Legal Cost Management
Costs management now applies to all part 7 claims below £10m. The relevant rules can be found in Civil Procedure Rules 3.12 to 3.18 and Practice Direction 3E on Costs Management. The recent case of GSK Project Management Ltd (in liquidation) v QPR Holdings Ltd [2015] EWHC 2274 (TCC) illustrates some of the difficulties parties may face when seeking approval of their costs budgets.
The rules
Under the rules, all parties (except litigants in person) must file and exchange costs budgets in which they must provide an estimate of the costs that are likely to be incurred at each stage in the litigation process (CPR 3.13). The budgets must be filed by the date stated in the notice of proposed allocation or, if no date is specified, seven clear days before the first case management conference (CPR 3.13). The budget must be verified by a statement of truth (PD 3E, paragraph 6).
The court has the discretion to make a costs management order, in which it will record the extent to which the budgets are agreed between the parties, or (to the extent not agreed) record the court’s approval of a budget, if necessary after making appropriate revisions (CPR 3.15). Where costs budgets have been filed and exchanged, the court will make a costs management order ‘unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made’ (CPR 3.15(2)).
What Is a Legal Cost Budget
A legal cost budget is commonly referred to as a Precedent H and is the first step in ensuring you recover your full costs on the conclusion of a claim. A Precedent H is used at the beginning of litigation and outlines the details of the costs expected to be received on conclusion. It also outlines where time and efforts should be focused during the course of litigation.
What is Involved in preparing a Cost Budget
A cost budget is used to manage costs throughout the litigation process. A Precedent H should be prepared by parties caught by the provisions and verified with a statement of truth, considering all issues in the case. The party should consider who will be working on the case, their hourly rates and build contingencies, when preparing a cost budget.
When Should a Cost Budget be Filed
There is a strict deadline for filing the Precedent H which must be met, or the penalties can be severe, reducing the chance to recover legal costs from the other side. Costs Budgets must be filed alongside the Directions Questionnaire if the value of the claim is less than £50,000. If the claim value exceeds £50,000, the Costs Budget must be filed 21 days before the first Costs and Case Management Conference (CCMC). We would always recommend that the Precedent H is filed with the Directions Questionnaire to avoid the likelihood of any default arising.
What should be Included in a Cost Budget
A Precedent H cost budget should include the following:
Your base costs incurred to date
The future costs to be incurred for the entirety of the case up to and including Trial
Anticipated costs should only account for what is reasonably foreseeable, and is catered for in any draft directions and the Directions Questionnaire. The Budget cannot account for every possible eventuality in the litigation.
Additional liabilities such as the success fee or ATE premiums should not be included in the costs budget, neither should VAT. Costs for the Precedent H Budget and the Costs Management process do not form part of the main figures, but can be located in the bottom right of the front sheet of the Budget as the respective 1% and 2% figures.
Here at Legal Cost Assistance Limited we are able to assist with all of your Cost Budget requirements.
