Why should you avoid a late cost budget submission?

Why should you avoid a late cost budget submission?

Why should you avoid a late cost budget submission?

The rules and regulations regarding cost management and the filing of a cost budget submission are clear and concise however numerous cases still miss the mark and budgets are still filed or served late. Typically, cases with a pleaded value of £50,000 or less are filed and exchanged with the directions questionnaires, for all other cases they are to be filed and exchanged 21 days before the first CMC unless stated otherwise by the court.

In this article, IG Legal will explain when a cost budget is required, its importance within the ruling of a case, and what happens when a cost budget is submitted late and how it can be remedied.

When is a cost budget (precedent H required)?

In UK law a cost budget is also referred to as a Precedent H, a document that is often required during part 7 multi-track cases. The filing and exchange of a cost budget remains one of the most critical components litigators consider during multi-track cases.

It is vital for compliance that a cost budget is fully understood and executed accurately and promptly, especially in cases where a court directs it. The outcome and consequences of not getting a cost budget submission right can be severe and negatively impact the ability to recover costs that are outside of court fees.

As stated previously, for the vast majority of cases all parties except litigants in person, the filing and exchange of budgets are necessary for setting out estimated costs for each stage of the legal proceedings ( for part 7 multi-track cases), in exceptional circumstances or when the court rules it the filing of cost budget can be manoeuvred.

Once a party has filed and exchanged their budget all other parties relating to the case but file an agreed budget discussion report no later than 7 days before the first Case Management Conference (CMC)

For Multi-track cases where the claim value is under £50,000 ( this must be stipulated on a claim form), a cost budget must be filed with the directions questionnaire ( CPR r.3.13 a). The current rules clearly state that less than £50,000) that means if that claim value is £49,999,99 then the cost budget is filed with the directions questionnaire. Now, if the claim value is exactly £50,000 then it is allowed for the cost budget to instead be filed 21 days before the first CMC.

For cases where the claim value that is pleaded exceeds £50,000 again, the cost budget must file 21 days before the first CMC, following any other order, or unless stated otherwise by the courts.

What does a cost budget include?

A cost budget or precedent H details all base costs incurred to date, and all future costs to be incurred for the totality of the case up to and including trial. VAT and any additional liabilities should be excluded from the budget figures. Additionally, the cost of preparing the budget and the costs management process do not form part of these central figures but should be stated at the bottom right of the front sheet of the budget as the respective 1% and 2% figures.

The costs of any interim application that take place should also be sought separately from the budget submitted.

When is a cost budget not required?

A cost budget is not required for instances where the value of the claim pleaded is more than £10 million, or in instances where the claim you brought to court on behalf of someone who is under 18, also known as a minor claim. Another long-standing matter where a cost budget can be forgone is when the claimant has limited or severely impaired life expectancy, this would be 5 years or less remaining.

As stated above the court can choose in exceptional circumstances to display budgeting in this case a cost budget is also not required. As the court has complete discretion to dismiss the exceptions, the only fully accurate way of guaranteeing an outcome in this area is to seek clarification directly from the courts. Parties must not contract out cost budgeting and the court retains complete power to make orders in relation to cost management when it considers them appropriate.

It is also important to consider the different kinds of precedent H documents that are required for the specific case being worked on (see below).

What different types of cost budget submissions are there?

Based on the value of the claim there are different types of precedent H documents that should be filed for a cost budget submission. For example, in cases where the costs exceed £25,000.01 or where the claim value exceeds £50,000 then a full precedent H submission is required.

In instances where the claim value is £50,000, you must be careful to avoid any issues and standard recommendations usually require a full precedent H filing as well, as touched on early rules apply differently to a claim value of £49.999.99 or less so to be on the safe side you should not file a partial cost budget as the courts may rule you have not followed protocol and decide you have not filed one altogether. The sanctions of such an improper filing could severely negatively affect the outcome of the case.

In cases where the costs do not exceed £25,000 or the value of the claim form is less than £50,000 then you are only required to use and submit the first of the Precedent H (CRP PD3E 4(b)). There may be circumstances where the litigator finds it appropriate or tactical to file and exchange more than just the front page however this is not the standard rule laid out by the court system.

Filing a cost budget late

The importance of filing a cost budget in the appropriate timely manner cannot be understated. As per CPR 3.14. if a party fails to file a Precedent H on time, it will be treated as if a budget had been filed comprising only of the applicable Court fees. The importance of filing a Precedent H on time cannot be understated. As per CPR 3.14, if a party fails to file a Precedent H on time, it will be treated as if a budget had been filed comprising only of the applicable Court fees. This means that any money that was previously potentially recoverable is lost as in any entitlement to it. This is why it is imperative that all stages of the cost budget are followed to the letter unless the court otherwise orders.

Once a cost budget is filed late, you are essentially running a claim without the ability to recover the substantive portions of the costs. Thanks to CPR r36.23 some portion of costs may be rescued as it permits recovery of 50% of the costs assessed, as long as the party is successful in beating the part 36 offer during the final hearing.

There is another way of remedying the breach however this must be immediate and prompt through the filing of an application for relief, relief is only granted in the right circumstances which are why it is imperative litigators have submitted budgets on time. To be granted relief the court considers the following three-stage test:

Identifying and assessing the seriousness or significance of the breach?

Considering why the failure occurred?

Considering all the circumstances of the case.

Finally to highlight the real severity of filing a cost budget late consider the case of BMCE BANK INTERNATIONAL PLC V PHOENIX COMMODITIES PVT LTD & ANOR (2018). This case involved the late filing of a cost budget and the high court refused the defendant relief from the sanctions of CRP 3.14 meaning they were only eligible to recover court fees. In this case, the defendant had filed their budget two weeks late and did not even apply for relief from sanctions until the morning of the costs CMC. The judge presiding over the case, The Hon Mr Justice Bryan found the breach serious and significant and couldn’t find any just reason why such an error had been made, he also found that the application for relief had not been made promptly and rejected it.

Despite clear and concise rules regarding multi-track cases and filing of a precedent H mistakes can still happen like the one highlighted above, however, this only negatively affects the claimant, even if the mistake of a late filing is made and the judge grants leniency, the expectation that all cost will be recovered is very slim and significant penalties would still apply.

About the author
Prior to setting out in the costing world Ivan was involved in running his own caseload within a Criminal Practice and gained valuable knowledge and experience for maximising the costs on every case. Given his keen interest and expertise in costs it was a natural step set up IG Legal Ltd. At its inception it...