Effective cost management is fundamental to successful litigation. Two processes are central to this: cost budget drafting and budget monitoring. While they are closely linked, they perform different functions and take place at different stages of a case.

Efficient cost management supports informed decision-making, strengthens negotiation positions, and ensures that the financial aspects of litigation do not jeopardise the overall objectives of the case.

ARC Costs can support law firms at every stage of this process. Our team of experienced Costs Draftsmen and Costs Lawyers provides specialist guidance on preparing accurate and proportionate costs budgets, monitors expenditure against approved figures, and advises on any necessary budget variations.

What is a costs budget? (Precedent H)

A costs budget, also known as a Precedent H, is a court document that sets out each party’s estimated litigation costs for every phase of the proceedings. It is used in the court’s management of the case and, crucially, at the end of the claim when assessing recoverable costs.

The preparation, exchange, and filing of a costs budget must occur early in the proceedings, as required under the Civil Procedure Rules. Failure to comply with this requirement carries significant consequences. Parties who do not file a costs budget may find themselves limited to recovering only the applicable court fees, effectively forfeiting the ability to recover the majority of their legitimate legal costs.

What should be included when costs budget drafting?

A costs budget should provide a comprehensive record of all base costs incurred to date, as well as future costs anticipated throughout the entirety of the case. This encompasses pre-action costs, costs associated with the preparation of statements of case, and those related to the issuing of proceedings.

For each phase of the budget, it is essential to include an estimate of the time required for advising the client, taking instructions, and corresponding with both the opposing parties and the court in relation to that phase.

It is important to note that any time spent preparing the budget itself, or related supporting materials, should not be included within any phase of the draft. Once approved by the court, the maximum figures permitted under the CPR 3.15(5) should be recorded.

The contingent costs section should be used to capture both short term and long term anticipated expenses that fall outside the standard categories. Examples of such costs include the trial of preliminary issues, applications to amend pleadings, requests for third-party disclosure, or, in defamation cases, applications relating to meaning.

Where particular costs are likely to be disputed – for instance, the instruction of an expert – the relevant phase should clearly record both the estimated costs and the fact that they are contested. Only costs that are more likely than not to be incurred should be included in the budget.

When is costs budget drafting required?

In multi-track cases – including personal injury claims – every represented party must file a Precedent H.

• Claims valued at under £50,000:

Costs budgets must be filed with the Directions Questionnaire.

• Claims valued over £50,000:

Budgets must be filed no later than 21 days before the first CCMC.

ARC Costs typically advises clients to file a Precedent H with the Directions Questionnaire wherever possible. This proactive approach reduced the risk of sanctions or later relief-from-sanction applications.

Under PD 3D 4a, budgets must be in the Precedent H format, in landscape orientation, and easily legible by both the court and the opposing parties.

Failure to file a costs budget carries significant consequences. If a party does not submit a complaint Precedent H, the sanctions imposed are severe: the party will generally only be entitled to recover the applicable court fees, with all other costs deemed unrecoverable.

Amending and varying a costs budget

A budget may be revised before or after approval if there is a material change in circumstances under CPR 3.15A. For example, new evidence may require additional disclosure or expert involvement, justifying a revised budget.

Before seeking approval for a variation, the revised budget should be served on the opposing party using Budget Variation Notice, known formally as a Precedent T. If an agreement is not reached, an application to the court is required. Early and regular review of the budget helps ensure alignment with incurred and anticipated costs and avoids discrepancies with subsequent bills of costs.

What is budget monitoring?

Once a costs budget has been approved, ongoing budget monitoring becomes essential to ensure compliance with the court’s Costs Management Order and to control expenditure throughout the case. This process involves actively tracking costs against the approved budget for each phase of litigation, identifying potential overspend, and taking corrective action where necessary.

Effective budget monitoring allows solicitors to respond promptly to unforeseen developments that may affect costs, ensuring that any necessary adjustments are made in accordance with CPR 3.15A. It also provides a clear record of actual expenditure, which supports recoverability during the detailed assessment process. Without consistent monitoring, there is a risk that otherwise reasonable costs may exceed approved limits and become unrecoverable, potentially impacting both the client and the firm’s financial position.

How can costs draftsman assist with budget drafting and monitoring?

Costs draftsmen play a crucial role in both the preparation and ongoing management of litigation budgets. Their expertise ensures that budgets are accurate and fully compliant with the Civil Procedure Rules, while also providing practical oversight to protect costs recovery.

In the drafting stage, a costs draftsman prepares detailed Precedent H budgets, taking into account case-specific factors. They ensure each phase is quantified and justified, identifying potential proportionality issues in advance to minimise the risk of disallowances or sanctions. Costs draftsmen also provide strategic advice on negotiating budgets with opposing parties and offer support at CCMS to secure court approval.

During the monitoring phase, costs draftsmen track actual expenditure against the approved budget throughout the case. They identify any potential overspend and advise on necessary adjustments or applications to revise the budget under CPR 3.15A. By maintaining detailed records of expenditure and providing ongoing strategic guidance, costs draftsmen help ensure that all litigation decisions remain financially proportionate and that recoverable costs are maximised at detailed assessment.

How can ARC Costs assist?

At ARC Costs, we provide comprehensive support for law firms and clients across all aspects of costs management. Our team of highly experienced Costs Draftsman and Costs Lawyers acts as independent experts for both paying and receiving parties, offering impartial guidance tailored to your position in the dispute.

Our services cover the full spectrum of legal costs management. We regularly prepare and negotiate costs budgets, ensuring that anticipated costs are realistic and compliant. At the conclusion of a successful case, we also prepare detailed electronic bills of costs, allowing for efficient submission and review in line with court requirements.

Whether you are looking to manage costs effectively throughout a case or require expert advice on a final costs settlement, our team provides practical, expert guidance every step of the way.

To discuss your case with one of our costs experts, call us on 01204 397302, or email one of the team at info@arccosts.co.uk.

Follow Us