Costs Management has been in operation in England and Wales since the Jackson Reforms were implemented in April 2013. It is an important cog in the process of civil litigation and it is important that practitioners are aware of when a costs budget is required. This guide seeks to provide assistance with the process and vagaries of costs management.
If you require any advice or assistance then get in touch with the team at Sextons who will be happy to help.
What is costs management?
Costs management is the process of budgeting costs in civil litigation. The parties prepare their budgets prior to a Costs and Case Management Conference where the Court will approve the parties budgets for the remainder of the litigation.
The costs incurred to date are included in the budget but are not assessed, though the judge may make comment in relation to them. The anticipated costs are considered and a budget set for the remainder of the litigation.
A costs budget is completed on a Precedent H form which can be found on the MOJ website: https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part03/practice-direction-3e-costs-management#Annex%20B
A costs budget is broken down into the following phases:
When does Costs Management apply?
Costs management applies 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.
When must I file my costs budget?
That depends upon how much your claim is worth.
Where the claim as stated in the claim form is for less than £50,000.00 then you must file your budget with your directions questionnaire but in any other case, you must file your budget no later than 21 days before the case management conference.
It is worth remembering that the rule means 21 clear days. Don't get caught out by filing your budget on the 21st day. You will already be too late!
Do I have to file a costs budget if I am a litigant in person?
No. A litigant in person does not have to file a costs budget but must be provided with a copy of the budget of any other party if that party has a legal representative acting for them.
What if I file my costs budget late?
If you file your costs budget late then you will be considered to have filed a budget comprising only of the applicable Court fees. You will then need to apply for relief from sanctions if you wish to recover your budgeted costs. The sanction only applies to the budgeted costs and you can also make a part 36 offer which, if successful, will allow you to recover 50% of your budgeted costs from the date of expiry or rejection of that offer.
Don't leave it to chance though, your best bet is to ensure you file your budget on time, every time!
What if my budget needs to be updated or I exceed my budget during the course of the litigation?
The rules do allow you to make an application to amend your budget. Budgets can be amended up or down but there must be some "significant development" that has occurred within the litigation to justify an amendment. The Court will not approve an amended budget where a party has simply got their sums wrong.
If you need to prepare an amended budget, your first step should be to provide a copy to your opponent and seek their agreement to the amendment. If agreement can be reached between the parties, then the Court will simply approve the amendment. Where no agreement can be reached, an application to the Court will be required and the Court will have to decide whether the approve the amendment or not.
How does a costs budget effect the detailed assessment process?
If the Court is assessing the costs on the indemnity basis, then the Court will not have regard to the costs budgets. That can happen where a Claimant has beaten their own Part 36 offer or where the Court has made an order on the indemnity basis. However, if the costs are to be assessed on the standard basis the Court will:
(a) have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings;
(b) not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so; and
(c) take into account any comments made pursuant to rule 3.15(4) or paragraph 7.4 of Practice Direction 3E and recorded on the face of the order.
Each phase of the budget is considered in isolation and it is not possible to move any allowance that you have not spent on one phase to another if you have exceeded budget.
It is likely on assessment that you will not be allowed to recover between the parties any costs that have been incurred in excess of your budget. There are exceptions to this though and you may be able to persuade the Court that costs over and above your budget should be allowed where there is "good reason" or where there have been interim applications made which were not included in the budget though the rule (Practice Direction 3E (7.9)) does state that it must be reasonable that they were not included in the budget.
What costs can be recovered for the Costs Management process?
The rules allow for the following to be recovered, 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.
There are many other things to consider when dealing with costs management but this guide deals with the basic requirements of the process. If you need any further information or assistance with the costs management process then get in touch with Sextons Legal and we will help you through the process.
If you require any advice or assistance then get in touch with the team at Sextons who will be happy to help.
What is costs management?
Costs management is the process of budgeting costs in civil litigation. The parties prepare their budgets prior to a Costs and Case Management Conference where the Court will approve the parties budgets for the remainder of the litigation.
The costs incurred to date are included in the budget but are not assessed, though the judge may make comment in relation to them. The anticipated costs are considered and a budget set for the remainder of the litigation.
A costs budget is completed on a Precedent H form which can be found on the MOJ website: https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part03/practice-direction-3e-costs-management#Annex%20B
A costs budget is broken down into the following phases:
- Pre Action Costs
- Issue/Statements of Case
- CMC
- Disclosure
- Witness Statements
- Expert Reports
- PTR
- Trial Preparation
- Trial
- ADR/Settlement
- Any Contingencies
When does Costs Management apply?
Costs management applies 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.
When must I file my costs budget?
That depends upon how much your claim is worth.
Where the claim as stated in the claim form is for less than £50,000.00 then you must file your budget with your directions questionnaire but in any other case, you must file your budget no later than 21 days before the case management conference.
It is worth remembering that the rule means 21 clear days. Don't get caught out by filing your budget on the 21st day. You will already be too late!
Do I have to file a costs budget if I am a litigant in person?
No. A litigant in person does not have to file a costs budget but must be provided with a copy of the budget of any other party if that party has a legal representative acting for them.
What if I file my costs budget late?
If you file your costs budget late then you will be considered to have filed a budget comprising only of the applicable Court fees. You will then need to apply for relief from sanctions if you wish to recover your budgeted costs. The sanction only applies to the budgeted costs and you can also make a part 36 offer which, if successful, will allow you to recover 50% of your budgeted costs from the date of expiry or rejection of that offer.
Don't leave it to chance though, your best bet is to ensure you file your budget on time, every time!
What if my budget needs to be updated or I exceed my budget during the course of the litigation?
The rules do allow you to make an application to amend your budget. Budgets can be amended up or down but there must be some "significant development" that has occurred within the litigation to justify an amendment. The Court will not approve an amended budget where a party has simply got their sums wrong.
If you need to prepare an amended budget, your first step should be to provide a copy to your opponent and seek their agreement to the amendment. If agreement can be reached between the parties, then the Court will simply approve the amendment. Where no agreement can be reached, an application to the Court will be required and the Court will have to decide whether the approve the amendment or not.
How does a costs budget effect the detailed assessment process?
If the Court is assessing the costs on the indemnity basis, then the Court will not have regard to the costs budgets. That can happen where a Claimant has beaten their own Part 36 offer or where the Court has made an order on the indemnity basis. However, if the costs are to be assessed on the standard basis the Court will:
(a) have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings;
(b) not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so; and
(c) take into account any comments made pursuant to rule 3.15(4) or paragraph 7.4 of Practice Direction 3E and recorded on the face of the order.
Each phase of the budget is considered in isolation and it is not possible to move any allowance that you have not spent on one phase to another if you have exceeded budget.
It is likely on assessment that you will not be allowed to recover between the parties any costs that have been incurred in excess of your budget. There are exceptions to this though and you may be able to persuade the Court that costs over and above your budget should be allowed where there is "good reason" or where there have been interim applications made which were not included in the budget though the rule (Practice Direction 3E (7.9)) does state that it must be reasonable that they were not included in the budget.
What costs can be recovered for the Costs Management process?
The rules allow for the following to be recovered, 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.
There are many other things to consider when dealing with costs management but this guide deals with the basic requirements of the process. If you need any further information or assistance with the costs management process then get in touch with Sextons Legal and we will help you through the process.