Note on amendments to CPR and Practice Direction Provisions in Relation to Costs Budgeting
Coming into force 6th April 2016
Section II of CPR 3, dealing with costs management, will be amended:
- So as to dis-apply budgeting to claims made by or on behalf of minors where the claim is commenced on or after 06.04.16
- Where the value on the claim form is less than £50,000.00, budgets must be filed and served with the directions questionnaire
- In all other cases the budget must be filed and served not less than 21 days before the first CMC
- Agreed budget discussion reports must be filed not less than 7 days before the first CMC
PD 3E will be amended to provide:
- Budgeting will ordinarily be dis-applied in cases where the Claimant has a limited or severely impaired life expectancy
- Parties must follow the precedent H guidance note
- Where budgeted costs do not exceed £25,000.00 or the value of the claim as stated on the claim form is less than £50,000.00, the parties must only use the first page of precedent H
- Specifies the contents of a budget discussion report
To make clear that it is not the court’s role on budgeting to fix rates but only to fix total costs by reference to phase.
The amended section II of CPR 3 and PD 3E will read as follows (amendments underlined):
II COSTS MANAGEMENT
Application of this Section and the purpose of costs management
1. This Section and Practice Direction 3E apply to all Part 7 multi-track cases, except—
a) where the claim is commenced on or after 22nd April 2014 and the amount of money claimed as stated on the claim form is £10 million or more; or
b) where the claim is commenced on or after 22nd April 2014 and is for a monetary claim which is not quantified or not fully quantified or is for a non-monetary claim and in any such case the claim form contains a statement that the claim is valued at £10 million or more; or
c) “where in proceedings commenced on or after 6th April 2016 a claim is made by or on behalf of a person under the age of 18 (a child) (and on a child reaching majority this exception will continue to apply unless the court otherwise orders); or
d) where the proceeding are the subject of fixed costs or scale costs; or
e) the court otherwise orders.”.
1A) This Section and Practice Direction 3E will apply to any other proceedings (including applications) where the court so orders.
2) The purpose of costs management is that the court should manage both the steps to be taken and the costs to be incurred by the parties to any proceedings so as to further the overriding objective.
Filing and exchanging budgets and budget discussion reports
3.13.—(1) Unless the court otherwise orders, all parties except litigants in person must file and exchange budgets—
where the stated value of the claim on the claim form is less than £50,000, with their directions questionnaires; or
in any other case, not later than 21 days before the first case management conference.
(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.
Failure to file a budget
Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees.
Costs management orders
1) In addition to exercising its other powers, the court may manage the costs to be incurred by any party in any proceedings.
2) The court may at any time make a ‘costs management order’. Where costs budgets have been filed and exchanged the court will make a costs management order unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made. By a costs management order the court will—
a) record the extent to which the budgets are agreed between the parties;
b) in respect of budgets or parts of budgets which are not agreed, record the court’s approval after making appropriate revisions.
3) If a costs management order has been made, the court will thereafter control the parties’ budgets in respect of recoverable costs.
Costs management conferences
1) Any hearing which is convened solely for the purpose of costs management (for example, to approve a revised budget) is referred to as a ‘costs management conference’.
2) Where practicable, costs management conferences should be conducted by telephone or in writing.
Court to have regard to budgets and to take account of costs
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.
Assessing costs on the standard basis where a costs management order has been made
3.18 In any case where a costs management order has been made, when assessing costs on the standard basis, the court will –
a) have regard to the receiving party’s last approved or agreed budget for each phase of the proceedings; and
b) not depart from such approved or agreed budget unless satisfied that there is good reason to do so.
(Attention is drawn to rules 44.3(2)(a) and 44.3(5), which concern proportionality of costs.)
PRACTICE DIRECTION 3E – COSTS MANAGEMENT
This Practice Direction supplements Section II of CPR Part 3
Production of Costs Budgets
Part 7 multi-track claims with a value of less than £10 million
1. The Rules require the parties in most Part 7 multi-track claims with a value of less than £10 million to file and exchange costs budgets: see rules 3.12 and 3.13.
a In any case where the parties are not required by rules 3.12 and 3.13 to file and exchange costs budgets, the court has a discretion to make an order requiring them to do so. That power may be exercised by the court on its own initiative or on the application of a party. Where costs budgets are filed and exchanged, the court will be in a position to consider making a costs management order: see Section D In all cases the court will have regard to the need for litigation to be conducted justly and at proportionate cost in accordance with the overriding objective.
