This Practice Note considers the general approach to costs budgeting by the courts, the court’s role in managing costs and the different approach to incurred costs compared to budgeted costs. It also considers the court’s approach to hourly rates and contingencies and the position where the parties have or have not agreed their respective costs budgets. Costs budgeting—general approach Costs budgeting is not a detailed assessment but a process in which the court determines what is a reasonable and proportionate sum on a standard basis for the budgeted (future) costs of each party. In broad terms, the purpose of costs budgeting is to enable the parties to be informed as to what they might have to pay the other party in the event that they are unsuccessful and/or a costs order is made in the other party’s favour. At the costs budgeting stage, the court will take a fairly broad brush approach. However, in exceptional cases it may be appropriate or necessary for the court to go through a party’s budget with ‘a fine tooth comb’ analysing

ARCHIVED: This Practice Note was archived as at 1 December 2013 and is for historical purposes only. It is useful for those wishing to understanding about the costs budgeting pilot schemes which ran prior to 1 April 2013. Purpose of the costs budgeting pilot schemes Two costs pilot schemes were used to see how costs budgeting would work in practice. • Mercantile court pilot—this ran in all Mercantile and TCC courts and was a voluntary scheme. The pilot was monitored using questionnaires and phone calls to evaluate how effective it was in controlling costs and keeping clients informed as to the overall costs position. An interim report looked at its operation and published in February 2012, although relatively limited responses were received. A further report was published by Fenwick Elliot in October 2012. • Defamation pilot—this ran in the RCJ and the Birmingham District Registry and applied to libel, slander and/or malicious falsehood claims. This was a mandatory scheme For further detail on the pilot schemes and interim reports see Related Documents. What lessons were

Explanation: a budget provides an estimate of the reasonable and proportionate costs (including disbursements) which a party intends to incur in the proceedings. A costs budget is a document which sets out the costs already incurred and future costs of a party. It is set out either in costs precedent H, of a document in the same form as Precedent H. The costs budget must be completed and discussed with other parties in the proceedings prior to the first case management conference when it will be considered by the court if not agreed by the parties. A failure to file and serve a costs budget has onerous consequences.

Dispute Resolution analysis: The judgment follows a three-day costs management conference concerning group litigation against various defendants accused of unlawfully modifying vehicles to cheat emissions tests, thereby concealing that thevehicles allegedly emitted pollutants beyond EU Emissions Regulation limits. The claimants’ budget sought over £208m for future costs, while the defendants sought £212m. Unusually, the judges, Mr Justice Constable and Senior Costs Judge Gordon-Saker, reviewed both agreed and contested budget phases, substituting approved amounts for the ‘eye-watering’ sums initially proposed. This scrutiny occurred despite the costs budgeting rules, which traditionally do not permit courts to alter agreed budget figures. Both budgets were substantially reduced, with judges particularly critical of the claimants' costs. This case illustrates that courts expect even large-scale group litigation to be conducted efficiently, utilizing available economies of scale, and will not hesitate to actively manage costs, even in high-value cases. Written by Alice Nash, barrister at Hailsham Chambers.

This Practice Note provides information about when a costs budget must be filed at court and exchanged with the other parties as set out in CPR 3.13. Guidance is also provide regarding when the parties are able to agree to extend the time for filing and exchanging costs budgets in accordance with CPR 3.8(4). Note, costs budgeting does not apply to cases that come within the fixed costs regime. For information on fixed costs, see: Fixed costs—overview. This Practice Note provides guidance on the interpretation and application of the relevant provisions of the CPR. Depending on the court in which the matter is proceeding, specific considerations may apply, see: Court specific guidance. Requirement to file and exchange a cost budget Filing requirement in cases subject to the costs budgeting regime There is a requirement for each party, unless they are a litigant in person, to file and exchange a costs budget in accordance with the timescales set out in CPR 3.13(1) or a court order. For information on the timescales, see: When does a costs budget have

Timetable or directions to review costs budgets Providing a costs budget can be difficult, especially in complex cases where the type and quantity of work required to progress or defend a claim can change over time. CPR 3.15(6) recognises this and provides that the court may set a timetable or give other directions for future reviews of budgets. This approach enables the parties to keep their costs budgets under review with an ability to seek amendment if appropriate. Where this is the case, the parties must ensure that such directions are diarised and reviews undertaken in accordance with the directions. Continual monitoring of cost budgets Once a costs budget has been completed and agreed with the other side, or approved by the court, the court will undertake active costs management of the case throughout the proceedings. The parties therefore need to monitor their costs budgets to ensure that they are staying within the budgeted costs for each phase of the proceedings. If the costs incurred are greater than those set out in the costs budget,

