Legal Cost Specialists

Posts made in January, 2020

Discrepancy between incurred costs in budget and bill

By on Jan 20, 2020 | 3 comments

Preparation of the Precedent H costs budget requires figures to be inserted for both past incurred work and future estimated work. PD 3E para.7.4 provides: “As part of the costs management process the court may not approve costs incurred before the date of any costs management hearing. 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 budgeted costs.” Therefore, although Precedent H includes both incurred and estimated costs, any costs management order will relate only to future estimated work. CPR 3.18 states: “In any case where a costs management order has been made, when assessing costs on the standard basis, the court will – (a) have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings; (b) not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so; and (c) take into account any comments made pursuant to rule 3.15(4) or paragraph 7.4 of Practice Direction 3E and recorded on the face of the order.” In light of PD 3E para.7.4, the “approved or agreed budgeted costs” in CPR 3.18 appears to relate only to the future estimated costs, as opposed to the incurred pre-budget costs, and CPR 3.18(a) or (b) cannot act as a limit on the incurred pre-budget costs. What happens when the pre-budget costs claimed in a subsequent Bill of Costs exceed the costs that were shown in the earlier Precedent H? Absent something going seriously wrong, the main reasons for a discrepancy between the incurred costs shown in a Precedent H and a final Bill are: (a) The costs draftsman drafting the Bill identifies some additional pre-budget work that was not included by the fee earner who prepared Precedent H. (b) The costs draftsman drafting the Bill places some of the pre-budget work into more appropriate phases than the fee earner had done when preparing Precedent H. The generally accepted starting point is that the incurred costs simply fall to be dealt under detailed assessment by reference to the ordinary reasonableness and proportionality tests. However, matters are not necessarily that straightforward where the costs shown...

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