Author: Anna Lockyer

Drafting Costs Management Orders

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There can be uncertainty around the content and wording to include in draft costs management orders, a point reinforced by Senior Master Cook in Baroness Lawrence & Ors v Associated Newspapers Limited [2025] EWHC 3207 (KB) when he ordered a re-draft of an incorrectly drawn costs management order, observing “parties seldom draft proper or effective costs management orders”, despite his King’s Bench Division Guide note on Cost Management Hearings, setting this out at Paragraph 13 of Annex 8:

Essentially, confirmation of any agreed/not agreed incurred costs, the amounts by which the budgeted costs of each party have been agreed or approved (as required by CPR 3.15(2)) and any comments made by the court at the hearing with regards to the predications the assumptions are based on, should be clearly recorded on the Order. These statements may include the extent of disclosure; the number of days any experts will attend trial; and whether a mediation or some other settlement meeting is anticipated.

There are occasions when a table can be included in the costs management order that sets out the budgets’ figures, distinguishing those agreed from those approved.

If directed by the court, costs set out in this tabular form, may replace the requirement for front sheet costs budgets.

There are also certain judges who prefer an additional provision in a costs management order, referring to how departures from budgets would only be allowed with good reason, as per CPR 3.18(b). This may be provided for as follows:

“This costs management order is without prejudice to any issue which a party wishes to take on detailed assessment save that the court will not depart from the receiving party’s last approved or agreed budget unless there is good reason to do so.”

In recent years, templates have remained mostly unchanged, but the courts seem increasingly focused on ensuring costs management orders are properly prepared. Having a correct draft ready ahead of a costs management hearing, can be crucial to obtaining the desired outcome.

Anna Lockyer is a Senior Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Budgeting GLOs: Second CMC (Mark 2), Tranche 3

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“Over-lawyering” was the key criticism of the High Court in another round of costs budgeting the Pan Nox Emissions group litigations.

In this third Tranche, the Claimants’ budgets were reduced from £55.7m to £21m and the Defendants’ budgets from £75.8m to £48m with Mrs Justice Cockerill DBE and Senior Costs Judge Rowley deciding that in respect of the Claimants’ budgets “the largest reductions stem from the layers of representation leading to, for example, claims for individual, non-lead firms to audit or replicate work already being done by the Lead firms”.

The full judgment can be read here: Various Claimants v Mercedes-Benz Group AG & Ors (Re Pan NOx Emissions Litigation) [2025] EWHC 2307 (KB) (10 September 2025)

Costs Budgeting Pilot Scheme for QOCS Cases

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PD51ZG3 will apply to Part 7 multi-track claims in the High Court District Registries at Manchester and Birmingham to which CPR 44.13 (Qualified One-Way Costs Shifting) applies. It is not intended to apply to County Court cases and there will be no financial limit on the value of the claims.

The commencement date of this pilot is the 6 April 2025 and it will run for 3 years (subject to Parliamentary approval), aligning with the Business and Property Court Pilot and the less than £1 million non-BPC/non-QOCS Pilot.

In terms of the new process, all parties (save for Litigants in Person) will file a Precedent Z 21 days before the first CMC. In most cases, the Defendant will then file a Precedent RZ, within a prescribed timescale.  The Claimant will not however be required do so because, apart from in a very small number of cases, they will have QOCS protections and will not be called on to pay the Defendant’s costs. The Claimant does not therefore generally need to comment on the Defendant’s budget.

QOCS protections means there is generally no need to costs manage the Defendant’s costs (because the Claimant will not be called on to pay the Defendant’s costs). The Court retains the power to manage the Defendant’s costs in appropriate cases. The CPRC sub-committee’s view is that this is most likely to happen if the Defendant has pleaded (or otherwise raised) a credible case that the claim (or Claimant) is fundamentally dishonest.

For information relating to the Pilot Schemes under PD51ZG1 and PD51ZG2 see: https://clarionlegalcosts.com/2025/02/10/costs-budgeting-light-pilot-schemes-179th-practice-direction-update/

The new Precedent Cost Forms for all 3 Costs budgeting “light” Pilot Schemes are available here: Precedent Cost Forms – Justice UK

Anna Lockyer is a Senior Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Costs Budgeting Light Update

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As discussed at the CPRC meeting last month, two draft costs budgeting pilots have now been prepared in respect of:

  1. Business and Property Court (BPC) cases; and
  2. Certain other cases valued at under £1m.

A new Precedent costs form (modelled on the existing Precedent H) has been drafted and approved in principle.

