Some of the most common questions I get asked by my clients involve when and how do they go about revising their previously approved budgets during the course of litigation. These are never easy to answer given the ambiguities surrounding such terms as ‘significant development’ or ‘good reason’ and the court’s powers to make rulings on costs for work already incurred. The Civil Procedure Rules Committee has attempted to address some of these issues by introducing a new ‘Precedent T’ as part of their 122nd update to the Civil Procedure rules which came into force early this month.
Life Pre-Precedent T
The previous process for revising an approved budget stems from Practice Direction 3E. The parties are obliged to revise their budgets in respect of future costs (upwards or downwards) should significant development in litigation warrants such a revision. The revised budgets should be exchanged between the parties and hopefully agreed. The court’s only intervention would come should the parties be unable to reach an agreement. If this was the case, then a further budgeting hearing would have been required.
Most court users will be familiar with the, sometimes significant, times which can elapse prior such a hearing being listed. This raises the question of how the court should deal with the costs arising out of the significant development in the litigation but have already been incurred by the time of this further hearing. Budgeting should be prospective, not retrospective of course. I believe that the 122nd update is an attempt to streamline and standardise this process.
The New Regime
The procedure for revising a budget during the course of litigation is set out in CPR r3.15A. This mandates the parties to use Precedent T to serve particulars of the variations proposed on every other party. The receiving party must then submit the particulars of variation to the court promptly, with the previously approved budget and an explanation of the points of difference if the revised costs have not been agreed. The court then, in every case, must approve, vary or disallow the proposed variations having regarding for any significant developments since the date of the previous approved budget. Note the mandatory involvement of the court in determining the reasonableness of the revision. Previously should the parties agree revisions between themselves, the court would merely record the revised figures, with no discretion as to their level. Now the court must actively have input.
The changes also deal with that thorny issue of whether the court has a remit to deal with costs already incurred. It does. It is quite conceivable that a court may now disallow work already completed in the interregnum period between a significant development arising and a Precedent T landing on the judge’s desk.
These new rules are supported by a heavily revised Practice Direction 3E. Large portions of the old Precedent H Guidance Notes are now incorporated. Also, within the new Practice Direction is a provision for a party to apply to the court where another party is behaving ‘oppressively’, causing the applicant to spend money disproportionately on costs. In the event of success, the court can order such relief as may be appropriate.
The new Precedent T form is a two-tab Excel document which is fairly self-explanatory. Those with experience with costs budgets in Precedent H and budget discussion reports in Precedent R will be familiar with its layout. Users would do well to remember to double check the accuracy of the auto sum function in respect of the expert phase on the variation particulars. The current template on the Practice Direction auto-populates cells from a table of fees of experts alone. This may require manual amendment should counsel or court fees be required in this phase.
A further problem arises out the form’s requirement to state a previously budgeted figure for the fees of each individual expert. Practitioners will likely be familiar with Costs Management Orders which simply provided a gross amount for a phase. It will be nigh on impossible to breakdown such an amount across specific fields of expert with any accuracy. In the absence of any additional guidance it may prove more helpful to leave the figures in this column blank and provide further explanation elsewhere on the form.
Thoughts for the Future – plain sailing?
As a Costs Lawyer the ambiguities surrounding the revisions of approved costs budgets have always caused difficulties in managing the parties’ expectations and uncertainties as to outcomes. The 122nd update has certainly attempted to address these ambiguities. The process is now streamlined and it should be clear to the parties what is expected of them. The court’s involvement in the process is also clarified and confirmed.
However, as always with the hydra that is costs management, when one problem/head is removed, others will replace it. What for instance, defines ‘oppressive behaviour’ and what relief could be granted? Similarly, the update may rationalise the current process, but it might not provide that holy grail of greater consistency of outcome. The involvement of the court in each revision of budgets, with their wide discretion of approving, varying or disallowing revisions, could create potentially significant geographical variations.
I imagine the revisions of costs budgets will be giving legal practitioners significant reading material for some time yet!
This article appeared in the New Law Journal on 8 January 2021
Adam Grant, council member of the Association of Costs Lawyers and Costs Lawyer at Pure Legal Costs Consultants