What Is a Legal Cost Budget?

A legal cost budget is commonly referred to as a Precedent H and is the first step in ensuring you recover your full costs on the conclusion of a claim.  A Precedent H is used at the beginning of litigation and outlines the details of the costs expected to be received on conclusion. It also outlines where time and efforts should be focused during the course of litigation.

What is Involved in preparing a Cost Budget?

A cost budget is used to manage costs throughout the litigation process. A Precedent H should be prepared by parties caught by the provisions and verified with a statement of truth, considering all issues in the case.  The party should consider who will be working on the case, their hourly rates and build contingencies, when preparing a cost budget.

Which CPR Provisions Apply to Preparation of a Costs Budget?

Practice Direction 3E sets out the rules for costs management. It is worth noting the recent changes to Paragraph 7.4 of the Practice Direction which you can read more about in our recent article to find out how the changes can impact on your cost budgets.

When Should a Cost Budget be Filed?

There is a strict deadline for filing the Precedent H which must be met, or the penalties can be severe, reducing the chance to recover legal costs from the other side. Costs Budgets must be filed alongside the Directions Questionnaire if the value of the claim is less than £50,000. If the claim value exceeds £50,000, the Costs Budget must be filed 21 days before the first Costs and Case Management Conference (CCMC). We would always recommend that the Precedent H is filed with the Directions Questionnaire to avoid the likelihood of any default arising.

What should be Included in a Cost Budget?

A Precedent H cost budget should include the following:

• Your base costs incurred to date
• The future costs to be incurred for the entirety of the case up to and including Trial
• Anticipated costs should only account for what is reasonably foreseeable, and is catered for in any draft directions and the Directions Questionnaire.  The Budget cannot account for every possible eventuality in the litigation.

Additional liabilities such as the success fee or ATE premiums should not be included in the costs budget, neither should VAT. Costs for the Precedent H Budget and the Costs Management process do not form part of the main figures, but can be located in the bottom right of the front sheet of the Budget as the respective 1% and 2% figures.