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A costs budget provides a detailed breakdown of the legal costs of each phase of the case, identifies the costs already incurred and provides an estimate of future costs.
The phases include pre-action, issues/statement of case, case management conference, disclosure, witness statements, expert evidence, pre-trial review, trial preparation and trial.
Work is included in each phase for preparing documents, advising the client, taking instructions, and corresponding with the other party/parties and the court in respect of matters falling within that phase.
The rules of the preparation of a Costs Budget are found in the Civil Procedure Rules, Practice Direction 3E – Costs Management
Costs budgets apply to all Part 7 multi-track cases, except;
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
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
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
where the proceedings are the subject of fixed costs or scale costs; or
the court otherwise orders.
A failure to file a Costs Budget as required may result in the court restricting the costs to the court fees only.
Establishing an accurate costs budget is essential to ensure maximum recovery of costs.
The court will not allow recovery of the costs from the paying party in excess of the budget unless there is a good reason to depart from the budget.
A budget must be provided to the court in the form of Precedent H.
The parties must only complete the first page of the Precedent H form in cases where a party’s total costs (incurred and estimated) do not exceed £25,000 or the value of the claim as stated on the claim form is less than £50,000.
Where the stated value of the claim is less than £50,000, a costs budget should be filed with their directions questionnaire.
In any other case, the budget must be filed not later than 21 days before the first case management conference.
The costs of preparing the costs budget are recoverable up to £1000 or 1% of the budget whichever is the higher.
All other recoverable costs associated with the budgeting and costs management process are recoverable up to 2% of the approved budget apart from in exceptional circumstances when the court may allow a higher amount.
The parties negotiate to try and agree on the budget phases for both parties.
A form Precedent R must be filed detailing the offers and the court advised as to what has and has not been agreed, usually 7 days before the Costs and Case Management hearing. If the parties are unable to agree the budget the amount will be decided by the judge at a Case and Costs Management hearing.
Both parties are usually represented either by their solicitor, a barrister, or a Costs Lawyer. The court will review the budgets and may manage the costs to be incurred (the budgeted costs) by any party in any proceedings. They cannot manage the costs that have already been incurred. An approved/agreed Costs Budget relates solely to the costs still to be incurred.
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—
record the extent to which the budgeted costs are agreed between the parties;
in respect of the budgeted costs which are not agreed, record the court’s approval after making appropriate revisions;
record the extent (if any) to which incurred costs are agreed.
If a costs management order has been made, the court will thereafter control the parties’ budgets in respect of recoverable costs.
Whether or not the court makes a costs management order, it may record on the face of any case management order any comments it has about the incurred costs which are to be taken into account in any subsequent assessment proceedings.
Save in exceptional circumstances
Yes in certain circumstances. A costs budget is unlikely to be amended simply because the amount of time was underestimated but may be amended upwards or downwards if there has been a “significant development” in the case.
A request for a revised budget must be completed promptly and served on the opposing party and filed at court. The application to vary the budget must be made in line with the Form prescribed in Practice Direction 3E . The amendments must be confined to the “significant development”.
If the costs are to be assessed on the standard basis the court will consider the last approved or agreed budgeted costs for each phase of the proceedings.
They will not depart from the budget unless they are satisfied that there is a “good reason” to do so. This applies whether the party is seeking to go above or below the level of the budget.
They can also take into account any comments that were made at the Costs and Case Management hearing and recorded on the face of the order. This may include any comments made in relation to the incurred costs or proportionality.
We have significant experience in preparing costs budgets and the costs management process and preparing bills of costs following settlement of the cases which have been subject to the Costs Management process
We can assist with;