Each pilot maintains the exclusions set out in CPR 3.12 (claims of £10m or more and claims brought by children).

The draft BPC Practice Direction provides for where the court does not make a CMO and allows court discretion, incorporating “unless the court orders otherwise” in the interests of clarity.

The BPC Pilot is intended to cover BPC of England and Wales (i.e. the Rolls Building) and at least two BPC District Registries (including Business and Property work in the county courts in those District Registries).

The non-BPC under £1m pilot mirrors the BPC under £1m position.

Various implementation issues, including the pilot courts, numbering of the Precedent and Practice Direction, and the commencement and duration of the pilots are yet to be finalised.

Costs Budgeting Reform Gains Momentum

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Flexible budgeting recommendations made by the CJC’s report of May last year have been accepted by the Master of the Rolls and more recently discussed at last month’s CPRC meeting.

Key points:

  • A new Precedent H costs form has been proposed, modelled on the existing Precedent H
  • A draft new Practice Direction includes budgeting claims with a value of over £10m
  • A draft pilot Practice Direction provides for 5 categories of case, each limited in certain courts:

– Business & Property Courts (BPC) claims with a value of £1m or more;

– BPC claims with a value of less than £1m;

– Qualified One-Way Costs (QOCS) claims;

– Non-QOCS claims; and

– Certain other non-BPC claims.

It was agreed in principle that each case category may have its own Practice Direction and the implementation dates need not be the same.

Watch this space for further updates…

Master orders Labour Party to present common and non-common elements in single costs budget

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On the basis it would be “expensive and speculative” to produce separate costs budgets for the defended claim and the Part 20 claim, Master Dagnall decided only one budget would be required at the CCMC stage.

By way of background, Taylor and others v Evans (as representative of the Labour Party) and others (Named Third Parties) [2023] EWHC 2490 (KB) is a data protection claim relating to an internal report that was compiled when the Labour Party was being investigated by the Equality and Human Rights Commission regarding allegations of anti-Semitism.

The draft report was leaked soon after the last general election at a time when Jeremy Corbyn was being replaced by Sir Keir Starmer. The Defendant’s main defence and premise on which their Part 20 claim is brought, is that third parties, who at the material time were employees and officers of the Defendant but aligned with Mr Corbyn, leaked the internal report and were engaged in a conspiracy to undermine Sir Keir Starmer.

In relation to budgeting Master Dagnall took the view that “if the main claim and the Part 20 claim are to be tried together as I have directed is to be the case, then, unless there is some particularly good reason, they are simply producing figures for each phase.”

Master Dagnall then went on to say “at this point the underlying purpose of the budgeting process is to tell parties, what is reasonable and proportionate for each party to spend; and this is done by the court and the other parties simply being given proposed figures for each phase, and the figures for each phase then being settled by agreement or court approval.”

“It seems to me it would be perfectly possible for a judge at trial to say that a particular costs order should be made which reflects the fact that some issues were, it turns out, not the concerns of the claimants and they have sought to distance themselves from those issues. It seems to me those are decisions which can only be taken at trial itself and I am not convinced myself at this point that it is clear that such is going to be the situation, and do not think that I should be directing the budgeting process on the basis that such is likely to occur.”

“I also bear in mind that it is always open to the judge to consider that there is good reason to depart from the costs budgets, and the judge can deal with such a situation at trial in a number of different ways, by making a variety of different costs orders or simply directing that the cost budgets will, in one way or another, be given no or only limited weight. But it seems to me that these are all matters pre-eminently for the trial judge. Costs budgeting may effectively limit the spending decisions taken by parties as they go along, but the actual consequences as to what should happen to costs should be matter for the trial judge.”

“In any event, I do not regard it as clear enough that there are uncommon costs to make a specific direction about any particular category of costs.”

“The parties are under their ordinary duties when preparing costs budgets to consider whether or not the ordinary form of them is inappropriate. If they do so consider, and consider that there are costs which simply relate only to one of the other sides and not another, then the court would normally expect them to refer to that and, in some way or other, reflect it in their material.”

