Precedent H: a practical guide to preparing a costs budget

Costs management under CPR 3.12 to 3.18 generally applies to multi-track Part 7 claims, subject to exceptions, including claims with a stated value of £10 million or more and some specialist lists. Litigants in person are not required to file a budget. The court can also order budgets in other cases.

Where the claim is valued at less than £50,000, budgets are filed with the directions questionnaire. Otherwise they must be filed and exchanged no later than 21 days before the first case management conference. Missing the deadline can have severe consequences: under CPR 3.14, a party that fails to file a budget may be treated as having filed one comprising only the applicable court fees, unless relief is granted.

Precedent H divides costs into phases: pre-action, issue and statements of case, CMC, disclosure, witness statements, expert reports, PTR, trial preparation, trial and ADR/settlement, with contingencies for work that may or may not be required. Each phase shows incurred and estimated costs, split between time and disbursements.

Assumptions are not padding. They define the scope of the estimate, such as the number of witnesses, expert disciplines, disclosure volume and trial length. If the case changes significantly, those assumptions form the basis of an application to vary the budget under CPR 3.15A, which should be made promptly.

Parties must file a budget discussion report, Precedent R, no later than seven days before the first CMC, setting out which phases are agreed and the paying party’s proposals for those that are not. The court approves or records agreement of estimated costs phase by phase; it does not approve incurred costs, though it may comment on them.

A good Precedent R is concise and reasoned. Offering realistic figures, rather than a blanket reduction, tends to carry more weight with the judge. Our Costs Lawyers prepare budgets and represent parties at costs management conferences, including in high-value and complex claims.

On standard basis assessment, the court will not depart from the last approved or agreed budget for a phase unless satisfied there is good reason. In practice, that makes the approved estimate the ceiling for most phases. Incurred costs remain open to assessment in the ordinary way.

It follows that time spent on a well-reasoned budget pays for itself. Underestimating can cap recovery; overestimating invites cuts and criticism. Monitoring actual spend against each phase throughout the case allows timely variation applications and avoids an unpleasant surprise at the end.