Costs Budget 2022 Advice Guide
Frequently Asked Questions
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When is a Costs Budget (Precedent H) Required?
In Multi-Track cases, you must file a Costs budget with the Directions Questionnaire if the claim value is under £50,000, or 21 days before the first Case Management Conference (CCMC), if the claim 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.
What does a Costs Budget include?
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. VAT and additional liabilities (any success fee or ATE premium) are excluded from the Budget figures.
Costs of preparing the Budget and the Costs Management process do not form part of the central figures, but can be located in the bottom right of the front sheet of the Budget as the respective 1% and 2% figures.
The costs of any interim applications that take place (for example for slight variation in directions) can also be sought separately from any Budget.
Can a Costs Budget be Amended?
Prior to any Budget being approved, we would strongly recommend that your Cost Budget is updated to ensure incurred and anticipated costs are up to date.
On success, when you prepare 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, you will need to show a material change in circumstances that could not have been foreseen when the original 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 is a ‘Good Reason’ to Deviate from a Costs Budget?
Common law is quite ambiguous on the issue. It is well established that a ‘Good Reason’ is a high threshold to overcome. As such, to be successful it must be demonstrated that when the Budget was prepared, that the change in circumstances could not have been foreseen.
In addition, if efforts have been made to amend the Cost Budget promptly following the change in circumstances (but the Cost Budget has not been approved due to the conclusion of the case), then this will benefit your case.
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.
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.
In What Case Types Does a Cost Budget Need to be Filed?
Essentially it is in any case where the Court directs it (PD 3E 2(a)). The general rule however, is that a Budget should be filed in any Multi-Track matter A Cost Budget is not required in any matter valued in excess of £10,000,000, any minor claim or where the Court chooses to dis-apply budgeting.
What Happens if I Don’t File a Cost Budget?
Your recoverable costs will be limited to Court fees only. This severely prejudices your client’s ability to continue their claim given that they will be unable to recover their Solicitor’s fees. An application for Relief from Sanctions can be made however, this must be done promptly on realisation of any default/in the event any party raises an issue.
The consequences of not making any application for relief will be severe and we would always recommend that you err on the side of caution. That said, based on the recent decision of Hardy v Skeelis, such consequences do not impact upon incurred costs, and would only prevent the recovery of anticipated costs.
This also highlights the importance of making a strong Part 36 Offer. Under CPR 36.23, if you beat your own Part 36 Offer at Trial, any unrecoverable costs due to late filing of a Budget are recoverable of 50% of the costs assessed.
What Implications Does a Cost Budget have on Recovery in any Bill of Costs?
A Cost Budget sets the reasonable limits of recoverable costs by any party early on in the litigation, and provides clarity to parties as to their costs exposure in the event of a loss.
In the event of success, if your budgeted costs within a phase are within the Budget, these should be recovered as claimed unless the paying party demonstrates a ‘good reason’ to depart downwards from the Budget. If your costs exceed a phase limit, you will be capped on your recovery unless a ‘good reason’ can be demonstrated to revise the Budget upwards.
How Can ARC Costs Assist?
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.