“(b) In cases where the Claimant has a limited or severely impaired life expectation (5 years or less remaining) the court will ordinarily dis-apply cost management under Section II of Part 3.”.
3. At an early stage in the litigation the parties should consider and, where practicable, discuss whether to apply for an order for the provision of costs budgets, with a view to a costs management order being made.
4. If all parties consent to an application for an order for provision of costs budgets, the court will (other than in exceptional cases) make such an order.
5. An order for the provision of costs budgets with a view to a costs management order being made may be particularly appropriate in the following cases:
a) unfair prejudice petitions under section 994 of the Companies Act 2006;
b) disqualification proceedings pursuant to the Company Directors Disqualification Act 1986;
c) applications under the Trusts of Land and Appointment of Trustees Act 1996;
d) claims pursuant to the Inheritance (Provision for Family and Dependants) Act 1975;
e) any Part 8 or other claims or applications involving a substantial dispute of fact and/or likely to require oral evidence and/or extensive disclosure; and
f) personal injury and clinical negligence cases where the value of the claim is £10 million or more.
a.) Unless the court otherwise orders, a budget must be in the form of Precedent H annexed to this Practice Direction. It must be in landscape format with an easily legible typeface. In substantial cases, the court may direct that budgets be limited initially to part only of the proceedings and subsequently extended to cover the whole proceedings. A budget must be dated and verified by a statement of truth signed by a senior legal representative of the party.
“b) Parties must follow the Precedent H Guidance Note in all respects.
c) In cases where a party’s budgeted costs do not exceed £25,000 or the value of the claim as stated on the claim form is less than £50,000, the parties must only use the first page of Precedent H.”.
(The wording for a statement of truth verifying a budget is set out in Practice Direction 22.)
“C. Budget discussion reports
6A. The budget discussion report required by rule 3.13(2) must set out—
a) those figures which are agreed for each phase;
b) those figures which are not agreed for each phase; and
c) a brief summary of the grounds of dispute.
The parties are encouraged to use the Precedent R Budget Discussion Report annexed to this Practice Direction.
D. Costs management orders”.
7.1 Where costs budgets are filed and exchanged, the court will generally make a costs management order under rule 3.15. If the court makes a costs management order under rule 3.15, the following paragraphs shall apply.
7.2 Save in exceptional circumstances-
a) the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the approved or agreed budget; and
b) all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the approved or agreed budget.
7.3 If the budgets or parts of the budgets are agreed between all parties, the court will record the extent of such agreement. In so far as the budgets are not agreed, the court will review them and, after making any appropriate revisions, record its approval of those budgets. The court’s approval will relate only to the total figures for each phase of the proceedings, although in the course of its review the court may have regard to the constituent elements of each total figure. When reviewing budgets, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.
7.4 As part of the costs management process the court may not approve costs incurred before the date of any budget. 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 subsequent costs.
7.5 The court may set a timetable or give other directions for future reviews of budgets.
7.6 Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions. Such amended budgets shall be submitted to the other parties for agreement. In default of agreement, the amended budgets shall be submitted to the court, together with a note of (a) the changes made and the reasons for those changes and (b) the objections of any other party. The court may approve, vary or disapprove the revisions, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed.
7.7 After its budget has been approved or agreed, each party shall re-file and re-serve the budget in the form approved or agreed with re-cast figures, annexed to the order approving it or recording its agreement.
7.8 A litigant in person, even though not required to prepare a budget, shall nevertheless be provided with a copy of the budget of any other party.
7.9 If interim applications are made which, reasonably, were not included in a budget, then the costs of such interim applications shall be treated as additional to the approved budgets.
7.10 The making of a costs management order under rule 3.15 concerns the totals allowed for each phase of the budget. It is not the role of the court in the cost management hearing to fix or approve the hourly rates claimed in the budget. The underlying detail in the budget for each phase used by the party to calculate the totals claimed is provided for reference purposes only to assist the court in fixing a budget.”.