Costs News

12 September 2019
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CPR update clarifies cut-off between budgeted and incurred costs

A change to practice direction 3E comes into force on 1 October to provide clearer guidance on the cut-off between budgeted costs and incurred costs, it has been confirmed.

The 109th update to the CPR issued by the Civil Procedure Rule Committee (CPRC) draws 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).

Currently, budgeted costs run from the date of the budget, not the case and costs management conference (CCMC), meaning the budget will need to estimate what costs will be incurred between the budgets being drawn and when the CCMC takes place.

Writing on the Keoghs website, Dan Oldroyd, an associate and member of the firm’s complex costs team, said that many in the costs industry saw this as a problem that was going to create more ambiguity.

“I disagree. It is usual practice now for the CCMC phase to be moved from the budgeted costs to incurred costs at the hearing, as at the hearing the costs are now incurred. The change is an extension of this to include the work in other phases as well as to enshrine this practice into a rule.

“In the cases below £50,000 where a budget is produced and the CCMC not listed for several months, this is difficult to do. In these cases, it is likely that it will require an updated budget ahead of the hearing to give an accurate reflection of costs incurred to the CCMC and costs estimated thereafter.”

But he said this would be a “relatively simple exercise” and, in most cases, was often done in any event “to show the court how compliant we are with the budgeting procedure”.

Mr Oldroyd continued: “On the higher-value cases, the costs budgets are generally produced a lot closer to the hearing as they are not required until 21 days before the first CCMC. Any budgets produced well before the hearing are going to need to be amended if prepared too early. 

“So, in my opinion, there is a slight difference to drafting a budget, to put the CCMC phase time all as incurred. There will be some estimating of the incurred time, before the CCMC takes place, but then are we not already doing that when drafting a budget?

“My own view is that this is a simple and welcome change. It is clear when the incurred costs cut off is and what is budgeted. The court does not manage the incurred costs and they will carry on being subject to detailed assessment at conclusion.”

He suggested that there may be some guidance required on what would happen when the incurred costs in the bill were vastly different to the budget. “I am sure this will amount to a good reason to depart from a budget where the circumstances have changed or where the budget was not accurately drawn before the first CCMC.

“This would be a welcome outcome to ensure parties are accurately and realistically estimating the costs to be incurred before the CCMC.”

Mr Oldroyd said the simplest way around all of this was not to draft the budget too early in high-value cases and to update the budget before the CCMC in lower-value cases.

Meanwhile, the 109th update has issued revised forms N260A and N260B, which support the costs for summary assessment pilot scheme that is running until March 2021.

It said this was in response to feedback received since their release in April with PD51X. The CPRC’s costs sub-committee has:

- Identified some general areas that could be presented in a better way;

- Redrafted the guidance notes (contained at Tab 6 on each form), “which are quite detailed but serve to address the issues raised by court users”;

- Ensured the same information is being obtained, but changed the layout and used the same language as in Precedent S (where possible) in the interests of consistency; and

- Not changed the practice direction itself.

It has not issued Word/PDF versions, with lawyers asked to use the Excel versions from now on.

Finally, the 110th update, which comes into force on 7 October, extends the application of the existing electronic working pilot scheme (PD 51O) to the Senior Courts Costs Office.

Comments

Dragon 2   12/09/2019 at 12:32

Oh dear - this demonstrates a fundamental misunderstanding of the term "budget" or "budgeting", and is ultimately not cost effective. A budget, in any circumstance, is a sum of money required to do a job from beginning to end. Once the Precedent H budget has been prepared it should not be repeatedly updated at considerable expense, not only so far as amending the budget itself, but adding more costs to the incurred costs which will ultimately have to be subject to the assessment process on conclusion, thus contrary to the CPR 1.1(2)(e) - more valuable court resources being required to deal with those increased incurred costs and challenges to them. The only adjustments to a Precedent H budget should be following agreement or determination as to how much may be spent (at CCMC stage), or if there is a fundamental change to the anticipated direction of the case - that was the what the budgeting Rules envisaged. Furthermore, to suggest all the costs of a CCMC "must be incurred" when still actively ongoing is absurd, particularly is there is inevitably future work to be done post the hearing to perfect directions orders, agree them with opponents and file them. It seems the change to the rule now makes future costs incurred. That cannot be right.

Anon   12/09/2019 at 12:41

Agree entirely with Dragon. This makes things worse.

John Smith   12/09/2019 at 16:34

Agree with fire dragon 243

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