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How will you provide your breakdown of costs by phase?

View profile for Marc Harris
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The Civil Procedure (Amendment No. 4) Rules 2015

Over 2 years following the introduction of the Jackson Reforms and the issue of implementing agreed or approved Costs Budgets into the Detailed Assessment process has now taken a step forward. The Civil Procedure (Amendment No. 4) Rules 2015 which are due to come into effect on 1 October 2015 will add the following to service of documents with the Bill:

In rule 47.6, in paragraph (1) -

  • (a) at the end of sub-paragraph (a), omit “and”; and
  • (b) at the end of sub-paragraph (b), insert -“; and
  • (c) if a costs management order has been made, a breakdown of the costs claimed for each phase of the proceedings”.

You will see that there is soon to be provision within the Civil Procedure Rules (“CPR”)  that upon service of a Bill of Costs when commencing Detailed Assessment proceedings, parties are to also serve a "breakdown" of the costs claimed for each phase where a Costs Management Order had been made.

There appears to be no such reference as to what should be done if a Costs Budget has been filed, but no Costs Management Order has been made. I suspect a breakdown would still be required.

Background

Since the introduction of the Jackson Reforms back in April 2013 costs management has played a huge part in the conduct of litigation, with many of the rules still in development today. Where Costs Budgets were required, the parties would be required to prepare these in accordance with relevant Rules and guidance, these would either then be agreed between the parties or approved by the Court.

Where a Budget is agreed or approved and a Costs Management Order is subsequently made, it is not the total sum of the Budget the parties are limited to but rather the total agreed or allowed for each individual phase.

Once the main action concludes the successful party will then need to commence Detailed Assessment proceedings in order to recover their costs. The recoverable costs are limited to the last agreed or approved Budget unless there are exceptional circumstances or costs are payable on the indemnity basis.

Bizarrely, there was previously no requirement or provision under the CPR to provide any breakdown of how the costs had been phased in the Bill of Costs when serving a Bill. Even though parties were put through this expensive exercise of costs management, the law-makers didn't put anything in place to administer this when it came to the question of costs at the end.

What Format Shall This Breakdown Take?

The new provision does not make clear how detailed or what format this breakdown should take. Would it be enough to just provide a total figure for each phase? Would the format of the front page of a Precedent H suffice?

Through applying the same format as the front page of the Precedent H the parties and Court can make very quick comparisons between the amount agreed or allowed for each phase in the Costs Budget and that now claimed under each phase in the Bill of Costs.  This approach would be suitable in allowing the Court to ascertain very quickly which phases have been exceeded.

So far so good, but what about after a Provisional or Detailed Assessment where certain phases have been exceeded at the outset?

Implications

Lets say a Bill of Costs has been prepared and with service of the Bill was a breakdown of the amount claimed under each phase. The breakdown, when cross-referenced with the last agreed or approved Budget, reveals that certain phases have in fact been exceeded in the Bill of Costs. The parties are unable to reach an agreement on costs, the matter proceeds through the detailed assessment process and now the matter has reached a Detailed Assessment hearing. The Court agrees that certain phases have been exceeded in the Bill of Costs and concludes there was no good reason for exceeding these phases and therefore that party is limited to the amount allowed for those phases.

The Court then proceeds to undertake a detailed assessment of the Bill of Costs making various reductions and then the parties recalculate the Bill of Costs at the end. How will the Court or either Party know whether any of those phases still exceed the Costs Budget? Quite simply no one will know and therefore it is not entirely clear how a Court will deal with this.

Conclusion

The new provision is long over-due and is definitely a step in the right direction in bringing Costs Management Orders into the detailed assessment process.  The problem however is that a breakdown of the costs claimed under each phase will only take the parties and Court so far. It will assist in making an initial determination on whether certain phases have exceeded the last agreed or approved Budget, but once an assessment of the Bill has taken place there is nothing in place to tell the Court whether the assessed Bill of Costs still exceeds certain phases.

It is not clear why only a breakdown is required and that an actual phased Bill of Costs is not. While a phased Bill of Costs would come with its own issues, surely it would help solve this foreseen problem above.

It is understood that a pilot scheme for a new format bill of costs will commence in April 2016.

How Paragon Costs Has Responded To The New Amendment

At Paragon Costs Solutions we have been phasing Bills of Costs since the introduction of Costs Budgets into the Costs Management process. We already have the systems in place to produce a breakdown of phased costs on request and, as from 1 October 2015, a breakdown when serving the Bill of Costs as required under the upcoming provisions.

When we prepare Costs Budgets for clients we keep records of our phasing for each and every item up to the completion of the Costs Budget, meaning that all costs in the Bill of Costs up until this point remain identical to that in the Costs Budget. When dealing with the future costs element, we have a team of highly trained Cost Budgeters who are competent with the phasing of all other work in the Bill of Costs given their familiarity and knowledge of Costs Budgets and phasing of costs.

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