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Costs budgeting is now a routine feature of civil litigation, butit continues to catch many practitioners out. Missing a budgeting deadline or underestimating the work required in certain phases of a case can significantly impact the amount of costs ultimately recovered.
At Peak Costs, we regularly assist firms with preparing and managing costs budgets across a wide range of litigation matters. Whilst the budgeting process is now well established, it is still often treated as a procedural step rather than the strategic exercise it should be.
This guide provides a practical overview of the purpose of costs budgeting, the key procedural deadlines involved, and what steps can be taken if a budget needs to be revised during the course of litigation.
The Purpose of Costs Budgeting
The primary aim of costs budgeting is to allow the court to manage the parties’ litigation costs at an early stage.
Each party prepares a costs budget using Precedent H, setting out the estimated costs for the key phases of the case. These typically include:
- Pre-Action
- Statements of Case
- CMC
- Disclosure
- Witness Statements
- Expert Reports
- Trial Preparation
- Trial
- ADR/Settlement Discussions
The court then reviews the budgets at the Case Management Conference (CMC) and approves or revises the figures for future costs.
Once approved, those figures effectively act as a framework for cost recovery. Under CPR 3.18, the court will not depart from the approved budget unless there is good reason to do so.
In practical terms, this means that if a party incurs costs significantly exceeding the approved figures, they may struggle to recover those additional sums on detailed assessment.
For this reason, preparing a realistic and carefully considered budget at the outset is critical.
Key Timescales in Costs Budgeting
Filing the Costs Budget – Precedent H
The costs budget itself is prepared using Precedent H.
In most multi-track cases where costs management applies, parties must file and exchange their budgets no later than 21 days before the first Case Management Conference.
Failure to file a budget on time can have serious consequences. Under CPR 3.14, the defaulting party may be treated as having filed a budget limited to court fees only, unless the court orders otherwise.
This sanction can significantly limit recoverable costs and highlights the importance of careful diary management.
Budget Discussion Reports – Precedent R
Once budgets have been exchanged, the parties are expected to try to narrow any areas of disagreement before the CMC.
This is done using Precedent R, the Budget Discussion Report.
Precedent R allows the parties to identify:
- Which phases of the opponent’s budget are agree
- Which phases are disputed
- What alternative figures are proposed
The report must usually be filed 7 days before the CMC and helps the court quickly identify the areas that require determination.
Monitoring the Budget During the Case
Costs budgeting does not end once the budget has been approved.
Solicitors should actively monitor their costs throughout the life of the case to ensure expenditure remains within the approved figures for eachphase.
Failing to keep track of budgeted costs can lead to situations where significant work has been undertaken but is difficult to recover due to the constraints of the approved budget.
What Happens if the Budget Needs to Be Increased?
Litigation rarely progresses exactly as anticipated. New developments can arise which require additional work that was not originally budgeted.
Where there has been a significant development in the litigation, a party may apply to revise its budget.
This is done using Precedent T, which allows the court to approve increases to certain phases of the budget.
Examples of developments that may justify a revision include:
- Additional expert disciplines becoming necessary
- Substantial disclosure issues emerging
- Amendments to pleadings expanding the scope of the claim
- Unexpected applications or procedural disputes
Importantly, such applications should be made promptly once the development occurs. Waiting until the end of the case to address an overspend is unlikely to succeed.
The Value of Early Costs Input
Given the impact budgeting can have on cost recovery, many firmsnow seek specialist costs input at an early stage of litigation.
Early involvement can help ensure that:
- Budgets properly reflect the likely work required
- Key phases are adequately costed
- Potential recovery risks are identified early
- Any necessary revisions to budgets are made at the right time
Taking a proactive approach to costs budgeting can often make a significant difference to the costs ultimately recovered at the conclusion of the case.
Final Thoughts
Costs budgeting is now embedded within civil litigation and playsan important role in controlling and recovering legal costs.
Understanding the purpose of the budgeting regime, meeting the keyprocedural deadlines and monitoring budgets throughout the life of a case areall essential to protecting a party’s ability to recover its costs.
When approachedstrategically, costs budgeting can be a valuable tool for managing bothlitigation risk and financial exposure.