This Practice Note considers the consequences of failing to serve a costs budget in time (or at all) and what options are available in the event of this happening to include the likely need to make an application for relief from sanctions. What happens if I am late providing the costs budget? CPR 3.13 provides that all parties, unless they are litigants in person, must file and exchange costs budgets either with their directions questionnaires, where the stated value of the claim on the claim form is less than £50,000 or, in any other case, no later than 21 days before the first case management conference (CMC). This is subject to the court making an order which provides for different timescales. It is important to be aware that the provision in CPR 3.14 on failing to file a costs budget covers not only a complete failure to provide a costs budget but also any failure to comply with the relevant rules. Where a party is late in filing their costs budget, the court can:

This Practice Note considers reviewing and revision/variation of a costs budget. It sets out the relevant rules, the conditions relevant for revising a costs budget, the need to seek agreement to the amendments before seeking court approval and the requirement to be prompt in both cases. It also considers the different approaches of the court to variations to agreed or approved costs budgets, what happens when agreement/approval is not obtained as well as the impact of sanctions under CPR 3.14 and discontinuance when seeking variation. Note, this Practice Note considers reviewing and revision/variation of a costs budget under the rules in force from 1 October 2020. There are also references to the ‘old’ practice direction 3E which was in force prior to 1 October 2020. It should also be noted that from 1 December 2022, CPR PD 3E was renumbered as CPR PD 3D. When must a party revise their costs budget? Each party in the proceedings, that has a costs budget, must revise its costs budget if the conditions in CPR 3.15A(1) apply. This rule provides that a revising

This Practice Note has been archived and is not maintained. For the current position, see Practice Note: Costs budgets—revision and variation. This Practice Note considers reviewing and amending/revising a costs budget. The Practice Note looks at the requirement to regularly review costs budgets and the rationale for doing so. It then covers the reasons why you may want to revise a costs budget and whether this will justify an order for revision. An insight is provided into the principles the court will apply when determining an application for amendment of a costs budget and insights into how these have been applied by the courts. This includes understanding the provision in CPR PD 3E, para 7.6 and the specific terms ‘future costs’ and ‘significant requirements’. Also considered are an agreement with the other parties to the amendments to the costs budget, and if such agreement is not forthcoming, when and how an application to the court should be made. The Practice Note also considers what happens if there was no agreement

This Practice Note sets out the position in respect of costs budgeting from 1 October 2020. This Practice Note explains why the phrase ‘significant developments’ is important when seeking to vary a costs budget and what is meant by the phrase. It provides examples, taken from judgments, as to what changes can be considered by the court to be significant developments. Why are ‘significant developments’ important? A costs budget can only be revised if there have been ‘significant developments’ that justify such a revision. This is provided for in CPR 3.15A(1): ‘A party (“the revising party”) must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions.’ It is important to note that where there have been significant developments that effect a party’s costs budget, that party (the revising party) must revise their costs budgets, whether that is upwards or downwards. What is meant by ‘significant developments’? The ambit of the phrase ‘significant developments’ can be difficult to understand as it is not

This Practice Note explains costs capping orders. It sets out when a costs capping order can be made and what it can cover; the salient issues in Barr v Biffa Waste Services are identified. Information is also provided in respect of how and when to make an application for a costs capping order and how to set the cap or vary a costs capping order. Note, costs capping orders differ from protective costs orders and different provisions apply when dealing with appeals. Costs capping orders in judicial review cases Sections 88 to 90 of the Criminal Justice and Courts Act 2015 provide a statutory regime for cost capping in judicial review proceedings, including providing for a dedicated cost capping order for judicial review. For more information, see Practice Note: Practice Note: Costs for judicial review—judicial review costs capping orders (JRCCOs) and interveners. Costs capping orders v protective costs orders Costs capping orders and protective costs orders both place limits on the amount of costs to be paid in proceedings. However, it is important to distinguish between

ARCHIVED: This Practice Note has been archived. It addresses provisions revoked on 1 April 2013 and is for historical purposes only. Costs capping orders and protective costs orders Costs capping orders (CCOs) and protective costs orders (PCOs) both place limits on the amount of costs to be paid in proceedings. However, it is important to distinguish between them, as the source of the court’s power in respect of the two is entirely separate, and the function and purpose of the two types of orders are very different. The general rule in respect of CCOs is now in r 44.18. In summary: • CCOs limit the level of costs a party can recover pursuant to a costs order subsequently made • PCOs limit the level of costs a losing party will have to pay Note: this rule does not apply to PCOs (r 44.18(3)) The introduction of CCOs On 6 April 2009, the CPR introduced new rules relating to costs capping orders. These are contained in r 44.18