Where are we with Costs Budgeting – A Review of Costs Budgeting and the Jackson Reforms?

It’s been more than two and a half years since the inception of the ‘Jackson Costs Reforms’ and the roll out of Cost Budgeting. A system, it’s fair to say, that was received with a certain degree of caution across the claimant sector.

As is inevitable with the introduction of any new way of working there have been some ups, and a couple of downs – it was only a few months ago that a temporary stay on costs budgeting for clinical negligence cases was granted, for example.

Here, PIC’s costs law expert and head of the firm’s South West division, John Plunkett, talks about what he thinks makes the new system ‘work’, and how best to approach the new reforms in order to minimise the drain on time and maximise return on investment.



Despite a couple of blips in the road, and the odd ‘Doomsday Merchant’ spinning their numerous tales of woe, Costs Budgeting has, rather surprisingly, brought about considerable clarity in the costs industry; and I for one am pleased the status quo appears to have plateaued and now enjoys a degree of calm.

In line with that, let’s look at and address the purposes, advantages and benefits of the Costs Budgeting exercise in modern-day litigation and find a way in which we as modern litigators can use the same as a tool to achieving maximisation of costs, increased profitability and a far more certain future than those “Doomsday Merchants” will have you believe is the result of the Jackson Costs Reforms.

Before we do that however, it is necessary to get the boring bits out of the way. Firstly by dealing with ‘Proportionality’, and how this determines the outcome of the Costs Budgeting process and, ultimately, the assessment of those costs which are recoverable.


Historically; proportionate actions and costs were defined by Lord Woolf in Lownds v Home Office (2002) as being both ‘reasonable and necessary’ to achieve success. Put quite simply; if the Receiving Party was capable of demonstrating that all costs and actions were both reasonable and necessary; then there was little to no prospect of the Paying Party successfully challenging those costs.

More recently, however, that definition has undergone something of a U-turn, and we are reliably informed by CPR 44.3(2)(a) that when ‘the amount of costs is to be assessed on the standard basis, the Court will – (a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they are ‘reasonably or necessarily incurred’.

It is therefore clear that if, during the process of determining whether the costs of performing a specific activity are found to be disproportionate under the new stricter regime, the Receiving Party will need to seek to find a less expensive route when carrying out the activity.

Yes, we have all heard of and long feared the exact definition of the new proportionality test, but it is in fact very clear. And so here we need to turn to CPR 44.3(5), which reliably informs us that costs will be proportionate if they bear some degree of resemblance to:

  1. the sums in issue in the proceedings;
  2. the value of any non-monetary relief in issue in the proceedings;
  3. the complexity of the litigation;
  4. any additional work generated by the conduct of the paying party; and
  5. any wider factors involved in the proceedings, such as reputation or public importance and the circumstances and nature of the litigation

So there you go; the ‘hard’ bit is dealt with. Now let’s deal with the easy bits shall we?


It has long been held by Jackson LJ that Costs Budgeting should be a tool used in actively seeking to manage and limit costs in litigation; ensuring those costs incurred and ultimately recovered by the Receiving Party are proportionate to those factors as set out above. So, how do we go about being successful with our Costs Budgeting practices?

Well, the SCCO’s first female Costs Judge, Master James (congratulations upon your new appointment), dealt with this very issue in as succinct a message as anyone could possibly have hoped when she was quoted as saying: “Don’t come to my Court unprepared.” It really is that simple! Being prepared and aware of what is required to bring your claim, and providing clear and concise instructions to your appointed Costs Lawyer, will undoubtedly result in a more realistic and reasonable Costs Budget being put before the Court.

Costs Budgets are generally prepared at a time when the Parties are agreeing Directions in advance of a CCMC, and it would serve every litigator well to remember that disingenuous attempts at negotiation and settlement are dealt with harshly by the Court.

The strongest position to take would therefore be the one that sees Parties agreeing reasonably achievable timetables, and approaching litigation with a view to ensuring no unnecessary costs are incurred in the process.

Obvious issues that will come to the fore during the Costs Budgeting process will generally deal with:

  • the course and conduct of the Parties to the litigation in the run-up to the CCMC;
  • the reasons and course you expect the litigation to take, having regard for the Parties conduct to that point;
  • the number and specialisms of experts requiring instruction, with an explanation of the nature of the evidence those experts bring to the table;
  • the number of lay witness statements required and whether those lay witnesses could be used to provide evidence in place of those more expensive experts above;
  • the true extent and nature of the disclosure documents in play and any reasons you consider delays may arise;
  • whether there is a need for 1 or 2 Directions Hearings;
  • whether there is a real need for a Pre-Trial Review Hearing;
  • the necessity of having a conference with the experts and witnesses in advance of the Trial and why those issues to be dealt with at such conference cannot be ironed out without the need for such conference;
  • the actual and accurate length of Trial and;
  • whether there is a need for a round table meeting and reasons why the Parties cannot reach compromise without the need for such meeting.

