What is a Budget Discussion Report?

A Budget Discussion Report is also known as the Precedent R and was introduced as part of the costs budgeting process to allow parties to comment on their opponent’s Precedent H costs budget on claims which commenced after 6 April 2016. The rules for the budget discussion report (Precedent R) are outlined in CPR 3 and PD 3E.  Under CPR 3.13 (2), parties must file an agreed budget discussion report alongside their costs budget at least 7 days before the first case management conference.

The Precedent R must set out which figures are agreed, and which figures are not agreed for each phase. It must also provide a brief summary of the grounds of dispute.

All parties are encouraged to use the Precedent R Discussion Report, however, there has been some criticism of the ambiguity of the choice of words used within the precedent R form, particularly the use of the words “claimed costs” which is used to show both incurred costs and future costs.

In recent case law, parties have also been criticised for their tactical use of Precedent R in costs budgeting.

Findcharm V Churchill

In the case of Findcharm Ltd v Churchill Group Ltd [2017] EWHC 1108 (TCC), the Defendants were criticised for using their budget discussion report as a game by placing unrealistic, low figures on each stage of the process without justification for any of the figures. Coulson J described this as “an abuse of the cost budgeting process” and further stated:

“some parties seem to treat cost budgeting as a form of game, in which they can seek to exploit the cost budgeting rules in the hope of obtaining a tactical advantage over the other side. In extreme cases, this can lead one side to offer very low figures in their Precedent R, in the hope that the court may be tempted to calculate its own amount, somewhere between the wildly different sets of figures put forward by the parties. Unhappily, this case is, in my view, an example of that approach.”

What can we Learn from Fincharm V Churchill?

Findcharm v Churchill is an example of how the budgeting process can be abused through use of the budget discussion report. It is important for all parties to be realistic in their use of the Precedent R form. Parties who use the Budget Discussion Report to tactically put forward unrealistic figures will leave themselves open to criticism from the Court for abusing the budgeting process.  If your opponent proposes unrealistic proposals in their Precedent R to your Costs Budget, or serves an unrealistically low Costs Budget to make your own look excessive, it is recommended that submissions are made as to this in your own Precedent R.

How can ARC Costs Assist?

Our specialist budgeting team are highly experienced in Costs Budget (Precedent R) Negotiations. The ARC Costs team are always happy to assist with the preparation of any Cost Budget and negotiation of the same. Whether you require assistance with drafting your precedent R, obtaining a costs management order, or preparation for detailed assessment, feel free to get in touch.

We can be contacted via email at info@arccosts.co.uk, or by telephone on 01204 397302. For more information on legal costs, please find out more about our speciality areas of expertise and our services on our legal costs page.