NEW RULES ON BUDGETING
The 83rd Update of the CPR brings a host of changes into force from 6th April 2016. There are very significant changes on the Budgeting process and its implication on assessment, of which practitioners need to be aware. The type of budget to be used in particular circumstances, the timing of filing/exchange and the contents of the budget are all subject to change. A new form is introduced, being an “Agreed Budget Discussion Report” which summarises the stance of the parties on each other’s budgets and which has to be filed prior to the 1st CMC. Bills also need to be in a different format where there has been a Costs Management Order.
There are provisions amending Practice Direction 3 E, which is the part which deals with the budgeting process. Perhaps the best place to start is to see that there is a new document “Guidance Notes on Precedent H” and the Practice Direction states that parties “must comply follow the Precedent H Guidance Note in all respects”. The mandatory nature of this requirement will be noted.
The Guidance Note starts by reiterating one of the principal changes, namely that where the monetary value of the case is less than £50,000 then the parties must only use the 1st page of Precedent H. At present, this restriction has applied only where the costs claimed are less than £25,000. That latter provision continues to apply, but it will be seen that now when deciding whether a full Precedent H is required depends not only on the costs claimed but also on the monetary value of the claim. The idea therefore is that for lower value claims on the multi-track the more simplified approach of simply the front page is all that will be required.
The Guidance Note still incorporates a table with suggestions as to the work to be included within each phase and has a reminder that allowance must be made for advice to the client, taking instructions and corresponding with the opponent/the court for matters falling within each phase. It is made plain that the “contingent cost” sections should only be used for costs which are more likely than not to be incurred. If that test is not met, then the present route of seeking to amend the budget should be followed.
It suggests that the assumptions should be limited to those which significantly impact on the level of costs, with brief details only required in the box beneath each phase. It says that “additional documents are not encouraged” and where they are disregarded by the Court the cost of preparation of them may be disallowed. Written assumptions are not normally required by the Court in cases where the parties are only required to lodge the 1st page of precedent H.
Finally on the Note, there is a very significant change that the time spent in preparing the budget and associated material must not be claimed in the draft budget under any phase. The permitted figure is to be inserted once the final budget figure has been approved by the Court. This is to facilitate the cap on the recoverable costs of preparing the budget (a maximum of £1000 or 1% of the budget as approved, whichever is the greater) which was somewhat difficult to calculate if the cost of preparation of the budget was included within the budget in the 1st place.
Turning then more specifically to the provisions of the Practice Direction, there are exclusions for the requirement of budgeting for Litigants in Person and for cases involving children which are commenced after 6 April 2016. It is also suggested that the Court may well dis-apply the budgeting process in cases where the Claimant has a limited life expectancy (and that will apply whether the life expectancy is to be curtailed as a consequence of the subject matter of the litigation or not).
In those cases with a monetary value of less than £50,000 or where the costs claimed are less than £25,000, the Precedent H (and from the above it will be noted that this is the 1st page only) must be filed and exchanged with the Directions Questionnaire. In other cases, a full Precedent H has to be filed and exchanged “not later than” 21 days before the 1st case management conference.
We will pause there just to reinforce points made in earlier blogs that when looking at “Time” in accordance with the Rules, periods expressed as a number of days are to be calculated as “clear days” such that the day on which the period commences and the day on which it ends are excluded. It is extremely important therefore to ensure that the full 21 clear days are allowed when filing and exchanging the budget and to do this simply 3 weeks before the date of the 1st CMC is not sufficient.
In addition to these requirements, the revised Practice Direction introduces a new form, Precedent R. This is to be filed 7 days before the 1st CMC and is called an “Agreed Budget Discussion Report”. It is again an Excel spreadsheet, in 5 columns which identify the phase, the sum claimed, the sum offered, whether figures are agreed and if not why not and then provides space for the Judge’s comments.
Practice Direction 47 is amended at paragraph 5.8 with the introduction of 2 new requirements. It is now made clear that in proceedings commenced after 1 April 2013, it is necessary to divide the bill for work done before and after that date. Further, where there has been a Costs Management Order, the bill must be divided into separate parts showing the costs claimed for each phase and providing details from the last approved or agreed budget of the incurred costs and those which were estimated. A further part is required showing the costs incurred in the initial preparation of the Precedent H and other costs incurred in the budgeting process.
Overall therefore, the amendments are an attempt to simplify the budget process for the smaller claims. They provide a mechanism for demonstrating the issues between the parties on their respective budgets (Precedent R) and for the separation out of the costs of preparing the budget. The division of bills pre-and post 1 April 2013 simply reflects what is supposed to happen now in any event, but the requirement for an altogether different format of bill which will now be in multiple parts with a plethora of information required will be a major change. The preparation of these bills will require very careful consideration and we trust that practitioners will continue to rely on our expertise to assist them in navigating these important matters.