The front page of the Precedent H form for costs budgets has a section at the bottom for completion of the costs of the costs budgeting process:
I routinely see budgets served where this part of the form has been completed, calculated by reference to 1% or 2% of the total of the budget as drafted (incurred plus estimated costs). This is plainly incorrect.
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 total of the incurred costs (as agreed or allowed on assessment) and the budgeted costs (agreed or approved); and
(b) all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted (agreed or approved) costs.”
The first point to note is that the 1% and 2% figures are caps. There is no automatic entitlement to these amounts. To get the full amount of the cap, it must be shown that reasonable work on the relevant task was undertaken that equals or exceeds the cap.
Secondly, the fact that the part of the % that relates to incurred costs is calculated by reference to the amount eventually “agreed or allowed on assessment” means that at the time the budget is drafted (and at the time of the costs management hearing) it is completely unknown what figure will eventually be agreed or assessed in respect of incurred costs. This will only be discovered at the conclusion of the claim once the other costs have actually been agreed/assessed. It is therefore not possible to calculate the 1% or 2% figure at that stage as the amount used to calculate the figure has not yet crystallised.
Thirdly, even in respect of the estimated future costs, at best it is simply wishful thinking to believe that because the estimated future costs are £x that this amount will be approved in full. Any reduction by the court in respect of estimated costs will lead to a corresponding reduction in the amount allowed for the “budget drafting” and “budget process” caps.
Matters are not helped by the Precedent H Guidance Notes which state:
“Budget preparation: the time spent in preparing the budget and associated material must not be claimed in the draft budget under any phase. The permitted figure will be inserted once the final budget figure has been approved by the court.”
The reference to “inserted” is clearly intended to mean the amounts that will be inserted on the front page of Precedent H.
This is also simply wrong, because at the point the future estimated costs are approved by the court, the amount that may be agreed/assessed for the incurred costs will, again, remain unknown.
Precedent H itself is clearly defectively drafted. The 1% and 2% figures can never be inserted at the costs management stage and these elements should not be on Precedent H.