Budget fee preparation explanation

The minutes of the February meeting of the Civil Procedure Rules Committee have now been released.  Given almost equal prominence as progression of the role of hot-tubbing in civil litigation are changes to be made to the provisions of section 7.2 of Practice Direction 3E.  Dominic Woodhouse of Victoria Square Chambers reports.

As practitioners will be aware, PD3E limits the amounts which are recoverable for preparing budgets and dealing with their management, save in exceptional circumstances, to 1% and 2% of ‘the approved or agreed budget’.

Per the minutes:

‘Although reference to the budget is to the entire Precedent H (see paragraph 2.5 above), PD E 7.2 currently refers to the ‘approved or agreed budget’, not ‘the budget’. Only costs yet to be incurred can be approved by the court, which could be taken to suggest that the approved or agreed budget does not include incurred costs and that the present position is that the percentage only applies to estimated costs (now ‘budgeted costs’).’

The committee notes that this is the approach urged in that august publication Cook on Costs and taught on judicial training courses. It is also the approach argued for in the White Book supplement ‘Costs & Funding following the Civil Justice reforms: Questions and Answers’, edited by former Senior Costs Judge Peter Hurst and with contributions from District Judge Simon Middleton and pre-eminent costs counsel Roger Mallalieu. It does therefore perhaps say something to the detriment of judicial consistency that the experience of half of the members of the sub-committee is that the percentage is frequently applied to the whole of the costs, i.e. both incurred and estimated.

Whilst we may differ with the conclusions reached in Cook on Costs and the White Book supplement and say that there are cogent reasons why the percentage is to be applied to the whole of the budget, including incurred costs, it is notable that notwithstanding training and authoritative legal textbooks, the approach taken by different judges remains varied. This does not fill one with enthusiasm for assessing the likely approach to be taken to the costs of the costs budgeting exercise, or for that matter for firms estimating their likely recovery at the conclusion of a case where one facet of the costs incurred may be halved.

We can cease wringing our hands however as it is now apparently to be made clear in a future amendment to PD3E, with section 7.2 amended to read as follows:

(a)    the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the total of the incurred costs (whether agreed or not) and the budgeted costs (agreed or approved); and

(b)    all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the total of the incurred costs (whether agreed or not) and the budgeted (agreed or approved) costs.

All’s well that ends well then, even if it is to belatedly make clear the intention which we would say must have been evident from the start, though we do wonder how the Court will treat the allowance on detailed assessment where a decision was made at the CCMC that the budgeting costs were to be limited to a percentage of the future costs only, rather than the whole budget. Perhaps this is an example of that lesser seen beast, ‘good reason to depart’…