- Litigation Futures - https://www.litigationfutures.com -

Cut-off between budgeted and incurred costs to be clarified

Oldroyd: Simple and welcome change

A change to the CPR coming into force on 1 October should provide clearer guidance on the cut-off between budgeted and incurred costs, it has been argued.

An amendment to practice direction 3E draws the line between costs incurred up to and including the date of the first costs management hearing (incurred costs) and costs to be incurred after that date (budgeted costs).

Currently, budgeted costs run from the date of the budget, not the case and costs management conference (CCMC), meaning the budget will need to estimate what costs will be incurred between the budgets being drawn and when the CCMC takes place.

Dan Oldroyd, who leads Keoghs’ complex injury costs team in Southampton, said many in the costs industry saw this as a problem that was going to create more ambiguity.

Writing on the Keoghs website, he said: “I disagree. It is usual practice now for the CCMC phase to be moved from the budgeted costs to incurred costs at the hearing, as at the hearing the costs are now incurred. The change is an extension of this to include the work in other phases as well as to enshrine this practice into a rule.

“In the cases below £50,000 where a budget is produced and the CCMC not listed for several months, this is difficult to do. In these cases it is likely that it will require an updated budget ahead of the hearing to give an accurate reflection of costs incurred to the CCMC and costs estimated thereafter.”

But he said this would be a “relatively simple exercise” and in most cases was often done in any event “to show the court how compliant we are with the budgeting procedure”.

Mr Oldroyd continued: “On the higher-value cases, the costs budgets are generally produced a lot closer to the hearing as they are not required until 21 days before the first CCMC. Any budgets produced well before the hearing are going to need to be amended if prepared too early.

“So, in my opinion, there is a slight difference to drafting a budget, to put the CCMC phase time all as incurred. There will be some estimating of the incurred time, before the CCMC takes place, but then are we not already doing that when drafting a budget?

“My own view is that this is a simple and welcome change. It is clear when the incurred costs cut off is and what is budgeted. The court does not manage the incurred costs and they will carry on being subject to detailed assessment at conclusion.”

He suggested that there may be some guidance required on what would happen when the incurred costs in the bill were vastly different to the budget.

“I am sure this will amount to a good reason to depart from a budget where the circumstances have changed or where the budget was not accurately drawn before the first CCMC.

“This would be a welcome outcome to ensure parties are accurately and realistically estimating the costs to be incurred before the CCMC.”

Mr Oldroyd said the simplest way around all of this was – in high-value cases – not to draft the budget too early, and in lower-value cases to update the budget before the CCMC.

Meanwhile, the Civil Procedure Rule Committee has also issued revised forms N260A and N260B [1], which support the costs for summary assessment pilot scheme that is running until March 2021. It said this was in response to feedback received since their release in April with PD51X.

It has not issued Word/PDF versions, with lawyers asked to use the Excel versions from now on.

Also, from 7 October, the electronic working pilot scheme, as set out in practice direction 51O, will be extended to the Senior Courts Costs Office.