As we all know costs budgeting was the subject of a consultation process last year to look at the exemptions in place. All practitioners will need to be aware of the changes which are coming into force on 22 April 2014 as they will now encompass more cases then under the previous exemption regime.
The new rules for costs budgeting are currently in draft and still require approval of the Lord Chancellor and Parliament therefore could be subject to change when laid before Parliament for approval. Below we set out the new provisions and the implications for practitioners.
This rule is to be amended such that it will only apply to Part 7 claims. In relation to exemptions, following the costs budget consultations, the existing exemptions are to be removed and replaced with a much more workable blanket exemption such that costs budgeting will NOT apply to cases with a value of £10 million unless the parties agree to its application or the court orders otherwise. The court therefore retains a discretion to order costs budgeting to apply to a case.
The value of £10 million will be determined either by reference to the amount of the money claimed as stated in the claim form or, if the claim is not quantified, it will be taken from the statement of truth in the claim form that the claim is valued at £10 million or over.
This rule remains unchanged. There have been a number of cases which have grappled with how this rule should be construed such as
- Burt v Christie  All ER (D) 86 (Feb)
- Porbanderwalla v Daybridge Limited Case No: 3YK 77641, Birmingham county court
- Rattan v UBS AG  EWHC 665 (Comm)
The position now, given that costs budgeting will not apply to Part 8 claims, must be that the provision in the rule which states that if no date is specified by the court the costs budgets must be filed and exchanged seven days before the first case management conference must be taken as being the default position. Therefore for practitioners who are dealing with a case in which the court has not given a date for filing and exchange it is important to determine the seven day period. Note: this is seven clear days (CPR 2.8(2)).
No amendment to this provision dealing with sanctions for failing to file a costs budget.
The existing provision simply states that the court may at any time make ‘costs management order’. However, the new provision will put the onus on the court to make such an order where costs budgets have been filed and exchanged. An order will not be made if essentially the court is satisfied that one is not required. For this to be the case, the litigation will need to be capable of being conducted in accordance with the overriding objective, ie for it to be just and proportionate, without the need for a CMO.
The court’s recording of comments within the CMO together with the court‘s control of the costs budgets will remain the same as the current CPR 3.15 provisions.
Practice direction 3E
CPR PD 3E deals with Costs Management.
Are costs budgets required? There will be a number of changes to the practice direction. Of particular note are:
- where there is no requirement for costs budgeting under the rules the court can make an order that costs budgeting will apply either on the application of a party or on the court’s own initiative. Parties should consider the need for costs budgeting at an early stage of the proceedings
- where parties agree to costs budgets the court will make such an order, unless there are exceptional circumstances
- specific cases are identified in which it might be appropriate to provide cost budgets
- unfair prejudice petitions under s 994 of the Companies Act 2006
- disqualification proceedings pursuant to the Company Directors Disqualification Act 1986
- claims pursuant to the Inheritance (Provisions for Family and Dependants Act) 1975
- any Part 8 claim or other application which involves a substantial dispute of fact and/or is likely to require oral evidence and/or extensive disclosure
- personal injury and medical negligence claims where the value of the claim is £10 million or more
Form of costs budgets
The budget format provisions will remain the same. For convenience we provide both the long and short form (under £25,000 claim value).
The statement of truth will be updated for 22 April 2014. It will read:
This budget is a fair and accurate statement of incurred and estimated costs which it would be reasonable and proportionate for my client to incur in this litigation.
This new statement of truth is set out in the 69th Update – practice direction amendments within the new Precedent H form which is to be substituted into CPR PD 3E.
Costs management orders
Under the new provisions CMOs will generally be made. However, the remaining provisions in CPR PD 3E, para 2.2 – 2.9 will be retained.