Costs Budget (Precedent H)- Frequently Asked Questions

Costs management is a key aspect of multi track cases, and understanding how to correctly prepare, file, and negotiate a Costs Budget (Precedent H) can make a substantial difference to future costs recovery. At ARC Costs, our Costs Lawyers and experienced Costs Draftsmen specialise in preparing accurate, strategic, and Court-compliant budgets that maximise recoverability and reduce the risk of adverse costs orders. Below, we answer the most frequently asked questions about costs budgets, Precedent H requirements, and how ARC Costs can help.

What is a Costs Budget (Precedent H)?

A Costs Budget, formally known as Precedent H Costs Budget, is a document required in most multi track cases that sets out the costs already incurred and the estimated future costs of litigation. It enables the Court to manage and control costs at an early stage.

The budget includes:

• Costs incurred to date – these are not “controlled” by the Court, but comments can be passed on the level of costs incurred;
• Estimated future costs broken down by phase (e.g., disclosure, witness evidence, CMCs, trial preparation, trial advocacy) – these anticipated costs are what are set by the Court to control the cost of future litigation;
• Assumptions and contingencies which set out the basis for future costs, and any potentially likely deviations which may need to be taken into account.

The purpose of budgeting is to ensure costs remain proportionate and to give parties clarity on their likely exposure to legal costs up to and including the Trial.

Is a Costs Budget always required?

A budget is not always required, and specifically in the following instances a Costs Budget will not need to be filed and served:

• Cases on the small claims track, fast track (generally cases with a value of less than £25,000) or intermediate track (generally cases with a value of between £25,001 – £100,000);
• Certain specialist proceedings (e.g. fixed costs regimes);
• Where a party is a Litigant in Person (unless ordered otherwise by the Court), but other parties to the litigation with legal representation must still prepare a Costs Budget;
• In accordance with CPR 3.12, cases which exceed a pleaded value of in excess of £10 million, and;
• Cases involving a minor.

However, in most multi track cases, a party must file a costs budget unless the Court orders otherwise.  In certain cases which are eligible for costs budgeting, a Judge may consider it disproportionate or unsuitable for budgeting to apply, and may dispense with the usual requirements.

What happens if a party fails to file a Costs Budget on time?

Under CPR 3.13, the budget must be filed 21 days before the first Case Management Conference (CMC), or with the Directions Questionnaire (though this applies to cases where the pleaded value is less than £50,000) unless the court orders an alternative timetable.

If a party fails to file their Precedent H on time, the sanction under CPR 3.14 is severe, and the party is treated as having filed a budget comprising only court fees.  In practice this means even if successful in the litigation, the significant fees of instructing a Solicitor, barrister and incurring expert fees will not be recovered.

ARC Costs frequently assists solicitors in applying for relief from sanctions or drafting budgets urgently where deadlines are approaching, and so long as the Denton Test can be fulfilled, there are good prospects on obtaining relief from sanctions for failing to file and serve a Budget in time, so long as prompt action is taken.

What is a Budget Discussion Report?

After exchanging Costs Budgets, parties must complete a Budget Discussion Report (Precedent R). This sets out:

• Which elements of the opponent’s budget are agreed;
• Which phases are in dispute, and;
• Brief reasons for any disagreements.

This must be filed 7 days before the CMC.  There are no set consequences set out in the CPR for failing to file and serve a Precedent R however, failure to take this step will be taken by the Court as an agreement to the other side’s Budget, and it is unlikely oral submissions will be entertained at any Costs and Case Management Conference as a consequence.

ARC Costs prepares Budget Discussion Reports as part of its budgeting service, helping parties narrow issues and avoid unnecessary hearings.

What is the difference between a Bill of Costs and a Costs Budget?

A Costs Budget (Precedent H) is prospective, meaning it deals with future estimated costs and incurred costs at the case management stage, with a view to setting a cap or limit for each phase of the litigation, beyond which costs recovery will prove a significant hurdle to overcome.

A Bill of Costs, usually drafted in Precedent S (Electronic Bill) format, is retrospective and prepared after the case concludes to detail all costs actually incurred for assessment.  The Precedent S will break down all work done item-by-item and compare it to the approved Costs Budget, showing areas of underspend and overspend.  Generally costs will be permitted if they fall within the scope of the approved Budget, but will be disallowed if there is overspend on certain phases, absent a “good reason” to depart from the approved Budget.

In simple terms:

• Costs Budget = planning tool
• Bill of Costs = final account

ARC Costs drafts both documents and can guide you through the entire lifecycle of costs recovery.

What is the typical recovery rate for expertly drafted Costs Budgets?

