The defendant costs specialists

Cap on costs budgeting fees

By on May 20, 2015 | 8 comments

The post-Jackson CPR remains a mess of badly drafted and confusing rules.

The Glossary to the CPR defines “Budget” as:

“An estimate of the reasonable and proportionate costs (including disbursements) which a party intends to incur in the proceedings.”

The words “intends to incur” suggests that “budget” is limited to future costs. However, PD 3E para.6 states:

“Unless the court otherwise orders, a budget must be in the form of Precedent H annexed to this Practice Direction.”

There is no doubt that Precedent H requires both past (“incurred”) costs and future (“estimated”) costs to be included. A completed budget (following Precedent H) will therefore include, by necessity, both past and future costs.

PD 3E para.7.4, under the hearing “Costs management orders” states:

As part of the costs management process the court may not approve costs incurred before the date of any budget. The court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all subsequent costs.”

It is therefore clear that a costs management order can only “approve” future costs. This is well established and not disputable.

PD 3E para.7.2 states:

“Save in exceptional circumstances – (a) the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the approved or agreed budget”

What though, for these purposes, is the “approved or agreed budget”? The court cannot “approve” costs already incurred.

I am sure that this was intended to mean that if a budget filed by a party totalled £110,000 which was agreed/approved in full, the costs of completing that budget would be limited to £1,100 (being 1% of £110,000).

But, what if the budget includes £110,000 incurred costs and £110,000 future estimated costs and the same is agreed/approved in full? Which of these applies:

  1. The cap of the total for preparing the whole budget is £1,100 (being 1% of the £110,000 future costs) with nothing recoverable for the work including in the budget the incurred costs?
  2. The cap on preparing the part of the budget relating to the future costs is £1,100 (being 1% of the £110,000 future costs) with no cap on the recoverable costs for the work including in the budget the incurred costs?
  3. Is there a distinction depending on whether the budget is approved or agreed? PD 3E para.7.4 prevents the court approving incurred costs but does not prevent the other side from agreeing incurred costs. If a party agrees a budget without further comment, are they taken to have agreed the incurred costs or is it implicit the incurred costs are excluded from the agreement as the court has no control over such costs?

Cook on Costs 2015 identifies this problem and concludes the cap is calculated by reference to the future costs only:

“There appears to be some confusion as to what constitutes the ‘approved budget’ for the purposes of the percentage calculation. As the court may only budget costs to be incurred, it seems clear that the percentage is only of the sum approved by the court/agreed by the parties as the ‘to be incurred’ costs within those phases budgeted. This view is supported by the fact that CPR PD 3E, para 7 refers back to CPR 3.15. CPR 3.15(1) makes it clear that a costs management order may only be made in respect of costs to be incurred and CPR 3.15(2) makes it clear that budget for these purposes relates to the agreed or court approved figure after revision by the court. As the court cannot revise ‘incurred’ costs’, then the agreed or approved budget seems to be only the figures included in any costs management order. The alternative construction appears to us to rely upon the budget after a costs management hearing including both the costs managed costs and the non-costs managed costs, being described as an agreed or approved budget. This would have a curious effect at subsequent assessment as this would mean that even in respect of non-costs managed costs a party seeking to depart would need to show ‘good reason’.”

This does not seem to answer the problem as to whether the work done preparing the incurred part of the budget is covered by the same cap or whether those costs are entirely at large.

Cook on Costs introduces the subject with:

“Inevitably the costs management process adds an additional expense to litigation. Rather than allow for protracted argument about how much, the rules prescribe the sums that will be recoverable.”

This suggests nothing is recoverable for the work done concerning the incurred costs, otherwise a potentially significant part of the process is not prescribed and protracted argument is inevitable.

Now imagine the poor District Judge (or Deputy District Judge) trying to get their head around this issue based on points of dispute that are “short and to the point” and replies that are “limited to points of principle and concessions only”.


