The CPR are to be amended to clarify that the percentage cap allowed for the costs of the budgeting process refers to both incurred and budgeted costs, the Civil Procedure Rule Committee has decided.
Newly released minutes from its February meeting show that it preferred this approach to one that just took account of budgeted costs.
CPR 3 PD E 7.2 provides that, save in exceptional circumstances, the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the approved or agreed budget; and all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the approved or agreed budget.
In a report to the CPRC, Master Richard Roberts, chairman of its Sarpd sub-committee, said that, following the uncoupling of incurred costs and budgeted costs, the question arose whether the approved or agreed budget referred to both incurred and budgeted costs or only to budgeted costs.
Its unanimous view was that paragraph 7.2 needed to be amended to settle this, but it did not express a preference.
Laying out the arguments for each approach, it said in favour of the wider definition: “Whether costs are incurred or budgeted is determined by how long the parties have to wait for the court to hear a costs case management conference (CCMC), which is outside the control of both parties. To apply the percentage cap to ‘budgeted costs’ only leaves the parties open to the vagaries of when they are costs managed. In the RCJ, parties often have to wait four to five months from filing allocation questionnaires for a CCMC.
“It may also make parties reluctant to progress the case before the first costs case management conference, leading to delay, although it is often suggested that the lack of budgeting of incurred costs provides the opposite incentive to progress a case as far as possible before costs management.”
Further, the costs recovered should be proportionate to all of the costs incurred throughout the case, not only those incurred after the first CCMC.
The report continued: “Both parties’ costs draftsmen will have spent time on collating data on incurred costs and inserting this data in the correct phase of Precedent H, and will continue to do so during the course of the case. Why should the costs draftsmen’s costs of dealing with incurred costs not be recoverable?
“In many cases, if the claimant is not allowed to recover up to 1% and 2% of the incurred costs as well, the costs draftsman’s costs will exceed the 1% and 2% of budgeted costs which are allowed. The excess will be deducted by the claimant’s solicitors from the claimant’s damages, which is unjust. The claimant already has to pay success fees out of damages. The more economically unviable claims become, the less access to justice there will be.”
The main arguments in favour of the percentage applying to budgeted costs only were that the court has no control over the costs already incurred and it was therefore illogical to apply a percentage to such costs, and that incurred costs may clearly be disproportionate at the time of the CCMC.
The minutes of the CPRC meeting did not explain why it decided to go with the incurred and budgeted costs approach, or when the change would come into force.
However, the previously announced changes to the CPR following the Court of Appeal rulings in Sarpd and Qader take effect from today.
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