Very important change to the budgeting regime coming into effect from 1 October 2019

Practitioners should be aware of a very important change to the budgeting regime coming into effect from 1 October 2019 by way of the 109th Update to the CPR.

Budgets have generally been prepared such that the “incurred costs” shown will be the costs which have been incurred up to the date the Budget is prepared. From 1 October that will change and it will be necessary to show as incurred costs all those costs which will have been incurred up to and including the date of the first costs management hearing. The note to the revised Practice Direction says:

“Costs Management (PD 3E) effective from 01 October 2019: provides clearer guidance on the cut-off between budgeted costs and incurred costs, drawing the line between costs incurred up to and including the date of the first costs management hearing (incurred costs) and costs to be incurred after that date (budgeted costs)”

And the revisions to the Practice Direction will be thus:

“7.4 As part of the costs management process the court may not approve costs incurred up to and including the date of the costs management hearing. The court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all budgeted costs.”

However paradoxical it may sound the “incurred costs” will therefore now need to have an element of estimated costs included within them, such that costs in any phase which are likely to have been incurred by the time of the hearing are shown there.

Most obviously, the majority of the CMC phase will therefore now need to be shown in the incurred costs columns. No doubt there will be some post hearing work included within most Budgets, but the advocate’s fee, for example, which has hitherto been shown in the estimated costs columns, will now need to be shown as incurred.

Note the provision of CPR 3.13:

(1) Unless the court otherwise orders, all parties except litigants in person must file and exchange budgets—

(a) where the stated value of the claim on the claim form is less than £50,000, with their directions questionnaires; or

(b) in any other case, not later than 21 days before the first case management conference.

As experience has shown, it may be that on claims worth less than £50,000 the Budget will have been prepared a considerable time prior to the CCMC. Given that there will be a need for some degree of accuracy still within the incurred costs columns, it may be difficult to prepare a final version of the Budget so far out. There is no guidance as yet on this aspect, but presumably it will be common to update the incurred costs element of the Budget closer to the hearing itself.

We do of course recommend that practitioners liaise closely with their Costs Lawyers on this and indeed all aspects of costs law. Mistakes made at budgeting stage tend to have severe repercussions when the time for assessment of costs arrives.

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