This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.
From looking at the significant volume of opinions on the matter, it is clear that the current cost budgeting requirements contained in the Civil Procedure Rules (CPR) are not without detractors. The main criticisms of the process are that cost budgeting is, in itself, expensive, that cost budgets are only ever educated stabs in the dark and that the bases on which the judiciary decides what a 'reasonable' budget looks like are fairly opaque. This alert looks at whether the new rules under the CPR are likely to assist in alleviating these perceived shortcomings.
As from today (as the 83rd CPR update comes into force), the rules governing the obligations on cost budgeting are getting a bit of a re-vamp. In a nutshell, for claims subject to cost budgeting that are issued from 6 April 2016, the deadline for submitting budgets has been brought forward (now 21 clear days before the Case Management Conference (CMC)) and the parties are now required to submit agreed budget discussion reports no later than 7 days prior to the CMC.
What are Budget Discussion Reports (BDRs)?
Using the new 'Precedent R', parties to dispute must set out, for each phase of the litigation, the budget figures on which they do not agree along with brief summaries as to why (as set out in CPR Practice Direction 3E). The result being that the parties are compelled to discuss the budgets ahead of the CMC and that the Court is provided, in an easily digestible format, details of figures that the parties consider unreasonable in the circumstances and why.
Will the new rules help?
Under the previous rules and unlike the obligations in relation to disclosure, there was no requirement for the two sides to engage meaningfully with one another in relation to their respective budgets ahead of the CMC. Rather they would simply inform the Court of the budget figures that were agreed or otherwise. This, in practice, often leads to many letters alleging unreasonableness being waived indignantly before the judge at the CMC or subsequent hearings. The new rules do then provide a platform whereby there has to be a thoughtful dialogue between the parties, with reasons given for any objections and for this all to be done well ahead of the CMC – all good things.
However, since the introduction of the cost budgeting rules, it has been difficult to predict what judges, on any given day, will order in terms of the total recoverable sum that each party may be entitled to at the conclusion of the matter. This situation is unlikely to be alleviated completely by BDRs but the requirement for the parties to set out their reasons for areas of disagreement ahead of time can only be helpful to the Judge in reaching his or her decision and is therefore welcome. Although BDRs are not mandatory for hearings after the CMC, they may also prove to be very useful where a party seeks to contest an application to vary an already approved budget. The BDR will assist in crystallising the disagreement in relation to the disputed variations which can often be more contentious than getting approval for the original budget figures.
What would be helpful for the litigators would be for the CPR and/or the Court guides to provide more guidance as to the relevant considerations in deciding what a reasonable budget should look like. Such guidance remains to be developed on a case by case basis and given how (relatively) new the cost budgeting requirements are, this may take some time.
Overall, what the new rules, with this additional obligation to produce BDRs definitely won't achieve will be to make the cost budgeting process, in of itself, any less time consuming and therefore, costly.
