Varying a costs budget—changes in force from 1 October 2020

Varying a costs budget—changes in force from 1 October 2020

The Civil Procedure (Amendment No.3) Rules 2020, SI 2020/747 bring in major changes in relation to the revision and variation of costs budgets. These changes include a new costs precedent, Precedent T, which will need to be used by the revising party to provide the relevant information to all the other parties in the proceedings when seeking agreement to the proposed changes.

The Civil Procedure (Amendment No.3) Rules 2020, SI 2020/747, reg 4 set out amendments to CPR 3. Part of those amendments deal with the revision and variation of costs budgets. The current Part 3 does not deal with this issue, instead guidance is set out in CPR PD 3E, para 7. The new rules in the SI provide some welcome clarity for practitioners as to when variation of a costs budget should be sought, the information that needs to be provided to the other parties when seeking approval for the changes and the information that needs to be provided to the court, if agreement to the proposed revisions is not forthcoming. They also include the new costs Precedent T available on the Justice website: see section dealing with the 122nd update for a link to the new Precedent T

Key elements of the new rules which are found at new rule CPR 3.15A(1) onwards are:               

 •            the party seeking to revise their costs budget is now defined as the ‘revising party’ (CPR 3.15A(1))

•            there is still a requirement to revise a costs budget downwards, if appropriate to do so (CPR 3.15A(1))

•            the revising party must seek to revise their costs budget if there are ‘significant developments’ (CPR 3.15A(1)). Interestingly, the rules subsequently refer to ‘the significant development’ meaning there is a lack of consistency in the terminology used within the new rules. Despite a number of judgments grappling with what is meant by the phrase ‘significant developments’ the CPR Committee decided that there was no requirement to define this phrase. Whether it covers different scenarios such as a lone development, or whether multiple developments can be considered to be significant developments when viewed together, will require practitioners to have regard to the case law in this area

•            there is now a requirement for the revising party to promptly submit their revised costs budget to all other parties for agreement ((CPR 3.15A(2))). What is meant by ‘promptly’ will depend on the circumstances in the case and we will need to see the approach the courts take to this new requirement. It should be noted that there is no exception to the requirement to submit the revised costs budget form approval if dealing with litigants in person, even though in some cases, depending on the litigant in person, it will be debatable whether it is in the interests of the litigant in person to put them in that position

•            the revising party will now have to complete a new costs Precedent T. This comprises two sheets. The first sheet is a summary sheet and also provides guidance on how to complete the precedent. The second sheet sets out the particulars of the proposed variations and the comments of the other parties as to whether they agree with the proposed variations and if not, why not

•            new rule CPR 3.15A(3) requires the revising party when completing Precedent T to:

◦            provide particulars of the variation(s) being proposed

◦            confine the particulars to those additional costs that arise out of the significant developments

◦            the revising party must certify that the additional costs proposed in the variation are not included in any costs budget or subsequent variation         

•            where the revising party is unable to obtain agreement from all other parties in the proceedings, they will need to submit the particulars to the court. Again, there is a requirement for this to be done promptly. What is not stated is whether this is done by filing the completed Precedent T with the court—it is assumed that is the intention of the new rule in CPR 3.15A(4). In addition, the revising party is required to provide an explanation of the additional costs where they have not been agreed

•            the court may approve, vary or disallow the proposed variations (CPR 3.15A(5)). In doing so, the court will need to have regard to the significant developments that have occurred since the date of agreement/approval of the revising party’s cost budget. It should be noted that the court is provided with the ability to list a further costs management conference. There is no guidance in the rules or the new practice direction 3E as to when that option might be chosen by the court

•            where the court approves a variation, it may do so in relation to costs that were incurred prior to the order for variation (CPR 3.15A(6)). The ability to apply for a variation of costs that have already been incurred prior to the date of the court order is a welcome clarification given this is an issue that has caused difficulties in the past

•            for completeness there is also a new rule, CPR 3.17(4). This provides that where an interim application is made which was not included in the costs budget, the court may treat the costs of that application as being in addition to the approved budgets, if the court considers that it was reasonable for it not to have been included within the costs budget. There is therefore no requirement to seek a variation of the costs budget to include such costs. It is noted that the new rule refers only to approved budgets but is presumed that the rule will be applied equally to agreed costs budgets as well.  

While the new rules provide some welcome guidance for practitioners when seeking variation of a costs budget, there are still some elements that will require insight from the courts as to how they should be approached.       

This analysis was first published on LexisPSL Dispute Resolution on 24 July 2020.

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About the author:

Janna is a dispute resolution lawyer. She deals primarily with cross border issues and is active in the work being undertaken in relation to the implications of Brexit for Dispute Resolution lawyers. Janna also heads up a LexisNexis costs team bringing together expertise from across the company to deal with the costs issues facing the profession.