PD 3E & CPR 3 – Get Your Costs Budget Right
Part 3 and Practice Direction 3E of the Civil Procedure Rules (CPR) deal with costs management and set out the rules for preparation and filing of a budget of legal costs. CPR 3 and PD 3E apply to most Part 7 Multi-track cases.
What is a Costs Budget?
If you are a party to a Multi-Track case, submission of a legal costs budget is required under the CPR. This type of budget is also referred to as a Precedent H and is necessary to control the amount of costs recoverable by either party at the end of proceedings.
CPR 3 and Your Costs Budget
Costs management is dealt with under CPR 3.12 to CPR 3.18 which sets out the rules for when and how a budget should be filed. It also states the rules regarding the Court’s powers regarding costs management orders, how a costs management conference (CCMC) should be conducted and how a Costs Judge should assess costs.
In regard to filing a costs budget, the CPR states that In Multi-Track cases, the budget must be filed with the Directions Questionnaire if the claim value is under £50,000, or 21 days before the first CCMC Case Management Conference, if the claim is pleaded over £50,000.
Under CPR 3.13, failure to file a costs budget would result in the receiving party only having the ability to claim the applicable Court fee.
PD 3E and Your Costs Budget
PD3E provides guidance on implementation of CPR 3. It provides guidance on how the costs budget should be prepared and states that a budget should be in the form of a Precedent H. The costs within the budget are divided into incurred and anticipated costs and, once approved, anticipated costs are given special protection by the Court at Detailed Assessment. Incurred costs are not protected and can be scrutinised on detailed assessment.
Recent Changes to Practice Direction 3E
Changes to Practice Direction 3E came into force on 1st October 2019. The changes made were specifically to Paragraph 7.4, which now states:
“As part of the costs management process the Court may not approve costs incurred up to and including the date of the costs management hearing. The Court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all budgeted costs.”
Due to these updated budget rules, the Costs Draftsman should ensure that all incurred costs go up to and including the date of the CCMC, and do not refer to the date of the Budget as the date of transition. The Draftsman may also need to make an estimation of costs within the incurred section when preparing a Costs Budget to factor in any delay between preparation of the Budget and in approving the Budget at any CCMC.
If successful, it is likely that a party’s costs will be subjected to detailed assessment on conclusion however, the preparation of an effective Costs Budget can ensure that a sizeable interim payment can be obtained on settlement/at Trial, and also that a high percentage recovery can be achieved on any subsequently prepared Bill of Costs.
How Can We Assist?
If you would like to find out more about best practice in preparing your Cost Budget, please feel free to view the section on our website for further guidance or have a look at our frequently asked questions to find out more, including making amendments to a costs budget and finding a good reason to depart from a costs budget.
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