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A quick guide to changes to cost provisions in CPR effective from 6 April 2016

View profile for Janina Muromceva
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It is no longer a surprise that each April brings further updates to the CPR. In fact the most recent update takes the total number of updates over the years to a respectable 83. I wonder, in light of ongoing and proposed changes to the legal system and specifically costs, whether there will be anyone from the legal profession to celebrate the 100th update which at the current rate will be reached in 17 years.

So what changes in relation to costs will the latest update to the CPR bring into effect from 6 April 2016?

 

Budgets

Provisions relating to costs budgeting are contained within Part 3 of the CPR. These provisions apply to most claims allocated to the Multi- Track. Before the latest update to the CPR the exceptions to these provisions only extended to claims that were commenced on or after 22 April 2014 with the monetary value or potential value of £10 million or more, any non-monetary claims and claims which were subject to fixed costs or scale costs or where the Court ordered otherwise. From 6 April 2016 costs management will also not be applicable to claims made by or on behalf of a child where proceedings are commenced on or after 6 April 2016. In addition costs management will be disapplied in cases where the Claimant has a limited or severely impaired life expectation which is 5 years or less.

Provisions regarding filing and exchanging budgets have also been tweaked. Previously all parties except litigants in person had to file and exchange budgets seven days before the first CMC if the Court order did not specify the date for the same. The new CPR provides that all parties except litigants in person must file and exchange budgets with the Directions Questionnaire where the value of the claim on the Claim Form is less than £50,000 or in any other case the budgets must be filed and exchanged not later than 21 days before the first CMC.

The new CPR has also introduced a further Precedent R (the family of the precedents is growing by the day) a.k.a budget discussion report which must set out figures which are agreed for each phase, figures which are not agreed for each phase and a brief summary of the grounds of dispute. It would appear that where budgets have been filed and exchanged all the parties must file an agreed budget discussion report no later than 7 days before the first CMC. 

There is also a slight change in the format of the budget. The updated CPR provides that the parties must only use the first page of the Precedent H where a party's budgeted costs do not exceed £25,000 or where the value of the claim stated on the Claim Form does not exceed £50,000. It would also appear that the Precedent H itself has been updated to show the recoverable costs of initially completing Precedent H and of the budgeting and costs management process separately to the main budgeted costs. The Precedent H specifically refers to 1% or £1000, which ever is higher of the approved or agreed budget, for preparing the initial Precedent H and 2% of the approved or agreed budget for costs management and the remainder of the budgeting process. It is also worth looking at the new and improved guidance notes for Precedent H which must be followed.

The Practice Directions to Costs Management include an entirely new provision set out in PD 3E paragraph 7.10 which reads as follows:

The making of a costs management order under rule 3.15 concerns the totals allowed for each phase of the budget. It is not the role of the court in the cost management hearing to fix or approve the hourly rates claimed in the budget. The underlying detail in the budget for each phase used by the party to calculate the totals claimed is provided for reference purposes only to assist the court in fixing a budget.”

As a cost practitioner I welcome the decision by the rules committee to explicitly state this as the Jackson reforms did not envisage cost budgeting to be a prospective detailed assessment and therefore this clarification is appreciated.

 

Bill of Costs

The recent updates to the CPR do not only concern costs budgeting; but extend to Bills of Costs and specifically the format and content of the Bill of Costs under Practice Direction 47.6. It is now a requirement, where Court proceedings were commenced on or after 1 April 2013, for the Bill of Costs to be split to show any costs incurred before and after 1 April 2013 to account for the old and the new test of proportionality. It is surprising that the CPR had to be amended to include this provision as this separation and the benefit of transparency should have been obvious to any practitioner; obviously it was not as it could be seen in the decision from Master Gordon-Saker in the case of BP v Cardiff and Vale University Local Health Board [2015] EWHC B13Here at Paragon Costs we have been splitting our Bills of Costs in this manner since the introduction of the Jackson reforms, it is disappointing to note that clearly some practitioners are still not doing this 3 years later requiring an amendment to the CPR.

The rules further provide that it is necessary to split the Bill of Costs so as to distinguish between the costs claimed for each phase of the last approved or agreed budget. In addition the Bill must distinguish between the incurred and budgeted costs. These provisions are only applicable where a costs management order has been made, the costs are to be assessed on the standard basis and the receiving party's budget has been agreed or approved by the paying party or by the Court.  This is a sensible addition and will greatly assist both the parties and the Court when assessing costs that have been subject to costs management.

And finally where a costs management order has been made and the receiving party’s budget has been agreed by the paying party or approved by the Court, (a) the costs of initially completing Precedent H and (b) the other costs of the budgeting and costs management process must be set out in separate parts within the Bill of Costs.

It seems that going forwards the receiving party's Bill of Costs will contain multiple parts within parts to comply with all the relevant rules. No doubt the current updates were made with intention to make claims for costs more transparent. The only question is whether costs for preparation of these Bills will be proportionate as to prepare a compliant Bill of Costs will no doubt be more time consuming?

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