A major revamp of the Civil Procedure Rules and Practice Directions concerning Costs Budgeting will be coming into effect on 1st October 2020.
In an effort to resolve tensions within the rules, practice directions and guidance the CPRC have taken the decision to consolidate Costs Management into two sources: the CPR and the accompanying Practice Direction. As such, there will be a shift on 1 October 2020 as some provisions previously found in the Practice Direction are transferred into the CPR proper, Guidance becomes part of the Practice Direction and some guidance and practice directions fall by the wayside, presumably, because they have now been superseded by judicial guidance.
Beside a number of key references being changed (for example, the provision setting out the 1% and 2% caps for the costs of Costs Budgeting moving to CPR 3.15(5) from the Practice Direction) the main change is the introduction of a new procedure for varying the Costs Budget which includes a new Precedent to get to grips with.
Varying a Costs Management Order
The new provisions will be found at CPR 3.25A from the 1 October. The rules now impose a mandatory duty on each party to revise their Costs Budget when there is a ‘significant development’ in the litigation. The Process is as follows:
- Serve the proposed variations to the Budget in the form of Precedent T on the Defendant,
- Ensure that the Precedent T only includes the additional costs occasioned by the ‘significant development’,
- The Precedent T must be certified that any costs included within Precedent T have NOT been include in any previous Budget or Precedent T,
- The Precedent T must then be served at the Court promptly, with a copy of the previous Budget, and an explanation of the areas of agreement/difference between the parties,
- The Court will then either approve, vary or disallow the proposed variations with reference to the significant developments but can also set the matter down for a further costs management hearing.
It must also be considered that the Court will now have the powers to vary the Budget in respect of the costs related to the variation which have been incurred prior to the order for variation but after the Costs Management Order. So, it must be considered that whilst best practice will be to prepare the Precedent T prospectively in anticipation of costs being incurred, the CPR does provide the Court to update the Budget retrospectively if costs have already been incurred. It is likely that the Court will limit the use of this discretion to when events of the litigation and time pressures make it impossible to get the Precedent T prepared and agreed prior to when the costs need to be incurred.
The Precedent T
The Precedent T is available from a link attached to the CPR Practice Direction in excel format. The ‘Variation Particulars’ tab appears to be very similar to the Precedent R Budget discussion report allowing for the varying party to set out justifications for the increased costs sought. It further allows the non-varying party space to make a counter offer and provide comments if the variation is disputed. Interestingly, this tab also provides for a detailed breakdown by each expert for any variation of fees/disbursements. It is therefore clear that the Precedent T does anticipate a ‘significant development’ to include the need to instruct new expert specialities or to obtain further expert evidence.
Another important development which will be introduced into the CPR 3E Practice Direction is the new concept of ‘oppressive behaviour’. Unfortunately, no examples are provided for what constitutes ‘oppressive behaviour’ save for the fact it is when a party is ‘behaving oppressively’. The application to be made under this new heading seems to be directed against a party’s actions which seek to cause the applicant to spend money disproportionately on costs. The provision then provides the power to the Court to ‘grant such relief as may be appropriate’. Again, it is unclear what sanctions may be imposed by the Court or what relief may be available to be sought against such an application. It seems that when one door is closed and a simplified method introduced to limit disputes relating to Budgeting another is created to allow for further areas of disagreement and dispute.
So, in summary it looks like we are entering into another phase of significant developments in the lifespan of Budgeting and it will be interesting to see how the changes bed in. One thing for sure is that Budgeting has matured a significant amount since it was first introduced.
We have gone through the initial painful toddler teething phase when Budgeting was introduced and neither Solicitors or Courts wanted anything to with Budgeting,
We progressed through the younger years where strict draconian rules and sanctions disciplined the profession to embrace Budgeting following the decisions of Mitchell and Denton.
This was shortly followed by the rebellious teenage years where everyone was Budgeting but each in their own unique way and there was little in the way of consistency from either side.
Budgeting developed in ‘early adult life’ with further guidance provided by the Courts through additional training and consistent approaches became the norm when Budgeting resulted in a sense of calm and understanding.
However, could the new changes herald Budgeting’s continuing maturity as we get to grips with the new rules and with Precedents H, R and T. Could the new changes unleash new unanticipated disputes as parties are now able to put down in writing objections to the Budget as originally drawn, objections to any variations of a Budget and now also raise issues of ‘oppressive behaviour’. Only time will tell.
Kris Kilsby, Costs Lawyer
Direct Dial: 01228 588232
Email: [email protected]