Changes in effect from 1 October 2020
Application of this Section and the purpose of costs management
(1) This Section and Practice Direction 3E apply to all Part 7 multi-track cases, except—
(a) where the claim is commenced on or after 22nd April 2014 and the amount of money claimed as stated on the claim form is £10 million or more; or
(b) where the claim is commenced on or after 22nd April 2014 and is for a monetary claim which is not quantified or not fully quantified or is for a non-monetary claim and in any such case the claim form contains a statement that the claim is valued at £10 million or more; or
(c) where in proceedings commenced on or after 6th April 2016 a claim is made by or on behalf of a person under the age of 18 (a child) (and on a child reaching majority this exception will continue to apply unless the court otherwise orders); or
(d) where the proceeding are the subject of fixed costs or scale costs; or
(e) the court otherwise orders.
(1A) This Section and Practice Direction 3E will apply to any other proceedings (including applications) where the court so orders.
(2) The purpose of costs management is that the court should manage both the steps to be taken and the costs to be incurred by the parties to any proceedings (or variation costs as provided in rule 3.15A) so as to further the overriding objective.
Filing and exchanging budgets and budget discussion reports
(1) Unless the court otherwise orders, all parties except litigants in person must file and exchange budgets—
(a) where the stated value of the claim on the claim form is less than £50,000, with their directions questionnaires; or
(b) in any other case, not later than 21 days before the first case management conference.
(2) In the event that a party files and exchanges a budget under paragraph (1), all other parties, not being litigants in person, must file an agreed budget discussion report no later than 7 days before the first case management conference.
(3) The court—
(a) may, on its own initiative or on application, order the parties to file and exchange costs budgets in a case where the parties are not otherwise required by this Section to do so;
(b) shall (other than in an exceptional case) make an order to file and exchange costs budgets if all parties consent to an application for such an order.
(4) The court may, in a substantial case, direct that budgets are to be limited in the first instance to part only of the proceedings and extended later to cover the whole proceedings.
(5) Every budget must be dated and verified by a statement of truth signed by a senior legal representative of the party.
(6) Even though a litigant in person is not required to prepare a budget, each other party (other than a litigant in person) must provide the litigant in person with a copy of that party’s budget.
Failure to file a budget
3.14 Unless the court otherwise orders, any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees.
Costs management orders
(1) In addition to exercising its other powers, the court may manage the costs to be incurred (the budgeted costs) by any party in any proceedings.
(2) The court may at any time make a ‘costs management order’. Where costs budgets have been filed and exchanged the court will make a costs management order unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made. By a costs management order the court will—
(a) record the extent to which the budgeted costs are agreed between the parties;
(b) in respect of the budgeted costs which are not agreed, record the court’s approval after making appropriate revisions;
(c) record the extent (if any) to which incurred costs are agreed.
(3) If a costs management order has been made, the court will thereafter control the parties’ budgets in respect of recoverable costs.
(4) Whether or not the court makes a costs management order, it may record on the face of any case management order any comments it has about the incurred costs which are to be taken into account in any subsequent assessment proceedings.
(5) Save in exceptional circumstances—
(a) the recoverable costs of initially completing Precedent H (the form to be used for a costs budget) shall not exceed the higher of—
(i) £1,000; or
(ii) 1% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted costs (agreed or approved); and
(b) all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted (agreed or approved) costs.
(Precedent H is annexed to Practice Direction 3E.)
(6) The court may set a timetable or give other directions for future reviews of budgets.
(7) After a party’s budgeted costs have been approved or agreed, the party must re-file and re-serve the budget—
(a) in the form approved or agreed with re-cast figures; and
(b) annexed to the order approving the budgeted costs or recording the parties’ agreement.
(8) A costs management order concerns the totals allowed for each phase of the budget, and while the underlying detail in the budget for each phase used by the party to calculate the totals claimed is provided for reference purposes to assist the court in fixing a budget, it is not the role of the court in the costs management hearing to fix or approve the hourly rates claimed in the budget
Revision and variation of costs budgets on account of significant developments (“variation costs”)
(1) A party (“the revising party”) must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions.
(2) Any budgets revised in accordance with paragraph (1) must be submitted promptly by the revising party to the other parties for agreement, and subsequently to the court, in accordance with paragraphs (3) to (5).
(3) The revising party must—
(a) serve particulars of the variation proposed on every other party, using the form prescribed by Practice Direction 3E;
(b) confine the particulars to the additional costs occasioned by the significant development; and
(c) certify, in the form prescribed by Practice Direction 3E, that the additional costs are not included in any previous budgeted costs or variation.
(4) The revising party must submit the particulars of variation promptly to the court, together with the last approved or agreed budget, and with an explanation of the points of difference if they have not been agreed.
(5) The court may approve, vary or disallow the proposed variations, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed, or may list a further costs management hearing.
(6) Where the court makes an order for variation, it may vary the budget for costs related to that variation which have been incurred prior to the order for variation but after the costs management order.”
Costs management conferences
(1) Any hearing which is convened solely for the purpose of costs management (for example, to approve a revised budget) is referred to as a ‘costs management conference’.
(2) Where practicable, costs management conferences should be conducted by telephone or in writing.
Court to have regard to budgets and to take account of costs
(1) When making any case management decision, the court will have regard to any available budgets of the parties and will take into account the costs involved in each procedural step.
(2) Paragraph (1) applies whether or not the court has made a costs management order.
(3) Subject to rule 3.15A, the court—
(a) may not approve costs incurred before the date of any costs management hearing; but
(b) may record its comments on those costs and take those costs into account when considering the reasonableness and proportionality of all budgeted costs.
(4) If an interim application is made but is not included in a budget, the court may, if it considers it reasonable not to have included the application in the budget, treat the costs of such interim application as additional to the approved budgets.
Assessing costs on the standard basis where a costs management order has been made
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 3.17(3) and recorded on the face of the order.
(Attention is drawn to rules 44.3(2)(a) and 44.3(5), which concern proportionality of costs.)