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PRACTICE DIRECTION 3E – COSTS MANAGEMENT This Practice Direction supplements Section II of CPR Part 3

A. Production of Costs Budgets

Part 7 multi-track claims with a value of less than £10 million


The Rules require the parties in most Part 7 multi-track claims with a value of less than £10 million to file and exchange costs budgets: see rules 3.12 and 3.13.

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Other cases


(a)    In any case where the parties are not required by rules 3.12 and 3.13 to file and exchange costs budgets, the court has a discretion to make an order requiring them to do so. That power may be exercised by the court on its own initiative or on the application of a party. Where costs budgets are filed and exchanged, the court will be in a position to consider making a costs management order: see Section D below. In all cases the court will have regard to the need for litigation to be conducted justly and at proportionate cost in accordance with the overriding objective.

(b)    In cases where the Claimant has a limited or severely impaired life expectation (5 years or less remaining) the court will ordinarily disapply cost management under Section II of Part 3.


At an early stage in the litigation the parties should consider and, where practicable, discuss whether to apply for an order for the provision of costs budgets, with a view to a costs management order being made.


If all parties consent to an application for an order for provision of costs budgets, the court will (other than in exceptional cases) make such an order.


An order for the provision of costs budgets with a view to a costs management order being made may be particularly appropriate in the following cases:


unfair prejudice petitions under section 994 of the Companies Act 2006;


disqualification proceedings pursuant to the Company Directors Disqualification Act 1986;


applications under the Trusts of Land and Appointment of Trustees Act 1996;


claims pursuant to the Inheritance (Provision for Family and Dependants) Act 1975;


any Part 8 or other claims or applications involving a substantial dispute of fact and/or likely to require oral evidence and/or extensive disclosure; and


personal injury and clinical negligence cases where the value of the claim is £10 million or more.

B. Budget format


(a)    Unless the court otherwise orders, a budget must be in the form of Precedent H annexed to this Practice Direction. It must be in landscape format with an easily legible typeface. In substantial cases, the court may direct that budgets be limited initially to part only of the proceedings and subsequently extended to cover the whole proceedings. A budget must be dated and verified by a statement of truth signed by a senior legal representative of the party.

(The wording for a statement of truth verifying a budget is set out in Practice Direction 22.)

(b)    Parties must follow the Precedent H Guidance Note in all respects.

(c)    In cases where a party’s budgeted costs do not exceed £25,000 or the value of the claim as stated on the claim form is less than £50,000, the parties must only use the first page of Precedent H.

C. Budget discussion reports


The budget discussion report required by rule 3.13(2) must set out—

(a)those figures which are agreed for each phase;

(b)those figures which are not agreed for each phase; and

(c)a brief summary of the grounds of dispute.

The parties are encouraged to use the Precedent R Budget Discussion Report annexed to this Practice Direction.

D. Costs management orders


Where costs budgets are filed and exchanged, the court will generally make a costs management order under rule 3.15. If the court makes a costs management order under rule 3.15, the following paragraphs shall apply.


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.


If the budgeted costs or incurred costs are agreed between all parties, the court will record the extent of such agreement. In so far as the budgeted costs are not agreed, the court will review them and, after making any appropriate revisions, record its approval of those budgeted costs. The court’s approval will relate only to the total figures for budgeted costs of each phase of the proceedings, although in the course of its review the court may have regard to the constituent elements of each total figure. When reviewing budgeted costs, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.


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 subsequent budgeted costs.


The court may set a timetable or give other directions for future reviews of budgets.


Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions. Such amended budgets shall be submitted to the other parties for agreement. In default of agreement, the amended budgets shall be submitted to the court, together with a note of (a) the changes made and the reasons for those changes and (b) the objections of any other party. The court may approve, vary or disapprove the revisions, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed.


After its budgeted costs has been approved or agreed, each party shall re-file and re-serve the budget in the form approved or agreed with re-cast figures, annexed to the order approving the budgeted costs or recording the parties’ agreement.


A litigant in person, even though not required to prepare a budget, shall nevertheless be provided with a copy of the budget of any other party.


If interim applications are made which, reasonably, were not included in a budget, then the costs of such interim applications shall be treated as additional to the approved budgets.


The making of a costs management order under rule 3.15 concerns the totals allowed for each phase of the budget. It is not the role of the court in the cost management hearing to fix or approve the hourly rates claimed in the budget. The underlying detail in the budget for each phase used by the party to calculate the totals claimed is provided for reference purposes only to assist the court in fixing a budget.

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