Costs Budget Advice Guide : FAQs
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What is a costs budget?
A Precedent H costs budget is a standard costs budgeting tool, also known as a Precedent H. It can be used to assess costs upon the conclusion of a claim. The parties involved in the claim are required to exchange and file these documents with the Court at the beginning of the proceedings.
When is a costs budget required?
In Multi-Track cases, including personal injury cases, all parties to the Court, except litigants in person must file an agreed Costs budget with the Directions Questionnaire if the claim value is under £50,000. It should be filed 21 days before the first Case Management Conference (CCMC), if the value on the claim form is pleaded over £50,000.
We recommend to many of our clients that it is best to file a Precedent H with the Directions Questionnaire to avoid the risks of being awarded Court fees only and having to apply for relief from sanctions.
Under Practice Direction 3D 4a of the Civil Procedure Rules:
“Unless the court orders otherwise, a budget must be in the form of Precedent H annexed to this Practice Direction. It must be in landscape format with an easily legible typeface.”
If a party fails to file a costs budget, they will not be entitled to recover any costs apart from the applicable court fees.
What should be included within a costs budget?
A Cost Budget details your base costs incurred to date and future costs to be incurred for the totality of the case up to and including Trial. These should include pre-action costs and costs incurred in relation to statements of case and the issuing of proceedings.
Each phase of the budget must include time estimated for advising the client, receiving instructions, and corresponding with the opposing party/parties and the court about matters related to that phase.
Time spent preparing the budget and any related materials must not be claimed under any phase of the draft budget. Once the court approves the costs budget, the maximum figures allowed under rule 3.15(5) should be entered.
The ‘contingent cost’ sections of the form should be used for anticipated expenses that do not fit into the main categories listed.
Examples include the trial of preliminary issues, applications to amend, third-party disclosure requests, or (in libel cases) applications concerning the meaning.
Costs that are disputed (such as the need for a particular expert) should be noted in the relevant phase of the budget, with an indication if they are contested. Only costs that are more likely than not to be incurred should be included.
Can a costs budget be amended?
Prior to any Budget being approved, we strongly recommend that your Cost Budget is updated to ensure incurred and anticipated costs are up to date.
When it comes to preparing a Bill of Costs, there can be a significant discrepancy between incurred costs shown in the Bill and budget. This can be due to the passage of time that has passed between the Cost Budget preparation and any CCMC, but this can be avoided if an updated Cost Budget is filed and served prior to any CCMC.
If a budget has been approved and it transpires that the current budgeted costs are insufficient, the party will need to show a material change in circumstances that could not have been foreseen when the original agreed Budget was prepared.
By way of example, this may be that in a PI claim, that the Defendant has provided surveillance evidence, which would significantly affect the phases of Disclosure and Expert Reports, which would need to be revised.
To amend a budget, the process to follow is to serve the revised budget upon the other side. If agreement cannot be reached, an application should thereafter be made to the Court for a revised budget.
What happens after costs budgets (Precedent H) have been filed/exchanged?
On exchange of Costs Budgets (Precedent H), parties must exchange Budget Discussion Reports (also known as Precedent Rs), and seek to agree the amounts in dispute. When costs budgets have been filed and exchanged the court will make a costs management order
“Unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made”.
All parties should agree to the amounts in dispute; otherwise, Orders will not be made by the Court and the outstanding issues will be resolved at the CCMC.
If the parties cannot agree on the Costs Budgets, the court will document the agreed-upon costs (if any) and will either approve or modify the claimed costs at the Costs Case Management Conference (budget hearing), based on what is deemed reasonable and proportionate for each phase.
When determining the reasonable and proportionate costs for each phase of the Precedent H Costs Budget, the court will consider, among other things, the factors outlined in CPR Rule 44.3(5)
It is important that the Precedent H is accurate, and that a sensible approach is taken as to the estimating of future recoverable costs and disbursements.
A Statement of Truth must be signed by to state the contents of a Costs Budget are accurate, and if the contents of a Costs Budget are under/over-pitched, this can have dire consequences at any CCMC and on conclusion of a claim, leading potentially to sanctions and/or a loss of a significant amount of costs.
It is at this juncture that an initial view of proportionality will also be formed by the Court, and this will be critical as to how any Bill of Costs is later considered at assessment.
How can ARC Costs assist?
At ARC Costs, we have a team of experienced Costs Draftsman and Costs Lawyers. We act as independent experts for either paying or receiving parties in order to maximise/minimise the amount of legal costs payable.
As part of our service, we regularly provide and negotiate Costs Budgets, as well as preparing electronic Bills of Costs on conclusion of any successful case.
To speak with one of our costs experts, call us on 01204 397302, or email one of the team at info@arccosts.co.uk.