Cost budgets are a crucial part of settling a civil case. Whether the matter is settled in or outside the court, the preparation of a cost budget is required for most cases. This includes:
- any case valued at over £50,000 and is not considered a personal injury (PI) claim; and
- any PI matter valued at over £100,000.
It is important to note that in any matters relating to PI claims, the treatment is that any PI claim filed on or after 1 October 2023 and valued at under £100,000 falls under what is known as the extended fixed recoverable costs (FRC) regime and thus does not require a cost budget. However, for any PI matter valued at over £10,0000 a cost budget is required.
If a case requires a cost budget, this is generally completed through a document known as precedent H, which is a document outlining all the legal costs spent, and will incurred by both party at every stage of a court claim.
This document is then filed with the court and is subject to the judge’s approval. This is done at the Case Management Conference (CMC), where both parties review each other’s costs and file a precedent R to comment on the costs. Once discussed, and approved by the judge, the successful party, in the claim, is able to recover their legal costs outlined in the budget within 14 days of the conclusion of the hearing.
What procedural steps need to be followed for cost budget?
It is important to note that for any case where a party is a litigant in person, a cost budget is not required. However, in any case where one of the parties is a litigant in person and the other is not, then the party who acquired legal representation still has to submit a cost budget.
Furthermore, even in a situation where either and or both parties were not required to submit a cost budget, either because of the reasons mentioned in the section above or because they are a litigant in person, the court may on its own initiative require a cost budget, in accordance to CPR 3.13(3)(a).
A costs budget needs to be filed 21 days before the CMC.
For non-monetary claims, the filing period will depend on the specific type of claim. Generally, non-monetary claims fall under CPR 3.13(1)(b).
What happens after filing a Precedent H?
As we mentioned, once the parties file the Precedent H, parties can then file what is known as a Precedent R Budget Discussion Report within 7 days before the first CMC. A precedent R budget discussion report records the budgeted costs claimed on a party’s precedent H with the costs that the other party is prepared to agree on, and the phase associated with it.
For the costs that the other party does not agree on, they are required to input their comments as to why they do not agree in the precedent R.
What happens if a party fails to file a cost budget?
If a party do not file a cost budget, within the deadlines set out, they will be limited to collect court fees only without recovering legal costs.
What if both parties are not able to agree on either cost budgets?
In the event both parties are not able to reach an agreement on their proposed budgets, the court will approve those costs that it deems reasonable under the precedent H during the CMC. In deciding reasonable and proportionate cost of each phase, the court will consider, the factors set out here: CPR Rule 44.3(5).
Costs proposed under the precedent H would be considered proportionate by the court if they carry a reasonable relationship to –
- the sums disputed in the proceedings;
- the value of non-monetary relief claimed in the proceedings;
- the complexity of the litigation;
- additional action undertook by the conduct of the paying party;
- any other factors involved in the proceedings, such as reputation or public importance; and
- any additional work undertaken, or expense incurred due to the damage caused to a party.
This covers an overview of costs budgets, and what the important aspects you need to be aware of. Next time, we will discuss how you draft a costs budget (precedent H).
Have you got a civil claim where you need assistance with a costs budget? The team at Freeman Harris would be happy to help. Email us at contact@freemanharris.co.uk or call us today at 0207 790 7311.