  1. It’s always made me chuckle, the cost firms who attempt to massage the figures to get the most out of the cap, and then seek that full amount as a fee in addition to a full costing of the file for a bill

    How I laugh when told its in the rules they get both fees; and then guffaw hysterically at their crestfallen silence when I point out there was no cost management order and their limited fee, doesn’t even apply

    But what makes my blood boil, are the outright liars who pretend it took them 7 hours to draw a sub £100k total budget, most of it future cost, then a few months later another 15+ hours to draw a bill. I always thought the ACL voting for J-codes was the worst case of Turkey voting for Xmas ever. Having seen so many of the above from certain firms, J-codes can’t come soon enough


    20th May 2015

  2. When the time comes, it will be more Jay cloths than J-Codes


    20th May 2015

  3. Expert: Someone who brings confusion to simplicity.
    Gregory Nunn


    20th May 2015

  4. Jackson’s first preliminary report from 2009, specifically records a meeting of the Costs Master, the Chairman of the ACLD, 2 drafting firms and a costs barrister. Of the various problems with the system, one topic discussed was a new bill format, and being advised most firms use electronic billing systems, a new electronic bill format was feasible and would be looked into. It was that work which was later presented to Jackson and referred to in his Final Report, and now developed

    Perhaps there was no literal “vote”. Perhaps there should have been?


    20th May 2015

  5. Stop bashing the ACL, yes there have been some shortcomings and a lot of questions to be asked and answered but its not the ACL who are driving us into the dirt. If they don’t pull their socks up they are likely to see their membership numbers drop or certainly renewals fall because there will be no point. Let them prove themselves by sinking or swimming but lets get behind them in the meantime because I don’t hear anyone else on here bringing anything helpful to the debate.

    J Codes tut, it will be back to the old CLAIM1 legal aid forms, Hey Sir, what do you do for a living ? “Oh errr im a form filler, but im a qualified one” tut.

    I think i may go and work for a medical agency, it seems that they have the collective common sense to scupper the government plans to short change them by morphing one company into about 20 entities so as to blanket diffuse the medco plans! what do costs draftsmen do? argue over piddly fixed fees for work you haven’t even carried out and draw unrealistic bills and budgets and instruct Counsel to justify them……

    Now here did I put that C.V


    21st May 2015

  6. I don’t see anyone bashing the ACL, previous posters simply pointed out that they had probably pre-determined their own (and everyone else’s) fate

    The point about J codes, is that there wont even be forms to fill, let alone bills to draw. Anyone capable could always of course go and swell the ranks of “paralegals” and actually conduct the cases they have moaned for years about billing


    21st May 2015

  7. As always a rather selective interpretation of the rules.

    Of course the cap is over the whole Budget, including incurred costs and anticipated.

    7.4 As part of the costs management process the court may not approve costs incurred before the date of any budget. The court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all subsequent costs.

    The Practice Direction above clearly shows that the Court’s are to consider the level of incurred costs when deciding an amount to allow for future. So although the Court’s are not to approve the incurred costs (how could they as there is no breakdown/bill and this is not a DA) but are to award an appropriate total figure for any particular phase including and taking into account both elements.

    7.3 …The court’s approval will relate only to the total figures for each phase of the proceedings, although in the course of its review the court may have regard to the constituent elements of each total figure

    Accordingly, the 1% and 2% must relate to the whole budget, as the Courts are to determine a reasonable and proportionate amount to budget for a particular phase, having considered incurred and estimated, and it is up to the solicitors how they use the overall budget given for such a phase. This also removes any issues with hourly rates which causes all sorts of issues. e.g. ‘You can claim £400 per hour or £200 per hour but the Court may only deem £5000 reasonable and proportionate for a particular phase’

    It simply cannot be 1% for only anticipated costs. The court may well look at incurred costs for a partuicular phase and gasp at the level of the same as excessive and disproportionate, and accordingly make a decision to award 0 going forward. In this scenario does this mean no fees at all are recoverable for preparing a budget that is a requirement by the rules and has informed the parties involved of potential costs liability and helped the Court to make a costs management order to control costs on any given action.


    30th June 2015

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