It is now a year on from the introduction of a new approach to the costs management of litigation in England and Wales with costs estimates, in their old form, being abolished and costs budgeting being introduced.
Our Lexis®PSL Dispute Resolution team have been busy analysing the impacts of the first year, considering what we have learnt and making their predictions looking forward.
We have made our Practice Note Jackson Reforms on costs budgeting – one year on available and you can click through to download the full Practice Note [PDF] . (Please note that text identified in red represents online content available to subscribers to Lexis®PSL Dispute Resolution)
What we have learnt: Precedent H
This is the form to be used by a party to file its costs budget. There were some hiccups with this form early on.
To include or not to include within the costs budget, that was the question. Despite this being clarified in mid May, the MOJ Precedent H was not updated to reflect this until 1 September 2013. See: Alert—need for court fees in the costs budget.
Statement of truth
This is left blank in the MOJ costs budget and parties therefore had to remember not only to add it in but also to add the correct wording as set out CPR PD 22 ie ‘The costs stated to have been incurred do not exceed the costs which my client is liable to pay in respect of such work. The future costs stated in this budget are a proper estimate of the reasonable and proportionate costs which my client will incur in this litigation’.
Our Smart Form precedent H, available since 1 April 2013, in both long and short form (for claims valued at less than £25,000) contains the correct statement of truth so removing the need to remember to add it.
The statement of truth caused difficulties with the wording ‘which my client is liable to pay in respect of such work’ where the client was not liable to pay eg under a funding agreement and there were calls for it to be revised to address this.
What happens if:
- no statement of truth is provided?—Outer Temple reported a case which remains anonymised in which the claimant’s costs budget simply had the wording [statement of truth] rather than having inserted the relevant statement of truth. The District Judge held that this was a breach of the rules and struck out the claimant’s costs budget. For more information, see Outer Temple report
- there is a failure to provide the correct statement of truth?—in Philip Pank a partial statement of truthwas provided. The court regarded this as an irregularity rather than rendering the costs budget a nullity. For further information, see: Failure to include full statement of truth did not render costs budget a nullity’ (Governor and Company of The Bank of Ireland v Philip Pank Partnership). Notwithstanding this decision, given the sanctions of getting costs budgets wrong all practitioners should comply with the CPR requirements which include the use of a specified statement of truth
Use of own Precedent H
This was considered in Murray. A mistake in omitting a tick box meant that the success fee and insurance premiums would be considered to be part of the costs budget; a position which would have a massive financial consequence for the claimant. In this instance the claimant was allowed to amend but only due to a change between the Precedent HB in the pilot scheme and the new Precedent H. For detailed analysis of this case, see: Rectification of costs budget considered (Murray v Dowlman) and The first case law on costs budgeting.
Looking forward—Precedent H
On 22 April 2014 the statement of truth in Precedent H will change to 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.’
Our Smart Form Precedent H available in long and short form (for claims valued at less than £25,000) will be updated to reflect this. In addition, our NEW Costs Budgeting Calculator, available as from 1 April 2014, will also be updated in line with the changes to the statement of truth.
Further topics covered in the full Practice Note[PDF] include:
- Costs budgeting and exemptions
- Filing and exchanging the costs budget
- Failure to file a costs budget
- Revising costs budgets
- Will the court depart from the costs budget?
- Costs budgets and indemnity costs
- Costs budgets and the benefits