Costs budgeting - key questions answered

Do you need to file a Costs Budget?

Pursuant to CPR 3.12 (1), costs management automatically applies to all Part 7 multi-track cases, therefore a Costs Budget (Precedent H) will be required in these claims. However, under CPR 3.12 there are some exceptions to this general rule. For example, monetary or non-monetary claims with a value of £10 million or more or claims made on behalf of a child are exempt from costs management.

Additionally, where a Claimant has a limited or severely impaired life expectation (5 years or less remaining) the Court will ordinarily disapply costs management.

However, following the rule changes introduced from 01 October 2020, there are some further instances where a Costs Budget may be required, as well as an apparent exception to one of the budgeting exceptions.

The new Practice Direction 3E (2) now provides that an order for the provision of costs budgets with a view to a costs management order being made may be particularly appropriate in the following cases—

(a)    unfair prejudice petitions under section 994 of the Companies Act 2006;

(b)    disqualification proceedings pursuant to the Company Directors Disqualification Act 1986;

(c)    applications under the Trusts of Land and Appointment of Trustees Act 1996;

(d)    claims pursuant to the Inheritance (Provision for Family and Dependants) Act 1975;

(e)    any Part 8 or other claims or applications involving a substantial dispute of fact and/or likely to require oral evidence and/or extensive disclosure; and

(f)    personal injury and clinical negligence cases where the value of the claim is £10 million or more.

Whilst costs management is not mandatory in these types of cases as yet, the fact that they are now specifically listed in the CPR which deals with costs management would appear to suggest that you should now be prepared to file a Costs Budget for these cases as well as Part 7 multi-track claims.

Also, of particular interest is rule (f) which appears to contravene the costs management exception under CPR 3.12 (a&b).

To my mind, these new rules, in addition to the addition of CPR 3.13(3) which provides that the Court “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”, signifies an expectation that costs management can and should be applied in almost any type of Part 7 or 8 non-fixed costs case.






When do you need to file your budget?

Thankfully, the rules on filing budgets are much more straightforward.

There are essentially two filing dates depending on the stated value of the claim on the claim form.

  • If the stated value is less than £50,000 (i.e £49,999.99 or less), the Costs Budget must be filed and exchanged with the directions questionnaires.


  • In any other case, the Costs Budget must be filed and exchanged not later than 21 days before the case management conference.


When should you amend your Costs Budget following the making of a Costs Management Order?

CPR 3.15A provides that you must revise your budget upwards or downwards if significant developments in the litigation warrant such revisions.


But what exactly constitutes a significant development?


Unfortunately, no further guidance has been provided within the CPR as to what amounts to a significant development warranting a revision to a Costs Budget.


To date, perhaps the most important guidance on this topic comes from the case of Al-Najar & Ors v The Cumberland Hotel (London) Ltd [2018] EWHC 3532 (QB).


In this case, Master Davison set out 5 principles in establishing whether something should be considered to be a significant development. The first key principle was that whether a development was ‘significant’ or not was a question of fact which depends primarily on the scale and complexity of what has occurred. In other words, there is no one size fits all approach and every development should be considered on its own merits based on the case specific facts of each individual case.


However, in his decision, Master Davison said, “if what has occurred is something that reasonably should have been anticipated by the party seeking to revise its budget, then they would probably be unable to label it significant”. Another of Master Davison’s principles included that the development must occur other than in the normal course of litigation.


Master Davison concluded that “the bar for what constituted a significant development should not be set too high because, otherwise, parties preparing a budget would always err on the side of caution by making over-generous (to them) assessment of what was to be anticipated”.


Further guidance with respect to what can amount to a significant development can be found in the case of Sharp v Blank & Ors [2017] EWHC 3390 (ch). The Defendant sought to vary their agreed budget due to 7 separate developments which they deemed to be significant. These developments included an increase in trial length from 59 to 107 days as well as additional disclosure and further expert evidence. Whilst ultimately the Court decided that some of the developments were significant and some weren’t, in essence, when making their decision the Court deemed that any modest adjustment in scope and value, or a development which could have been reasonably foreseen, could not be considered to be significant.


Lastly, in March this year there was some additional important guidance concerning the issue of significant development, particularly with respect to the foreseeability of the development. The case Thompson v NSL Ltd [2021] EWHC 679 (QB) concerned a personal injury claim where proceedings were issued in the county court with a value of up to £150k.


However, shortly after the Costs Budget was filed and served it became apparent to the Claimant that the claim would be substantially more and closer to £4m.


The matter proceeded to a county court budgeting hearing and although the court and the parties were aware of the increase in valuation at the time of the hearing, the Claimant’s budget was approved by the District Judge and a Costs Management Order was made.


The matter was transferred to the High Court and the Claimant applied to increase their budget on the basis that the case ‘had turned out to be in certain key respects more complex and more demanding of legal time and cost than was reasonably anticipated when the budget was drafted’.


The Claimant’s position was that they had not at that stage sought to apply to revise their budget prior to the hearing on the basis that it was not feasible to revise the budget because although it was clear the claim was worth significantly more, the impact of the medical evidence was not yet known.


The Defendant however averred that the Claimant had at no point up to or during the budgeting hearing applied to vary their budget, nor did they to seek any form of increase to the budget at the hearing. Consequently, the Defendant’s position was that appropriate time for revising the Claimant’s budget was in the period between filing and the costs budgeting hearing, which had now passed.


Ultimately, Master McCloud permitted the Claimant to revise their Costs Budget upwards.


In her decision, Master McCloud initially clarified that a significant development in the litigation did not need to be one specific event or date in time but could be due to a “collection of factors”.


Although Master McCloud acknowledged that ideally the Claimant would have informed the District Judge at the county court budgeting hearing the budget needed revision, it was by no means a deal- breaker in terms of their application.


In her ruling, Master McCloud reaffirmed the principle from Al-Najar “that as a matter of policy the bar for what constitutes a significant development should not be set too high because otherwise parties would always err on the side of caution by making over-generous assessments of what was to be anticipated”.


So, in summary, the decision to revise your budget will largely rest on whether there has been a significant development which was not reasonably foreseeable at the time the budget was made, but at the same time is significant enough to warrant a revision to the budget. Also, clearly the timing of any Costs Budget revision is an important factor to consider.


If you are in any doubt as to whether there has been a significant development, it is usually best to err on the side of caution and amend your Costs Budget as soon as practically possible. Otherwise, you could be left in a position where substantial work is undertaken, only for you to be told by the Court that the costs are not recoverable, either by virtue of the fact the development was not significant to warrant an upwards revision to the budget, or possibly even further down the line during a detailed assessment, on the basis that there is not sufficient “good reason” to depart from the approved/agreed Costs Budget.


At Renvilles, we deal with all aspects of costs budgeting for our clients. To find out how we can assist you, please contact us at any time and one of our team of experienced costs lawyers will be happy to discuss your requirements or answer any queries you may have.


Ryan Bradford  by Ryan Bradford Costs Lawyer

Costs Plus Newsletter