Cost Management in more detail

Question 1

What cases does the costs management regime apply/not apply to?

Answer 1

By default, the costs regime applies to all cases except the following cases:

*Small claims track, fast track or intermediate track.

*Claims commenced on or after 22 April 2014 where:
- the amount of money claimed as stated on the claim form is £10 million or more;
- it is for a monetary claim which is not quantified or not fully quantified
- it is for a non-monetary claim and the claim form contains a statement that the claim is valued at £10 million or more.

*Claims commenced after 6 April 2016 made by or on behalf of a person under the age of 18.

*Claims that are the subject of fixed costs or scale costs.

Question 2

Is it possible for the court to disapply the costs management regime?

Answer 2

Yes, even when it would normally apply automatically (for example, where a claimant has as a limited or severely impaired life expectation of 5 years or less remaining, or require compliance with the regime even when it would not normally apply.

Question 3

Provide a brief overview of the costs management regime.

Answer 3

1. Parties prepare budgets which must be filed and exchanged usually 21 days before the first CMC.
2. The parties discuss the budgets
3. Budget discussion reports record extent to which the parties have agreed budgets.
4. Budget discussion report is filed and exchanged, usually 7 days before the first CMC.
5. Budget discussion reports are considered by the court.
6. Directions are determined in light of the estimated costs & court might make a costs management order.

Question 4

What is a costs management order?

Answer 4

A provisional indication of what should be considered reasonable and proportionate costs in any later assessment proceedings.

Question 5

When is it necessary to file and exchange the costs budget?

Answer 5

If the stated value of the claim is less than £50,000 then the costs budget can be filed with the parties DQ’s.

In any other case, 21 days before the first CMC.

Question 6

What is the budget?

Answer 6

The budget is an estimate of the reasonable and proportionate costs (including disbursements) which a party intends to incur in the proceedings.

Question 7

Must the budget be accompanied by a statement of truth?

Answer 7

Yes, at the end of the statement of truth must read: “This budget is a fair and accurate statement of incurred and estimated costs which it would be reasonable and proportionate for my client to incur in this litigation”

Question 8

What costs does the budget relate to?

Answer 8

The budget relates to what a party might hope to recover from the other side (party/party costs) as opposed to the amount a solicitor can charge a client for acting on its behalf (solicitor/party costs).

Solicitor’s fees (i.e. the amount charged to the client by the solicitor) are governed by the retainer (the contract between the solicitor and client), which does not need to bear any relation to recoverable costs. A solicitor may therefore be charging more than is in the budget for each stage of the litigation.

Question 9

Will it be necessary for parties to revise a costs budget?

Answer 9

Yes, if necessary.

Question 10

Is there a prescribed form for the costs budget?

Answer 10

Yes, precedent H.

Question 11

What does precedent H require?

Answer 11

It requires practitioners to set out any assumptions on which the budget is based and any possible contingencies (things which are anticipated but which may not be necessary, for example, an application for specific disclosure).

Question 12

Must Form H be accompanied by a statement of truth?

Answer 12

Yes, to be completed by the legal representative where the party is being represented.

Question 13

In what cases will the parties only be required to completed page 1 of precedent H?

Answer 13

Where the monetary value of the claim is less than £50,000 or if the party’s budgeted costs do not exceed £25,000, the parties must only use the first page of Precedent H.

Question 14

Is budgeting based on past or future costs?

Answer 14

Budgeting is all about future costs. Incurred costs (costs incurred pre-budget) are included on the Precedent H, but they cannot be altered by the court and the rule that a party will only recover budgeted costs unless there is good reason does not apply to costs incurred prior to the production of the costs budget.

Question 15

Explain the requirement for a budget discussion report

Answer 15

Parties are required to discuss budgets with each other in order to agree the costs figures where possible.

Question 16

What precedent does a budget discussion report take?

Answer 16

Precedent R.

Question 17

When must the budget discussion report be filed?

Answer 17

No later than 7 days before the first CMC.

Question 18

What do the parties indicate in the budget discussion report?

Answer 18

a) The figures which are agreed and not agreed for each phase of the litigation; and

b) A brief summary of the grounds of dispute.

Question 19

How does the budget discussion report assist the court?

Answer 19

Completing the budget discussion report enables the court to focus on those parts of the costs budget where there is disagreement between the parties.

Question 20

When will a CMO take place?

Answer 20

This generally takes place at the first case management conference. Alternatively, the court can convene a hearing solely for the purpose of costs management, in which case the hearing is called a costs management conference.

Question 21

What are the two main consequences of the court considering the budget and discussion reports?

Answer 21

Case management decisions

Costs management orders

Question 22

When making case management decisions what does the court have to have regard to?

Answer 22

When the court is making any case management decision, it is to have regard to any available costs budgets and the costs involved in each procedural step of the litigation.

This is particularly significant when the court is making important case management decisions at the first CMC, such as giving directions for the preparation of the case for trial.

Question 23

What is a CMO and when will the court depart from agreed budgets?

Answer 23

The court may, at any time, make a costs management order (‘CMO’), recording or fixing a costs figure for each phase of proceedings. When it comes to assessment the court will not depart from approved / agreed budgets unless satisfied that there is a good reason to do so.

Question 24

What is the position if no CMO is made?

Answer 24

If no costs management order is made, then the position is less ‘strict’. If there is a difference of 20% or more between the costs claimed by a receiving party on detailed assessment and the costs shown in a budget filed by that party, the receiving party must provide a statement of the reasons for the difference with the bill of costs, and the court may reduce the recoverable sum if the paying party reasonably relied on the budget.

Question 25

What is the process for revising a costs budget?

Answer 25

If significant developments in the litigation warrant a revision to a party’s budget (upwards or downwards), then:

1. An amended budget should be submitted to the other parties for agreement if possible (using a form prescribed specifically for variations – ‘Precedent T’); and
2. The amended budget then needs to be submitted to court for consideration.

This process is for addressing ‘significant developments’ in the litigation, not for correcting inadequacies or mistakes in the preparation of a costs budget in the first place, which is not generally allowed.

Question 26

What is the consequence of failing to file a budget?

Answer 26

Any party that fails to file a costs budget, when required to do so, will be automatically treated as having filed a costs budget comprising of only the applicable court fees unless the court otherwise orders.

Assuming the court then ‘approves’ such a budget by a costs management order, this becomes the starting point for what can be awarded in any future assessment proceedings.

Question 27

When does costs management generally take place?

Answer 27

Costs management generally takes place at the first case management, when directions are also being considered. Such a hearing is therefore often known as a costs and case management conference, or ‘CCMC’.