Are you prepared for significant costs adjustments?
From the 6th of April 2016 costs budgeting will undergo a number of changes which amount to the most significant adjustment to the process since its inception. The changes are numerous.
The following are the key changes:
• Where the value of the claim is under £50,000.00 only the front page is required. For claims worth under £50,000.00 the budget must be filed with the Directions Questionnaire. For claims worth £50,000.00 or above the budget must be filed 21 days before the first Case Management Conference.
• Cost budgeting no longer applies to minor claims and in cases where the Claimant has a limited or severely impaired life expectancy the court will ordinarily not apply cost management.
• The updated Practice Directions now set out that the Court cannot determine the hourly rate and will look at the total sum for each phase. This change represents increased clarity in an area that had caused considerable disagreement between parties in the past. Now that hourly rates can only be decided at assessment this should represent a significant streamlining of the budgeting process.
• A new document, a “Precedent R” must be filed by the parties at least 7 days before the first Case Management Conference. The document will set out which figures in an opponent's budget are agreed, or not agreed, for each phase of the budget and a brief summary of the grounds of dispute.
• The bill of costs must be split by reference to phase when there is an approved budget and costs are on the standard basis. The bill must also differentiate between the costs incurred in the agreed or approved budget and the estimated costs. This should mean bills should accurately reflect the agreed or approved budget and emphasises the importance of preparing budgets that reflect the work done.
• The costs for preparing the budget and any associated material should not be included within the budget. The costs of preparing the budget should be inserted into the budget once it has been approved by the Court.
• The current statement of truth is to be replaced with, “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.”
• The new Guidance Notes stress the need for brevity in the assumptions for the budget. The assumptions are now to be included with each individual phase and it does appear that assumptions would not be required for those budgets in which only the front page is required. This is however not clear at this point and it is hoped that this will be clarified as the process develops.
The changes are clearly intended to streamline the budgeting process, especially for those claims which are considered to be of lower value. The budgeting process has often been criticised for being unwieldy and there is hope that the reforms will provide increased efficiency. Guidance notes place an emphasis on keeping the budget proportionate and supporting documentation is discouraged.
The introduction of the budget discussion reports, (Precedent R) should make each party’s position clear and the issues clearly identifiable, thus encouraging parties to agree budgets and thereby reduce the burden that costs budgeting places on the courts.
Whether the reforms do represent a practical improvement in the process remains to be seen, it is however worth considering what the benefits are in introducing further changes to the costs budgeting process for practitioners and the Courts alike to get to grips with, when Lord Justice Jackson is determined to alter the landscape he created by extending the fixed costs regime and dispensing with the need for costs budgeting.
Until such time, practitioners need to be familiar with the new rules, update their case management systems to ensure that the changes to the deadlines are met, new procedures are followed and ensure that costs draftsman instructed early to comply with the new 21 day deadline or at the time of filing the direction questionnaire for claims with a value under £50,000.00.
Please contact any of the team at Civil and Commercial Costs Lawyers should you or any of your colleagues have any queries with regards these changes or any other costs queries.
Patrick Toal BA (Hons) GDL