Simplified Costs Budgeting Explained

 

 

1. Simplified Costs Budgeting is a pilot scheme which will only apply to Business & Property Courts claims (or Business & Property work in the Manchester, Leeds or Central London County Courts) with a value of less than £1million OR any other claims to which budgeting would ordinarily apply and the claim value is less than £1million and are proceeding in the Central London County Court or the Leeds or Bristol District Registries. It will also apply to claims with QOCs in the High Court at Manchester and Birmingham (see Point 12 below). 

 

2. Of the applicable claims it will only apply to claims issued on or after 1 April 2025 and before 1 April 2028. 

 

3. It will see the introduction of a new simplified Costs Budget, simplified Budget Discussion Report and simplified Precedent T. These documents have not yet been published. 

 

4. Budgets will be required 21-days before the first CMC (unless the court orders otherwise). Budget discussion reports 7 days before the first CMC. 

 

5. Where a CMO is made parties can apply to vary using the simplified Precedent T. 

 

6. Where a CMO is not made, parties will have to file updated Simplified Costs Budgets either 7-days before trial, 7-days before the trial window or 7-days before the PTR, whichever is earliest. 

 

7. Where there is no CMO the court can order updated simplified Costs Budgets at any time. 

 

8. Where there is no CMO then at assessment a receiving party would have to provide a Statement of Reasons where there is a difference of 20% or more between the simplified Costs Budget filed and the Bill of Costs. 

 

9. Where there is non-compliance with the pilot schemes then the court has discretion over the sanction, to include restricting costs to court fees only. 

 

10. For Business & Property Courts / Business & Property work in the County Court, a claim with either no statement of value or seeks only non-monetary relief or the parties are unable to agree whether the claim value is £1million more, unless the court orders otherwise, the claim shall be treated as though it’s worth over £1million and the pilot scheme will not apply. Note, this exception only applies to BPC claims & work. 

 

11. Litigant in persons remain exempt. 

 

12. There will be a third PD (at time of writing not published) which will be PD51ZG3 for Costs Budgeting light which will apply in High Court District Registries at Manchester and Birmingham for claims to which QOCs apply. It is understood that there will be maximum claim value unlike the other PDs. The PD will operate the same as the others, however, whilst Defendants will have to submit Budget Discussion Reports but Claimants will not ordinarily do so given they will not be called upon to pay the Defendant's costs. The court will retain the power to costs manage the Defendant's costs and this will most likely happen where Fundamental Dishonesty is raised. 

 

 

 

 

It is a pilot scheme which will apply to certain claims with an intention of simplifying the Costs Budgeting process. It will see the introduction of a new Precedent Z (simplified costs budget), Precedent ZR (simplified budget discussion report) and Precedent ZT (simplified Precedent T (for varying approved/agreed costs budgets)). 

 

The scheme will run for 3 years from 1 April 2025 to 31 March 2028. 

 

 

The Pilot Scheme will see the introduction of two new Practice Directions (PDs), PD51ZG1 and PD51ZG2. Snappy titles! 

 

The Pilot Schemes will apply to: 

 

- Certain claims in the Business and Property Courts and Business and Property work in the County Courts at Manchester, Leeds & Central London which hare issued between 1 April 2025 and before 1 April 2028 with a value of less than £1million. 

 

- Claims with a value of less than £1million which are issued on or after 1 April 2025 and before 1 April 2028 (and to which budgeting would apply) and which are proceeding in the Central London County Court or at the Leeds or Bristol District Registries. 

Litigants in person remain exempted from budgeting. 

 

- Claims in the High Court District Registries at Manchester and Birmingham to which QOCs applies. It's currently understood there will be no maximum limit on the claim value. 

 

 

In short where the pilot schemes apply it will be as follows: 

 

At the first CMC the court can either make a costs management order by reference to the simplified budget or determine under CPR 3.15(2) that a CMO is not required. 

 

If no CMO is made then parties must file and serve updated simplified Costs Budgets no later than 28 days before (and whichever is the earliest of): 

 

 

The court may also order a party to file an updated simplified costs budget at any stage of the proceedings. 

 

Further, where no CMO is made CPR PD 44 3.2 to 3.7 will apply. This specifies that where parties have filed a Costs Budget but no CMO has been made then if there is a difference of 20% or more between the costs claimed by a receiving party on assessment the costs in the budget previously filed then there must be a statement of reasons explaining the difference. The court on assessment will have regard to the budget. 

 

In addition, the paying party could argue that they reasonably relied upon a budget filed and also rely on that budget in order to dispute reasonableness or proportionality of the costs claimed. The paying party would have to provide a statement setting out its case in this regard in the Points of Dispute. 

 

Where either the paying party can show it relied upon the budget or there is not a satisfactory explanation for a difference exceeding 20% the court can restrict the recoverable costs claimed and may find that the difference between the costs claimed and the costs shown in the budget as evidence the costs claimed are unreasonable or disproportionate. 

 

Notably, the court can sanction any party who fails to comply with the PD and have complete discretion as to that sanction which includes limiting the recovery of the costs to be incurred to the applicable court fees. 

 

In addition, for Business & Property Courts / Business & Property work in the County Court, a claim with either no statement of value or seeks only non-monetary relief or the parties are unable to agree whether the claim value is £1million more, unless the court orders otherwise, the claim shall be treated as though it’s worth over £1million and the pilot scheme will not apply. This exception appears to only apply to BPC claims & work and is specifically not included in the pilot scheme for certain other claims with a value of less than £1million. 

 

For cases to which QOCs apply and simplified Costs Budgeting is applicable ordinarily the Claimant will not need to serve a budget discussion report. There may be some circumstances such as where fundamental dishonesty is raised where this may still be necessary. The Court's view is that QOCs means a Claimant will not ordinarily be paying the Defendant's costs. The Court will retain discretion to costs manage Defendant's costs in any event. They will still be required to submit a simplified Costs Budget. Further details are awaited as the accompanying PD has not yet been published.  

 

 

If you are dealing with Business & Property courts work or claims with a value of less than £1million within the Central London county court or Bristol or Leeds district registries then it is important to be aware of the changes, specifically around procedure. 

 

Whilst we don’t yet have the publication of the simplified Costs Budget, Budget Discussion Report or Precedent T, it remains clear that any non-compliance will be subject to sanctions. 

 

The changes to procedure, particularly where no CMO is made is extremely interesting and will actually require additional work in the guise of updated simplified Costs Budgets. 

 

It’ll also be interesting to keep an eye on and see how the pilot schemes develop in the coming years, if successful it’s likely the same will be expanded to cover more claims. 

 

What is clear (and as has always been the case) it’s vitally important that a robust costs budget is prepared at the outset, otherwise parties run the risk of curtailing costs recovery at the end of a claim.