It is a well known fact there can be severe financial sanctions applied to a party that fails to file their Costs Budget on time ie with their Directions Questionnaire, or in the event the claim is pleaded in excess of £50,000, within 21 days of the first Case Management Conference (CMC). Parties are often quick to file an application for relief from these sanctions due to the significant cost implications the sanctions can have. CPR 3.14 states that failure to file a budget on time means a party may be entitled to claim for their court fees only, though there are common law decisions which stipulate that such implications only apply to anticipated costs only, rather than also applying to incurred costs.

However, there is a grey area in the Civil Procedure Rules (CPR) related to the failure to file a Budget Discussion Report, also known as a Precedent R. The lack of express sanctions is revealed in CPR 3.13, which simply states:

“(2) In the event that a party files and exchanges a budget under paragraph (1), all other parties, not being litigants in person, must file an agreed budget discussion report no later than 7 days before the first case management conference.”

Due to the lack of express sanctions related to the late or absent filing of a Precedent R, it is down to the Court and Judge to rule on the circumstances and consequences of failing to file a budget report on time.

It has been advanced by many parties in the past, that failure to file and serve a Precedent R would suggest that the Costs Budget is not contested however, no common law guidance has ever been given on the issue.

Alexandra Handy v Dr Mohammed Azhar Aslam & Linia Limited (2021)

In the case of Alexandra Handy v Dr Mohammed Azhar Aslam & Linia Limited, the Claimant was seeking damages from a negligent lip augmentation procedure which took place in 2016. At the CCMC, which took place on the 3rd December 2021, the Deputy District Judge O’Connell investigated why the Second Defendant had failed to file and serve a budget discussion report on time, in relation to CPR 3.13(2) and paragraph 11 of Practice Direction 3E.

At the CCMC, the Claimant’s Counsel, Miss Badham, explained that the Claimant originally filed a costs budget on 10th November 2021, totalling £272,764.71. A new and updated budget was submitted 16 days later on 26th November 2021 at the revised amount of £298,208.90. The Claimant’s counsel urged the judge to use her discretion in refusing any contest to their costs budget due to the second defendant’s failure to file a budget discussion report on time.

Counsel for the Second Defendant argued that they had not filed a budget discussion report for the original costs budget on the 10th November 2021 due to being informed by the Claimant that they would be further submitting an updated one at least 14 days before the CCMC. The Second Defendant then argued that they failed to serve a budget discussion report as there was no time to do so before the costs and case management conference.

The Claimant’s counsel, Miss Badham, went on to refer to legislation in the White Book that states parties can update incurred phases up to the CCMC, and that the main issue and obligation is rather that of making sure a relevant and accurate costs budget is filed 21 days prior to the conference. By way of this, the Claimant had indeed followed protocols even though they admitted it was likely they would be updating their budget, which is their right to do so following guidelines.

Miss Badham stated how it would have been helpful and appropriate for the Second Defendant to still have filed a Precedent R, regardless of the Claimant’s right to update their costs budget, as the Second Defendant’s cost budget report would still have provided useful information regarding proportionality and disbursements of costs, which could easily have been tweaked in relation to any updated costs budget submitted by the Claimant.

It is also important to note that the Second Defendant had previously indicated their intention to settle the case prior to reaching a CCMC, and that the Claimant had, in fact, delayed the filing of their costs budget to accommodate this proposal. However, the case never settled, and so costs budgets were drawn up and the Second Defendant was presented with the updated budget seven days prior to the CCMC, giving them the required time to create a costs budget report.

The Outcome

DDJ O’Connell went on to say that there was no good reason for the Second Defendant to not have served their budget discussion report, as any report, whether it be for the Claimant’s original cost budget or updated budget, would have been helpful in assessing the costs and objections between the parties.

The Judge went on to state that, as there had been no mention of objections and no budget discussion report filed, she was allowing the Claimant’s budget as it has been drawn at the value of £298,298.90.

What Does this Mean?

This case is a prime example of the importance of filing the Precedent R on time, even though there are no clear set of sanctions for failing to do so. It exemplifies the Court’s power and discretion to impose sanctions where they see fit and can ultimately allow a parties costs budget to go completely unchallenged and allowed as claimed if there is no budget discussion report.

How ARC Costs can Assist?

Our team at ARC Costs are experienced in drafting Precedent H Costs Budgets and Precedent R Budget Discussion Reports and work to ensure our clients receive maximum costs recovery on their case.  It is imperative that Costs Budgets are drawn effectively, to ensure the maximum recovery of costs can be achieved in the event of a successful conclusion to any proceedings.

We provide our range of costs services to clients from a range of legal backgrounds and regularly work with both civil and commercial disputes,  and have also assisted on a range of cases going through to the Court of Appeal.

As independent costs experts, we can act for either the Paying or Receiving Party, to either minimise or maximise the recovery of costs respectively by the Receiving Party.

If you would like more information about the services we offer then please don’t hesitate to get in touch.

We can be contacted by email at info@arccosts.co.uk, or by telephone on 01204 397302.

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