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NEW RULES ON COSTS BUDGETING & COURT HEARING FEES
Two sets of amendments to the Rules are being implemented in relation to which Practitioners will need to be aware.
The first relates to Hearing Fees and is already in force from 6 March 2017. The Civil Proceedings (Amendment) Order 2016 amends the timing for payment of those fees (and no doubt Notices from the Court will advise when payment is required) but significantly it also scraps the ability to recover Hearing Fees where a matter settles or is discontinued after payment of the fee, but before commencement of the Trial. The details of the Order may be found here
The second amendments are to be found in the 88th Update to the CPR and are in relation to the Rules and Practice Direction on Budgets.
They mean that we will now have a new phrase to add to the costs lexicon, this being “budgeted costs”. The thrust of the amendments is to draw a greater distinction between incurred and estimated (or future) costs. The phrase “budgeted costs” is now used to refer to the estimated/future costs and the amendments make it plain that it is primarily the budgeted costs which are to be dealt with at the CCMC. Further, it is the decisions made on the budgeted costs which are to be taken into account upon any detailed assessment for the purposes of CPR 3.18.
This means that when assessing costs on the standard basis the Court will have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings and not depart from the decision on those budgeted costs unless there is good reason to do so.
This serves as clarification therefore that the particular restrictions arising from CPR 3.18 for any detailed assessment are to be in the context of the budgeted costs alone rather than the overall figure for each phase, which includes both the incurred and the budgeted costs.
What then of the incurred costs? It may be remembered that in the case of SARPD Oil International Ltd v Addax Energy SA & anor [2016] EWCA Civ 120, the Court of Appeal found that in the absence of a specific challenge to the incurred costs at the CCMC, if the Budgets were presented as agreed, then that agreement extended to the incurred costs as much as to the budgeted costs.
Practice Direction 3 E, paragraph 7.4 already provides that the court may not approve costs incurred before the date of any budget, but that it may record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all subsequent costs. That provision will substantially remain in place, but is now augmented by an additional paragraph to CPR 3.15:
“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”
And further a new paragraph in CPR 3.18:
“(the Court will)..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”.
Thus the importance of raising an issue in relation to the incurred costs is enhanced by specific inclusion of these comments within the Rules as opposed to simply in the Practice Direction. As noted above, this does not appear to bind the Judge upon assessment to the same extent as decisions made on the budgeted costs, but nevertheless such comments will be at least one factor in any decision made upon assessment of the costs incurred prior to the date of the CCMC.
All of this must be put into context with the anticipated Appeal hearing (see our last blog here) in relation to the extent to which a Judge upon assessment is entitled to deviate from the figures given at the CCMC and in particular whether that deviation may only be downward rather than upward, in the absence of good reason. Further, the obvious issue remains as to the extent to which the incurred costs will be debated at any CCMC given the usual time constraints which may often only be sufficient for a proper exploration of the “budgeted costs”. Will it be sufficient simply to raise a broad challenge emphasising that the paying party wishes to have the incurred costs scrutinised upon assessment because they appear “too high”? Or is there a requirement for more specific challenges, which of course may be difficult in the absence of a breakdown.
It does very much appear that we are far from the end of the road on the journey to understanding how the budgeting process will work.
Please contact us to discuss your requirements with one of our Costs Experts. T: 01772 435550 or 01604 604035.