Part 3 and Practice Direction 3D (previously 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 Practice Direcrtion 3D 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. A costs 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 (though this only impacts upon anticipated costs currently, and not costs incurred up to the date of the costs management order).

Practice Direction 3D and Your Costs Budget

PD3D 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.

CPR 3.17 – Incurred Costs

CPR 3.17 states that the Court may not approve incurred costs up to and including the Costs Management Hearing; however, the costs may be commented upon and taken into account when proportionality and reasonableness of budgeted costs are being considered.

“3.17

(1) When making any case management decision, the court will have regard to any available budgets of the parties and will take into account the costs involved in each procedural step.

(2) Paragraph (1) applies whether or not the court has made a costs management order.

(3) Subject to rule 3.15A, the court—

(a) may not approve costs incurred up to and including the date of any costs management hearing; but

(b) may record its comments on those costs and take those costs into account when considering the reasonableness and proportionality of all budgeted costs.”

Due to these 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.

Updating a costs budget

A costs budget may be updated in limited circumstances using a Precedent T Budget Variation Notice. There must be a “significant development” in the case to justify the submission of a Precedent T. 

Under CPR 3.15A:

“(1) A party (“the revising party”) must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions.

(2) Any budgets revised in accordance with paragraph (1) must be submitted promptly by the revising party to the other parties for agreement, and subsequently to the court, in accordance with paragraphs (3) to (5).”

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.

Contact one of the team via our contact form below, or call one of our costs experts on 01204 397302.

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