The consideration and preparation of a costs budget in civil litigation is not easy. It can be time-consuming and often requires specialist input from costs lawyers. Since its 2013 introduction, it is widely recognised that costs budgeting has led to progress in the discipline and understanding of costs. However, many feel that the cost budgeting regime requires a fresh approach with more flexibility, particularly when catering for different types of cases depending on the litigation’s value. 

Georgina Squire

Georgina Squire

Camilla Pratt

Camilla Pratt

Background

In 2022, the Civil Justice Council approved the creation of a Costs Working Group (the group) which launched a consultation on costs. The group’s focus included a review of the costs budgeting regime. In May 2023, it published its final report in which it stated that costs budgeting has ‘brought consideration of the costs of litigation into the heart of the litigation process. That is a significant and valuable shift. It should be retained. Nevertheless, the diversity of civil justice comes into play the moment one suggests that costs budgeting be retained. Characterised as “one size does not fit all” is the clear recommendation that in future the details of the way costs budgeting should work ought to be allowed to vary as between different areas of civil justice’. It proposed piloting a more tailored approach to costs management, to suit different case types, rather than a single approach for all cases.

As a result, two new pilots have been introduced which are intended to operate from 1 April 2025 to 1 April 2028.  

1. Business and Property Courts (B&PC)

Introducing new Practice Direction 51ZG1 which applies to:

  • Type of claim: Part 7 multi-track claims issued from 1 April 2025 and before 1 April 2028 to which costs management would normally apply under section II of part 3 of the Civil Procedure Rules and PD3D.
  • Value: a difference is made between claims over and under £1m. Where the claim does not include a statement of value, seeks non-monetary relief only or parties are unable to agree whether the value is £1m or more, unless the court orders otherwise, the claim shall be treated as if it had a value of £1m or more.
  • Forum: claims proceeding in the B&PC in London (the Rolls Building), the B&PC in Manchester or the B&PC in Leeds.

2. Cost budgeting-‘lite’ (claims in the county court at central London or at the Leeds or Bristol district registries)

Introducing new PD51ZG2 which applies to:

  • Type of claim: Part 7 multi-track claims issued on or after 1 April 2025 and before 1 April 2028 with a value of less than £1m to which costs management would normally apply under section II of part 3 of the CPR and PD3D; and relevant claims not subject to the pilot under PD51ZG1 above and not subject to the qualified one-way costs shifting rules set out in CPR 44.13.
  • Forum: relevant claims proceeding in the county court at central London or at the Leeds or Bristol district registries.

We will focus below on claims proceeding in the B&PC and the provisions of the new PD51ZG1.

Notable points of PD51ZG1

1. For claims over £1m practitioners will need to file and serve a simplified costs budget (precedent Z). There will be no automatic costs management. However, practitioners should be aware that the court could still make a costs management order (CMO) if it is satisfied that the litigation can only be conducted justly and at proportionate cost if costs are managed.

2. If the court makes a CMO, costs management directions will be made at the first case management conference. These could include the following:

a.    Whether the precedent Z will suffice or if it is necessary for any party to file and serve a costs budget using precedent H.

b.    Whether a precedent R or a simplified costs budget report (precedent RZ) is required.

c.    The listing of a further CMC or cost and case management conference. Unless the court orders otherwise the hearing will be listed to be heard within 35 days of the first CMC.

3. If the court does not make a CMO, each party must file and serve an updated precedent Z no later than 28 days before the start of the trial, the start of any trial window or seven days before any pre-trial review, whichever is earlier.

4. The court may also order a party to file an updated precedent Z at any other stage of the proceedings.

5. For claims under £1m, all represented parties must file and serve a precedent Z no later than 21 days before the first CMC. Each represented party must file and serve a precedent RZ no later than seven days before the first CMC.

6. The court will make a CMO at the first CMC unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective. If the court does not make a CMO the same process set out at paragraph 3 above will apply.

Conclusion

The court’s primary focus is to ensure that lower-value claims proceed at a proportionate cost with automatic costs management. However, it appears to be taking a more holistic approach to higher-value claims, with greater flexibility.

Practitioners running higher-value claims are likely to welcome the new PD51ZG1 as it simplifies the procedure of costs management. A CMO will only be made by the court if it forms the view that the litigation can only be conducted justly and at proportionate cost if the costs are managed.

We are yet to see how the court’s discretion will be exercised in determining which cases should be subject to a CMO and how the new regime will work in practice, but this will certainly be closely watched by practitioners in the coming months.

 

Georgina Squire is senior partner at Rosling King and a committee member of the London Solicitors Litigation Association. Camilla Pratt is a senior associate at Rosling King

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