In April 2013, new court rules were introduced that imposed an obligation on all parties to court proceedings who are represented by solicitors and who have cases worth in excess of £25,000 commenced after 1 April 2013 to file and serve a costs budget.
The rules have recently been amended to provide that parties must now exchange budgets rather than serve but this is still an obligation and a must rather than a may. The addition of this new rule extends the court’s case management powers yet further in relation to costs with the hope to control the costs of litigation which can without careful management become excessive and disproportionate to the amounts in dispute, particularly in lower value cases.
What is a costs budget?
Essentially, a costs budget is a detailed estimate and breakdown of the costs that will be incurred in pursuing a claim from issue of proceedings to trial in a prescribed precedent format. There has always been an obligation both under the court rules and the Solicitors Professional Conduct rules to provide the court, opponents and clients with a best estimate of the overall costs of pursuing a claim, however, it is now a mandatory requirement under the costs budgeting rules for each party to provide a detailed analysis and breakdown of the costs to be incurred at each stage of proceedings. What is more, the courts now actively manage the issue of costs and can limit the amount of costs that can be incurred in respect of each and any stage of court proceedings or indeed the overall costs provided in any budget.
Perhaps most pertinently, the new rules impose a draconian sanction for failing to file and exchange a costs budget - a party who fails to file a costs budget who is required to do so will be treated as having filed a costs budget comprising only the applicable court fees. In essence; no costs budget, no entitlement to recover costs, save for court fees which are insignificant compared to the overall costs that are likely to be incurred.
Further, it would appear that the courts will be imposing the new rules strictly. In Andrew Mitchell MP’s case against News Group Newspapers (the ‘plebgate’ case), the parties were ordered at a Case Management Conference to file cost budgets. Mr Mitchell’s solicitors failed to do so and as a result the court has ordered that his costs budget will be limited to a costs budget consisting of the applicable court fees for his claim. A subsequent application to lift that order was refused although the Master did grant leave to appeal. The matter is proceeding to the Court of Appeal.
For any party to litigation, a failure to file a costs budget could be disastrous if the party goes on to be successful in part or in whole as they will be met with a bill for costs that they will not be entitled to recover from the losing party. If this is the case, it will be the solicitors who failed to file and exchange the costs budget on behalf of their client who will be feeling the cost of this as this failure is likely to be pursued by way of a professional negligence claim by any out of pocket client. The decision of the Court of Appeal is awaited with baited breath!