Precedent T Guidance: How the new CPR rules will affect Varying Costs Budgets
Posted on 1st October 2020 at 10:35
By Jon-Paul Burnett, director and Costs Draftsman
More than seven years since the formal introduction of Costs Budgeting, a new process for any party wishing to vary their Precedent H came into effect from 1 October 2020.
The introduction of the Precedent T document is designed to streamline the approach to budget variation, which has always suffered from inconsistency.
The Civil Procedure (Amendment No. 3) Rules 2020 and the 122nd Practice Direction update will finally implement a proper precedent for varying a Costs Budget.
Whilst the existing rules have detailed the procedure, there has been a distinct lack of clarity as to how this information ought to be presented.
The incoming Precedent T revisions seek to address this and are designed to introduce a more streamlined process, with the expanded rules giving greater guidance.
What are the new Precedent T rules?
The new CPR r3.15A (1) declares that: “A party (“the revising party”) must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions.”
It is clear that there is now an obligation on all parties to consider their cases with respect to their Costs Budgets / Costs Management Order. A failure may see over-spends restricted or even budgeted costs retrospectively reduced at assessment.
The new rules apply to increases and decreases, with equal weight placed upon both. It is therefore not difficult to imagine paying parties varying their own budget downwards with the intention of seeking to force the receiving party into the same position.
CPR r3.15A (2) makes clear that varied budgets “must be submitted promptly […]”. It is unclear how the Court will interpret “promptly” but a long delay to varying a budget could conceivably see restrictions placed upon the recoverable costs between the parties.
The fact the rules only provide for “prompt” filing and serving may see arguments about precisely what is or isn’t quick enough.
The new rules also make it clear that the Court can vary any costs after the date of the Costs Management Order even if they have already been incurred by the time of the budget variation. This follows the approach set out previously in the case of Sharp v Blank & Ors [2017] EWHC 3390 (Ch).
What is the new process?
The new Precedent T process can be briefly summarised as follows:
1. Identify a significant development.
2. Complete the Precedent T Form.
3. Serve the Precedent T Form and seek to agree the proposed variations.
4. File the Precedent T at Court, together with the last approved or agreed budget and with an explanation of any disagreements between the parties.
5. The Court then has complete discretion and will initially seek to determine the issues without a hearing, though may list a further Costs Management Hearing if appropriate. The Court can approve, vary or disallow the proposed variations.
How will Precedent T affect revised budgets?
Firstly, the rules aren’t wholly clear.
They require a revising party to both file and serve the Precedent T promptly. This seems simple enough until you read that the Court also wants to be appeased of the areas of agreement and disagreement.
Obviously, this cannot be done until after the Precedent T is served and the other party has responded.
To ensure promptness for filing the Precedent T at Court, a strict time limit will have to be given to the other parties to respond to avoid any criticisms that matters were not progressed promptly.
There are also going to be on-going questions over what constitutes a “significant development” and this remains an area of contention.
If you have any doubt as to whether something is a “significant development” it would be wise to have a discussion with the costs experts here at Carter Burnett.
It is often fact sensitive and will likely remain so, particularly after the Civil Procedure Rules Committee declined to give further guidance on the issue in the rules earlier this year.
How to vary a Costs Management Order with Precedent T
The Precedent T will be annexed to PD 3E - although it is already available via the Ministry of Justice website.
It is useful to have a look over it in order to begin to consider how it will work.
Significantly, the document can be completed in Excel or Word. But if the Excel version is used, the parties are responsible for checking the formula and any formatting issues which arise.
Much of the Precedent T is self-explanatory.
It comprises of two parts: a front sheet and variation particulars. The form also includes guidance notes for completion of the Precedent T.
The front sheet bears similarities to the existing Precedent H and distinguishes the current budget with the variations sought.
However, it does not provide any information as to how the variation figures are arrived at.
One other area of note is the introduction of the Variation certification which must be signed by the revising party. This simply confirms that the sums included in the variation are not included in any previous budgeted costs or variation.
Whilst the new rules don’t specify that it should be a “senior legal representative of the party” who carries out the certification, it is probably best to ensure that it is (for belts and braces purposes), given the Costs Budget itself is to be certified by a senior representative (as per PD 3E P6).
Turning to the variation particulars, this more closely resembles the Precedent R (Budget Discussion Report). It has space for a figure for the total time and total disbursements but, unlike the Precedent H, there is no place for the revising party to show the sums are arrived at.
You can provide details within the corresponding explanation box (each phase has one with the exception of pre-action for obvious reasons) but space is extremely limited.
Similarly, the other parties can fill out a further column to set out why a particular variation is not agreed. Again, space is at a premium.
It is highly likely that all parties will utilise some form of an addendum to ensure that all of the necessary details can be provided to both the opposite party and to the Court itself. Remember, the Court may opt to deal with the budget variation on paper.
There is an additional page which mirrors the expert fee break-down which appears in the Precedent H. This allows you to set out each expert and then break-down the further amounts sought between reports, conferences and joint-statements.
However, it does have limitations as you cannot break-down the sums beyond these sub-headings.
Consequently, it is not hard to envisage that the Court / Other Party may require (or even expect) more information than the Precedent T provides for, particularly if significant sums are sought.
Conclusion – What’s next for revising costs?
From 1 October 2020, parties must follow the new rules set out in Part 3 of the CPR and also in PD 3E.
Parties will be expected to act promptly where variations are required (upwards or downwards) and must use the Precedent T.
The time spent varying a budget will fall under the 2% cap for ‘all other recoverable costs of the budgeting and costs management process’. For particularly intensive cases, it may be that the Court will be willing to disapply the cap as they did in Sir Cliff Richard OBE -v- The BBC & Chief Constable of South Yorkshire Police [2017] EWHC 1666(Ch).
The key point to take away is that the costs of any variation is recoverable in principle.
However, questions still remain about a situation where there is a downwards revision. This will necessitate all parties to spend time in dealing with the variation, but could create a perverse situation where the 2% cap falls disbarring parties from recovering time which is otherwise reasonably and necessarily spent.
Could this disincentivise some parties from varying a budget downwards?
It is also necessary for practitioners to be alive to the assumptions upon which the initial Costs Budget is agreed or approved, so that prompt action can be taken where there is a significant development in the litigation.
Where there is doubt, the best way to protect your position is to seek advice from a costs specialist. At Carter Burnett, our team can confidently guide you through the most appropriate steps which need to be taken.
The process and precedent is certainly welcomed, even if it has taken a long time to get to this stage.
Precedent T certainly has its limitations and it is reasonable to anticipate that the Court and the other party will no doubt want information beyond the scope of the Precedent T. Only time will tell how the new process is dealt with by the Court.
But it is certain that a failure to vary your Costs Budget could see otherwise recoverable costs disallowed.
As a result, you should be asking can you really afford not to engage with a costs lawyer?
If you’d benefit from professional costs advice, please don’t hesitate to get in touch for an informal discussion about all your budgeting needs.
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