When a Costs Budget is carefully prepared with robust assumptions and supported by evidence, the approved budget often results in substantially better recovery on assessment.

ARC Costs regularly sees a recovery of 70–90%, taking into account their:

• Budgets are drafted accurately;
• Phases include clear and well-reasoned assumptions;
• Counsel costs and disbursements are properly detailed and justified, and;
• Costs Lawyers engage meaningfully in budgeting discussions with other parties.

Poorly drafted budgets or those completed without specialist input frequently see significant reductions.  This can be because costs are over-anticipated or poorly justified.

At ARC Costs we also come across law firms that have completed their own Budgets internally, and have only turned to us at the end of litigation for preparation of the Bill, only for us to report that their Budget should have been prepared with professional assistance.  In these cases, for what is a modest cost of instructing a costs professional (generally a Costs Lawyer), sometimes tens or even hundreds of thousands more in litigation costs could have been recovered, had a Costs Budget been properly prepared in the first instance and with the assistance of ARC Costs or another professional costing company.

What are the best practices for preparing a Precedent H Costs Budget?

To maximise recovery and comply with the rules, the following best practices are essential:

1. Start early

Gather financial records, retainer information, rates, and incurred costs well in advance of the 21-day deadline.

2. Ensure accuracy of incurred costs

Historical invoices, WIP records and time entries should be checked carefully.

3. Draft clear and realistic assumptions

Assumptions explain how each phase has been costed and are critical for defending budgeted figures at CMC.  Anticipated/estimated costs should be based off draft directions and Directions Questionnaires, showing the likely course of litigation and taking into account important factors such as number of witnesses, experts to be instructed, and the anticipated length of Trial.

4. Engage in meaningful discussions

Proper use of the Budget Discussion Report can reduce disputes and streamline the CMC.

5. File and serve the budget correctly

Ensure that the party files (at Court) and serves (on other parties) the budget in the correct format, with a signed statement of truth, and serves it on all other parties.

6. Use specialist drafters where possible

Budgets prepared by costs lawyers are more accurate, fully compliant and proportionate, usually resulting in higher judicial approval.

ARC Costs follows all best practices and uses advanced budgeting software to ensure precision.

How can solicitors optimise budgeting for multi-track cases?

Solicitors can significantly improve outcomes by:

• Delegating budgeting to costs professionals
• Factoring budgeting discussions into early case strategy
• Monitoring spend throughout the case to ensure phases do not exceed the approved budget
• Applying for budget variation promptly if significant developments arise (this means keeping on top of your costs being incurred, which we can assist with, but also applying for variations with a Precedent T if there are any significant variations in the litigation procedure).
• Using accurate hourly rates and ensuring fee earner grades are applied correctly

ARC Costs provides continuous support throughout the case, from initial budgeting to monitoring and variation applications.

Do litigants in person have to prepare a Costs Budget?

If a litigant in person seeks costs, beyond fixed costs or limited statutory entitlements, they may be required to file a budget in multi-track cases if the Court so orders, but the default rule is that they do not need a Costs Budget.  Despite this CPR 3.13(6) makes it clear that Litigants in Person are still expected to file and serve a Precedent R Costs Budget Discussion Report if they seek to challenge the anticipated costs of other parties that have filed a Budget.

However, most litigants in person do not prepare Precedent H documents and often seek professional assistance. ARC Costs can assist where appropriate.

How can ARC Costs assist with Costs Budgeting?

ARC Costs offers a comprehensive service that includes:

• Preparation of Precedent H budgets
• Preparation of Budget Discussion Reports
• Attendance at CMC or CCMC hearings
• Negotiation with opponents
• Budget variations following significant developments
• Ongoing cost monitoring
• Post-settlement Bills of Costs and negotiations

Our budgeting service significantly reduces the risk of receiving adverse orders or being restricted to court fees only.

At ARC Costs our team are adept at dealing with any size of Budget, and we regularly assist in high value and complex litigation comprising of disputes involving millions of pounds in damages and costs.  Our professional indemnity covers us for disputes involving legal costs of up to £2.5 million, and we are therefore prepared to assist with your case, irrespective of the size.

Get Expert Help With Your Costs Budget

A well-drafted and strategically prepared Costs Budget can dramatically improve recoverability and minimise costs risk. Whether you need assistance filing a Precedent H, preparing a Budget Discussion Report, or negotiating budgets at CMC, ARC Costs has the expertise to help.

Contact our specialist team today for efficient and accurate budgeting support in all multi-track matters. Should you require any assistance or free initial advice, please call us on 01204 397302, or email one of our costs experts direct on info@arccosts.co.uk. 

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