hearing.
2. No explanation was provided by QPL as to why it took a further six months for an updated budget to be filed.
3. The updated budget included £84,514 for the solicitors’ costs for a three-day hearing and £77,450 for counsel – a total of £161,964 as against the £87,025 permitted for that phase in the original budget.
4. The issue was mentioned at the start of the Remedies Hearing but was not dealt with.

The judge, Mr David Rees KC, referred to the decision in National Museums and Galleries on Merseyside Board of Trustees v AEW Architects and Designers Ltd [2013] EWHC 3025 (TCC), where it was held that it would not be appropriate as trial judge to revise a budget at such a late stage.

“I propose to take the same approach here. I agree that there is here good reason for the court on assessment to depart from the petitioner’s approved budget to take into account the need for a second trial to deal with the remedies issue, the scope of which would not have been clear at the CCMC. However, I do not consider that it is now appropriate for me, after that trial has concluded, to approve amendments to the budget and I propose to leave the detail on this issue to the costs judge to resolve.”