The 93rd Update on Practice Directions
Changes have been made to the costs that can be recovered in relation to the cost budgeting process. The 93rd update on Practice Directions amendments came into force on 22 November 2017 and will apply to all cases subject to cost budgeting.
Costs Practice Direction 3E, paragraph 7.2 formerly read;
“7.2 Save in exceptional circumstances—
(a) the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% or the approved or agreed budget
(b) all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the approved or agreed budget.”
However, it has now been updated by the amendments to read;
“7.2 Save in exceptional circumstances—
(a) the recoverable costs of initially completing Precedent H shall not exceed the higher of £1,000 or 1% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted costs (agreed or approved); and
(b) all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted (agreed or approved) costs.”
Whilst the costs of the budgeting process had previously been calculated with reference to the costs contained within the Budget, this amendment has changed this so that the costs of the budgeting process are now linked to the incurred costs agreed or allowed on assessment.
Incurred costs are not budgeted and, as we all know, what is agreed or allowed on assessment can quite often be substantially different from what was claimed within a costs budget. Accordingly this amendment is likely to significantly reduce the costs payable in relation to the budgeting process, particularly in more substantial cases, unless they are able to establish “exceptional circumstances”.