Having been on hiatus since lockdown, we restart the Alerters with news of the Civil Procedure (Amendment No. 3) Rules 2020 and the 122nd Practice Direction Update. This hit the MOJ Civil Procedure Rules (CPR) homepage on 24 July 2020 and sets out changes to:
“Cost Budgeting and Variations: rationalises the current structure of the rules on variations to cost budgets. The changes have reduced the existing structure which involved three sources of rules (CPR Rules, a PD and a lengthy Guidance Note) into two documents, a set of rules and a PD which is intended only to include practice guidance”.
Of significance is the introduction of a new Precedent T (Budget Variation Summary sheet), as part of the changes to Practice Direction (PD) 3E effective from 1 October 2020, to be used in the event of variation of a budget.
The Civil Procedure (Amendment No. 3) Rules 2020, which, as its title suggests, amends the Civil Procedure Rules 1998, will introduce a new provision (rule 3.15A) which will deal with “variation costs” and will codify the practice currently set out in CPR PD3E, para. 7.6.
By way of reminder, CPR PD3E, para. 7.6 provides that:
“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”.
The new rule 3.15A retains the concepts of “significant developments” and inter-partes agreement, but now directs that parties “must” (not “shall”) revise, and adds that revisions must be done “promptly” and using a new form (Precedent T).
The change addresses the issue of budget variation by, in effect, upgrading PD 3E Para. 7.6 to “Rule status” and, in so-doing, determines the process which must be followed. The varying party must submit a Precedent T to the other side without delay. The Precedent T will allow the parties (and ultimately the court) to understand, in a recognisable format, what the proposed variations to the budget are.
The peremptory instruction, that a budget “must” be revised, applies equally to upward and downward revisions. It remains to be seen how this will play out, given that downward revisions are uncommon in practice (see, for example, our July 2019 Costs Alerter), but practitioners will need to engage in active costs management and be aware that significant developments may be outwith the assumptions which underpin their budget such that they need to take action. Indeed, the effect of the change is to place costs management and budgets (and their variation) at the forefront of the minds of practitioners.
Further, given the peremptory instruction, the likelihood is that the saving provision at CPR 3.18 of good reason may well become a higher threshold to overcome at detailed assessment (i.e. where a party could, and should, have varied their budget during the substantive case). Conversely, a paying party could use this to its advantage, to reduce the bill on assessment, by establishing good reason to depart from the approved budget where the receiving party failed to revise a budget.
We are happy to discuss any aspect of costs management (and all other areas of costs for that matter) and our team is available to talk you through the process including the pitfalls of non-engagement. Please ring or email for further information.