By Jack Andrew
Previously on the 1st October 2019, the following amendment was made to Cost Management, Practice Direction 3E, paragraph 7.4:-
“As part of the costs management process the court may not approve costs incurred up to and including the date of the costs management hearing. The court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all budgeted costs.”
This was a subtle, but, quite important amendment to the practice direction and hitherto, commentary followed from various outlets addressing the possible ramifications and lacuna created by the rule change. Indeed, MRN’s article is contained in the following hyperlink – https://www.costexperts.co.uk/cost-budgeting-black-hole-on-the-horizon-the-109th-update/.
Since that update, it has now been common practice for budget drafters to include a portion of estimated time (up to and including the CCMC) within the incurred costs column of the Precedent H when it is filed in anticipation of a future hearing, as a means to address this ‘lacuna period’ – … as a Court may not approve costs incurred up to and including the date of the costs management hearing (emphasis added)..
This of course brings about problems when an eventual final bill is prepared, if more or less time has been spent during the lacuna period from when a Precedent H is prepared to the actual CCMC, given the incurred costs (including any requisite estimated time for the lacuna) may not necessarily match the final bill.
CPR (Amendment no 3) 2020
However, following the hot off the press, proposed changes to the CPR (Amendment no 3), published on the judiciary’s website on 21st July 2020, it looks like the rule drafters have picked up on this point themselves and sought to address the matter by reverting to the previous wording. Now, from 1st October 2020, the following amendment is to be made to CPR 3.17:-
(1) When making any case management decision, the court will have regard to any available budgets of the parties and will take into account the costs involved in each procedural step.
(2) Paragraph (1) applies whether or not the court has made a costs management order.
(3) Subject to rule 3.15A, the court—
(a) may not approve costs incurred before the date of any costs management hearing; but
(b) may record its comments on those costs and take those costs into account when considering the reasonableness and proportionality of all budgeted costs.
Whilst perhaps not the most obvious change to the rules, this change in wording presents a very real shift from the practice direction. Now, the Court may ‘not approve costs incurred before the date of any costs management hearing’ as opposed to previously, the Court may ‘not approve costs incurred up to and including the date of the costs management hearing’.
As a result, the lacuna created by the previous practice direction has now seemingly been overhauled. No longer is a definitive time in the case included in the rules (the case management hearing) for when the Court may not approve incurred costs. Instead, the rules simply advise costs incurred before the date of any costs management hearing cannot be approved. As such, the costs between when a Precedent H is prepared and the actual CCMC themselves can now be estimated once again (as they were previous to the 109th update to the Practice Direction), or at the very least from the 1st October 2020.
Finally, something that is clear from this change in the rules and article. Preparing a Precedent H cost budget requires digestion of a quite complex framework of rules and knowledge of nuances, strict time frames and case law. MRN are specialists in drafting budgets and should any practitioner want to discuss matters, they should get in touch without hesitation.