Legal Cost Specialists

Cap on costs budgeting process

Claimant serves costs budget totalling £100,000. Defendant serves costs budget totalling £20,000. Defendant’s budget is, unsurprisingly, not disputed and approved by the court. Claimant’s budget is, unsurprisingly, hotly disputed and is dealt with at a costs management hearing.

PD 3E para.2.2 states:

“Save in exceptional circumstances –

(1) the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the approved budget;

(2) All other recoverable costs of the budgeting and costs management process shall not exceed 2% of the approved budget.”

The Claimant’s budget is reduced by the court to £60,000.

Each side’s costs of the contested costs management hearing appears to be limited to 2% of their own approved budget (rather than the budget of the other side).

So, the Claimant gets a maximum of £1,200 and the Defendant a maximum of £400, despite the fact the only reason for the costs management hearing is because the Claimant submitted an inflated budget. Fair? And is £400 even going to begin to cover the Defendant’s costs?

This has the appearance of not being very well thought through.

13 thoughts on “Cap on costs budgeting process”

  1. where does it say limited to YOUR OWN budget? if I were a defendant in your scenario, as the only reason for the Costs Management hearing was to argue over the other sides budget excess, I would be arguing any costs would be with reference to the budget in dispute.

    also, what is to prevent the Court awarding costs AGAINST a party producing an inflated budget in those circumstances, and where it slashes the budget as suggested in your scenario?

    but in practical terms, the first CMC is more likely to be for case management, not just costs, so costs will likely be in the case. Further, what’s the argument about, 95% of Defendants going into this, either (1) understate their budget knowingly so they only have to complete page 1 and try to limit the Claimant saying “well WE aren’t going to have to spend this much”, or (2) know they aren’t going to recover their costs – I seriously doubt any Defendant solicitor having an agreement with their Insurers to so limit their fees as your scenario suggests (and if I’m wrong, lets hear openly and candidly from all you Defendant firms out there, as I for one look forward to pointing to the statement of truth on page 1 of the budget and asking the Court to take note)

  2. question

    the PD you refer to , says recoverable costs of preparing the initial budget are limited to 1% of the approved budget

    it is known that the Court cannot approve, disapprove or do anything other than comment on the costs ALREADY incurred. Therefor, the APPROVED budget CANNOT by definition include any of the costs already incurred – in Claimant cases, the majority of their budget (and the work in preparing the budget figures)

    accordingly, the 1% cap CANNOT apply to the work already incurred

    someone tell why I am wrong, if indeed I am?

    p.s. All you claimant firms out there whom are limiting their budget fees to the 1% cap? hahahahahaha!

  3. @ greenhorn

    that’s only for the preparation of the initial budget. the 2.2(2)of the PD clearly states all other costs of the budgeting and costs management process shall not exceed 2% of the approved budget – it doesn’t say WHO’s budget, and if the Defendants is already agreed and the only one being APPROVED is the RP, then the cap must apply to the budget in dispute

  4. @ Anonymous, time 10:14am

    (1) states that the preparation of the Prec H is limited to the HIGHER of £1000 or 1%

    Therefore it’s a £1000 (+ vat) at a minimum for the Prec H document itself. You only have to worry about 1% when your budget is over £100K

    (2) says it’s the 2% cap is for the OTHER budget work needed – so the hearing attendance and arguing about it. So you get your extras for the hearing attendance limited to 2% of the allowed sum.

    I realise Simon wants to show how unfair the stated example is, but he’s failed to point out that the Claimant in this matter got £1000 + vat for their Prec H £100,000 budget…. and the defendant got £1000 + vat for their £20,000 budget which presumably took loads less time to prepare.

    Swings and Roundabouts!

  5. surely the indemnity principle applies

    if you spend less than £1000 on the budget then then your limited accordingly

  6. @ abcde

    wrong, the PD is clear than you will recover 1% or £1000 for drawing the budget “save in exceptional circumstances” – its a bit like the fixed costs and success fee in CPR 45. I’d like to see anyone brave (dumb) enough to argue an indemnity principle limit these days; I doubt citing “exceptional circumstances” would work

  7. @ anonymous 10:15

    Wrong, the PD is clear that “the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the approved budget”

    It is a cap, not a fixed sum.

  8. @ A nonny mouse

    wrong! I don’t wear caps, or hats or funny wigs, so I get the £1000.00 or £1% no matter what :p

    kinda scuppers the submission by P Williams about what Defendants charge tho, doesn’t it…….

  9. Or if you use the cost budget template (from the white book) with the incorrect wording for the statement of truth then your costs budget will be struck anyway!

    Did Jackson really intend this…

  10. We have no evidence of the content of these budgets, and trying to analyse this result is purely supposition.

    How do we know that the Defendant didn’t merely submit an unrealistically small Costs Budget purely in an attempt to discredit the Claimant’s.

    I would refer to a recent case of mine. SSD at £550k, Liability admitted early doors. The Defendant stated in their costs budget that they could obtain 6 medical reports, forensic accountancy evidence and run all the way to a 5 day trial for a total of £29,000.

    A highly unrealistic figure however you look at it. Defendant’s know, especially in cases where Liability is admitted, that the chances of them being awarded their costs are slim to none, and as such the temptation must be to produce a small costs budget, knowing that it will be ordered as drawn, merely to discredit the size of the Claimant’s budget.

    This is a double edged sword and to say that Costs Management Hearings are only due to the Claimant’s bills having been inflated is a very short sighted and yet again heavily Defendant biased view.

    We can all spout examples of where it seems the courts have made an erroneous decision one way or another, or where the system seems to favour one side over the other, just because one gets put up on a blog does not make it gospel.

    Judges are hardly known for their identical and unwavering interpretation of the law. If you don’t want these odd decisions, be honest. Produce an honest costs budget…. if there is there such a thing and reach an amicable agreement, requiring only a stamp.

    Failing that, overload the Courts with these disagreements and force them to change the way they do them, back to the old days where the value of a file was based on the strain it caused your elbow to lift it….

  11. @ costprimate036

    some valid points, save (1) Courts should be astute enough to know how stupid a costs budget is and it is the job of budget experts to educate them and point this out in proper advocacy, and (2) Defendant draftsmen (can the word “draftmen” be used for them when they don’t draft bills at all?) in the majority have no clue about what litigation costs because they never cost a file

    I agree the blog is defendant biased – but to be fair, it is Simons blog, he is a self-proclaimed defendant costs specialist, and he does not need to profess nor practise impartiality. What he DOES do, however, which so many others wont do, is offer an open forum for views to be exchanged, biased, informed, or otherwise

Leave a Comment

Your email address will not be published. Required fields are marked *

Post a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Scroll to Top