If both Parties enter into litigation whilst at the same time keeping an eye on the Overriding Objectives, there is no reason to believe the Court will not be able to deal with cases justly and at proportionate cost.

This in turn will result in more accurate and reasonable Costs Budgets being put before the Court. In fact; if Parties are acting reasonably, Costs Budgets will likely be agreed in advance of the CCMC, thereby avoiding the attendance of Barristers, Costs Lawyers and Solicitors at the listed CCMC.

Should unreasonable conduct be experienced, there is always the ability to recover more for dealing with the Costs Budgeting exercise, as PD 3E para 7.2 allows for the recovery of (a) £1,000 or 1% for preparation of the approved or agreed Budget and; (b) 2% of the approved Budget for all other recoverable costs of budgeting and costs management processes.

So what would be the point in your opposite number objecting to all of the liability, causation and quantum evidence; requiring both Parties to obtain their own expert and witness evidence; when the Court will simply allow the increase in your budgeted costs to allow for example; for the obtaining of updated medical reports, Part 35 Queries and the Part 35 Replies that flow therefrom, joint meetings and statements and more importantly; the need to have all experts and witnesses at Trial. There is no benefit as the larger the Costs Budget, the higher the costs budgeting fee allowance.

After all, the Costs Budgeting exercise is not one to be taken lightly. Set a Costs Budget too low and limit recoverability. Set a Costs Budget in such a way that it appears too high and it will be found to be disproportionate and is bound to find short shrift with the Court.

With proper insight a balancing act is easily achieved!


So, you have been through the process and sought the appropriate advice and you now have your approved/agreed Costs Budget. What do you do now? Easy!

Once again, you bring in your appointed Costs Lawyers and have them carry out regular audits to assist with keeping you appraised of where you are with respect to your incurred costs; and the balance of any costs you have left to carry out the work you consider is required.

This ensures you do not exceed the agreed Costs Budget and prevents the awful and unexpected losses that can be experienced in exceeding funds allotted to specific Phases within the Costs Budget.

It is in carrying out these audits that a clearer picture is painted of how unreasonable conduct by either Party is affecting the overall spend, and whether it is necessary to have the same addressed by the Court when seeking to have your Costs Budget increased.

Keeping the Court appraised of the same, and seeking extensions to the Costs Budget before incurring further costs, inevitably results in a far better recovery; with the additional bonus of watching the offending Party being hauled over the coals by the Court.

So, who’s paying for that auditing exercise? The Paying Party of course! See PD 3E para 7.2 (b) above.

Call to Arms:

Now that we understand and no longer fear the Costs Budget or costs budgeting exercise; how do we ensure nothing goes awry? Be reasonable and be realistic about recoverable damages; consider the real need for carrying out pieces of work and delegate work to supporting Fee Earners. And, finally, make sure you bring in the Costs Experts.

I am fortunate enough to be employed within a firm that appreciates, and indeed champions, the need and importance of sharing experiences. This perfectly positions us to accurately assess costs and predict the eventual outcomes; even when Judges are objecting to their own ‘disproportionate’ Listing Fees (a true story for another day).

Our role is to work side-by-side with our clients to maximise the potential profit on a case within the rules and regulations of costs budgeting whilst ensuring that their time is spent doing what they do best – recovering compensation for their clients!

It is our experience that anyone who has embraced the new reforms with open arms has certainly benefited and, as I mentioned at the start of this article, I for one welcome the opportunity for increased costs-clarity at every stage of litigation.

Finally, and in light of the recent appointment of Master James mentioned above, may I take this opportunity to refer to a great quote from her: “Costs Lawyers are very highly regarded at the SCCO and across England and Wales. We would certainly rather have a Costs Lawyer who knows his or her stuff than a Solicitor or Barrister who is determined to defend or attack every item in a Bill of Costs and really has only the vaguest idea of how to go about it.”

After all; nobody wants their Costs Budget being halved; as in the case of GSK Project Management Limited (in liquidation) –v- QPR Holdings Limited.

John Plunkett, PIC Costs Lawyer

DDI: 0117 332 8182

Email: john.plunkett@pic.legal

Website: www.pic.legal