COSTS BUDGETS: NEW RULES

New rules in relation to costs budgeting came in on 6 April 2016, but only apply to proceedings issued after that date and so will only now be starting to have effect.

 

Dates for filing costs budgets

 

New CPR 3.13 provides:-

 

“3.13.

• 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.

 

• 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.”

 

The sanction remains the same,  that is that failure to file the budget on time results in the defaulting party having its own costs budget limited to court fees, unless relief from sanction is granted.

 

In those circumstances, that is where the costs budget is limited to court fees, this rule has been softened in relation to the situation where a claimant matches or beats its own Part 36 offer at trial.

 

By virtue of CPR 36.23 such a claimant can get 50% of its assessed costs without reference to that limitation.

 

Likewise a defendant who makes an offer which a claimant fails to beat shall receive 50% of its assessed costs from the period from the expiry of the time for accepting the Part 36 offer until settlement or court order stop.

 

There is little problem with CPR 3.13(1) (a) as the parties know when the Directions Questionnaires are to be filed, but (b) can cause problems as the costs budget has to be filed 21 days before the first Case Management Conference, even if the court only gives little notice, due to the frequent and lengthy time gap between the court making the order and the order being sent out.  

 

Simon Gibbs, in his excellent Legal Costs Blog states in his post on 19 July 2016 – Date to File Costs Budgets –

 

“It is difficult to see the logic behind the different dates for when the budgets should be filed and exchanged.  To do so with the directions questionnaire, for lower value claims, is inevitably a costs front-loading step.  It is likely to be a more disproportionate additional cost for these lower value claims than it would be for higher value ones.  It is also more likely to be an additional wasted cost as lower value claims are, on average, more likely to settle at an early stage in proceedings and often well before a CMC (when a costs management order might actually be made).

 

The latter problem is compounded by the fact that the courts continue to struggle to list matters for CMCs at an early stage.  The consequence of this is that by the time the matter does reach a CMC the earlier costs budgets will often be out-of-date and largely redundant (with the work therefore either being wasted or having to be repeated with up-to-date budgets).

 

It is unfortunate that the rules have been drafted in such a way as to generate a largely unnecessary and unhelpful front-loading of costs.  Unless you are a costs lawyer or law costs draftsman I suppose.”

 

It has also been pointed out that the “unless the court otherwise orders” provision still remains in force and that courts are still sending out the Notice of Allocation which contains a provision that budgets are to be filed with the Directions Questionnaire regardless of the value. On the face of it this conflicts with CPR 3.13, but is arguably allowed under the “unless the court otherwise orders” provision, even though no one will have actually made a decision.

 

Changes to Practice Direction 3-E Costs Management

 

Sub-paragraph (b) provides that “parties must follow the Precedent H Guidance Notes in all respects”.

 

(c) states:-

 

“(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.”

 

Thus if the value of the claim as stated on the Claim Form is less than £50,000.00 then only the first page of Precedent H must be completed.

 

Even if the value of the claim stated on the Claim Form is £50,000.00 or more then only first page of Precedent H must be completed if the party’s budgeted costs are £25,000.00 or less.

 

In non-multi track claims and fixed costs cases there is no requirement to file a budget. Consequently claims for damages for £25,000 or less, which will normally be fast-track claims, do not require a budget unless allocated to the multi-track. A higher value claim not allocated to the multi-track does not require a budget either.

Fixed Costs cases can be allocated to the multi-track, for example if there is an allegation of fraud, but do not require a budget unless the court so orders, which it may well do in those circumstances.

 

Budget discussion report

 

New Practice Direction 3 – E – C – 6A provides:-

 

“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.”

 

Precedent R is here.

 

Other changes

 

Exemption for children

 

A new CPR 3.12(1 )(c) is inserted:-

 

“(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

 

• where the proceeding are the subject of fixed costs or scale costs; or

 

(e) the court otherwise orders.”

 

CPR 3.12 is the exception provision and the full rule may be found here.

 

This new provision may well apply to fatal accident cases where a claim is brought on behalf of a child, even where the child is not a party as the rules state “made by or on behalf of a child”. Thus in a fatal accident case where one of the dependents is a child this provision may apply. The action may be brought by the executors, administrators or other dependents, but the claim is brought on behalf of all of the dependents.

 

Impaired life expectancy

 

As we have seen the exemption for children is part of the Civil Procedure Rules. The Practice Direction provides another potential exemption in that it states that the court will “normally dis-apply” costs management in a case where the claimant has limited or severely impaired life expectancy.

 

The relevant Practice Direction is PD 3E-2(b) which reads:-

 

“(b) In cases where the Claimant has a limited or severely impaired life expectation (5 years or less remaining) the court will ordinarily disapply cost management under Section II of Part 3.”

 

No fixing of hourly rates

 

Generally courts have not set hourly rates at the costs budgeting stage and there is a new Practice Direction at paragraph 7.10 of Practice Direction 3-E:-

 

“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.”

 

Bill of Costs to show each phase

 

In Practice Direction 47 – Procedure for Assessment of Costs and Default Provisions – new sub-paragraphs 5.8(7), (8) and (9) are inserted as follows:-

 

“(7) Where the case commenced on or after 1 April 2013, the bill covers costs for work done both before and after that date and the costs are to be assessed on the standard basis, the bill must be divided into parts so as to distinguish between costs shown as incurred for work done before 1 April 2013 and costs shown as incurred for work done on or after 1 April 2013.

 

(8) Where a costs management order has been made, the costs are to be assessed on the standard basis and the receiving party’s budget has been agreed by the paying party or approved by the court, the bill must be divided into separate parts so as to distinguish between the costs claimed for each phase of the last approved or agreed budget, and within each such part the bill must distinguish between the costs shown as incurred in the last agreed or approved budget and the costs shown as estimated.

 

(9) Where a costs management order has been made and the receiving party’s budget has been agreed by the paying party or approved by the court, (a) the costs of initially completing Precedent H and (b) the other costs of the budgeting and costs management process must be set out in separate parts.”

 

The amendment rules are the Civil Procedure (Amendment) Rules 2016 and are here 

The 83^rd Update – Practice Direction Amendments – are here.

I am very grateful to Gordon Exall for his indispensable blog – Civil Litigation Brief and to Simon Gibbs for his excellent Legal Costs Blog.