Making budgets work for you
An overview of the Government’s decision to implement Budgets and its implications
From the 1 st April 2013 Budgeting was introduced as a way for Courts to address the problem of excessive and disproportionate costs being incurred in litigation. Budgets were introduced so that the Courts can monitor and, if necessary, restrict the costs being incurred by any party.
The far reaching provisions for judicial management of costs have had a dramatic and at times chilling impact on litigation. The requirement in most cases following Lord Justice Jackson’s reforms is that litigators are expected to prepare a detailed costs budget at the start of the litigation and then stick to it. The consequences of not doing so may be very costly unless the court can later be persuaded to allow a party to depart from the budget. Another, possibly unintended, consequence may be that more clients will more readily participate in alternative dispute resolution once presented with budgets covering all likely stages in the litigation until the end of trial. Whether the reforms achieve the objective of driving costs down will depend to a very large extent on how judges deal with their enhanced case management powers.
As an experienced litigator, surely I’m best placed to deal with my Budget?
The preparation of a Cost Budget is very time consuming and, whilst estimating time is more of an art than a science, being able to provide the Court with a detailed explanation and breakdown of the future time claimed is very beneficial. The Budgeting team at MRN work on a bespoke programme which allows the future time to be calculated accurately rather than plucking a rough figure out of the air for each phase. Furthermore, the Budgeting team are experienced in preparing Budgets for a wide variety of matters and have first-hand experience of attending CMCs which means that they know what the Judges are looking for within a Budget.
When is a Budget required?
The Rules require the parties in Part 7 Multi-Track claims with a value of less than £10 million to file and exchange Cost Budgets. A Budget must be filed by the parties with their Directions Questionnaires unless otherwise ordered.
What is the time line from when I receive the Notice of Proposed Allocation?
The Budget must be filed by the date provided on the Notice of Proposed Allocation. This date will vary from Court to Court, however, given the consequences of failing to file a Budget by that date, the Precedent H should be prepared as soon as possible.
Once a Budget has been served what happens next?
What happens next varies from case to case. All cases will be listed for a CCMC where Directions and Costs will be dealt with. Some Courts will provide Directions to be complied with in preparation for the CCMC, others will not. At MRN, we always try to contact the other party ahead of the CCMC and try to agree as much of the Budgets as possible before the hearing date.
What approach can I expect from the Court at the Costs Management Hearing?
At present, the approach to Budgets varies not only between the Courts but also between the Judges within those Courts. The usual format for a Costs Management Hearing however, is that the parties advise the Judge which, if any, elements of the Budgets have already been agreed. The Judge then gives the parties an opportunity to explain which elements of the other party’s Budget is not agreed and why and allows the parties to respond. The Judge will then make a decision and provide a figure that they deem reasonable.
Is the Proportionality test still applied when considering a Budget?
Yes. Although we often argue that many of the limbs of the proportionality test cannot be considered and applied until the claim has concluded.
Who should attend the Costs Management Hearing?
It is important that whoever attends the CMC, is familiar with the contents of the Budget and knows exactly what work has been included within the future time estimate.
Once a Budget has been approved by the Court does that mean costs are agreed?
No. Once the case is settled, the costs assessment process will then proceed as usual.
How do I ensure to keep within Budget?
We recommend that budgets are reviewed regularly to ensure that the costs being incurred are not exceeding the limits which were set by the Court. It may be prudent to undertake a review of the Budgets several months after the Budgets are approved.
What is the process if I need to exceed the amount agreed?
Ideally, the Budget should be amended before the approved amounts are exceeded. Cost Practice Direction 3E, paragraph 7.6 sets out the process for amending Budgets and states that the revised Budget should be sent to the other parties for agreement. In default of agreement, the amended Budgets should be sent to Court with a note of the changes made, the reasons for those changes and the objections of any other party. The Court may then approve, vary or disapprove the revisions.
What if I fail to file my Budget in time?
The consequences of failing to file the Precedent H form in time is that you will be restricted to a Budget consisting of the appropriate Court fees only.
What if my Budget is found to be non-compliant?
If the Budget is found to be non-compliant, the Court may impose a Sanction. An Application for Relief from Sanctions should be made as soon as possible.
What criteria must my case meet to be eligible for Relief from Sanctions?
In order for an Application for Relief from Sanctions to be made, there must have been a breach of the Rules which has resulted in a Sanction being imposed. If there has not yet been a breach but one is anticipated, an Application for Relief will not be the appropriate course of action.
Please note: the points raised are merely a summary of our interpretation of the rules. We accept no liability for any misconstrued understanding of the same, nor any loss or damage sustained as a result of any reliance upon such summaries.
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