“For me to lay down any rule at this point seems to me as inappropriate, so I am not going to do so.”

“In my judgment, the parties should just simply provide costs budgets on the ordinary basis.”

Anna Lockyer is a Senior Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

LFAs deemed DBAs: uncertain times ahead for Litigation Funders following significant Supreme Court ruling

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Last month, the handing down of the judgment in R (on the application of Paccar Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28 saw the Supreme Court allow an appeal, ruling that Litigation Funding Agreements (LFAs) are Damages-Based Agreements (DBAs) if they provide for a percentage return.

This decision overturned the Divisional Court’s well-established practice of LFAs not being DBAs; the repercussions are particularly significant to opt-out collective actions in the Competition Appeals Tribunal where DBAs are prohibited.

LFAs were previously found not to be DBAs because litigation funding did not amount to “claims management services”, to which the statutory DBA regime applies. The Supreme Court has now decided that “claims management services”, according to their natural meaning, includes litigation funding.

As a result of this decision, swathes of LFAs will be unenforceable, which is significant for the funding of disputes and the wider funding industry; a problem to be addressed by both litigation funders and claimant solicitor firms that rely on third party funding.

Many existing LFAs are now vulnerable to unenforceability challenges on the basis they are not compliant with the statutory regime for DBAs in s58AA of the Courts and Legal Services Act 1990 and the DBA Regulations 2013.

Compliant LFAs

In order to comply with the DBA regulations, an LFA needs to:

  • provide the reasons for setting the percentage return;
  • be limited to no more than 50%; and
  • involve giving credit for any costs paid or payable by the other side (i.e. a solicitor entering into a DBA gives credit for costs recovered and a litigation funder gives credit for costs paid or payable from the other side).

If an agreement has provision for payment of any other sums other than the percentage return, so for example it has a multiple – which means in the event of success the claimants will pay the funder whatever that multiple provides, then arguably that agreement is not a DBA, because the sum payable is not determined by the amount received.

It is common for LFAs to provide for the repayment of the investment plus a percentage return, which can be mathematically provided for in a formula. Similarly, there could be a multiple expressed as a percentage although that could be construed as an artificial way of saying that the payment is with reference to the amount received. In these circumstances there is scope for the agreement to be deemed a DBA, but there is a risk it could be challenged on grounds of non-compliance.

Put simply, LFAs that do not provide for a percentage return should not be caught by the outcome of this case.

Existing LFAs

In relation to existing cases, a re-drafting and re-negotiation of funding agreements seems to be the main way forward in view of this Appeal.

If an LFA contains a severance clause, it may be possible to sever out the percentage provision leaving just the multiple provision. Greater reliance may need to be placed on any severance provision in circumstances where the funded party will not agree to a renegotiated agreement, although in ongoing cases, the funded party is almost certainly going to want more funding for the continuation of the litigation, so it is in the interests of both parties that agreements are renegotiated.

Funders poised to enter into agreements, should ensure they either properly comply with the DBA regulations and section 58AA of the CLSA or alternatively, if preferred, they should make certain their agreement is clearly based solely on a multiple to avoid any scrutiny in a DBA context.

Careful consideration of Collective Proceedings Orders in the Competitions Appeals Tribunal will also now be required in light of this decision.

The Future

There is a very real risk of successful claimants seeking recovery of funds they have paid to their funder as consequence of this case.

In concluded matters, where successful claimants have paid a share to the funder based on a percentage and it now turns out that those agreements will have been unenforceable, there is a risk of those claimants seeking to recover sums paid to their funder. No doubt defences along the lines of limitation, change of position and unjust enrichment will be raised by funders.

These actions are an unfortunate ramification that would have been avoided altogether had the outcome of this case been different. There will likely be legislation to correct this somewhat ‘disruptive’ decision, but there has been no indication as to when or if it will be retrospective in effect. 

Anna Lockyer is a Senior Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com.

Attendances on Case Manager, MDT and Deputy should materially progress matter to be included in Costs Budget

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In the case of Hadley v Przybylo [2023] EWHC 1392 (KB) it was ruled that fee earner time dealing with Case Managers, Multi-Disciplinary Teams and Court of Protection Deputies should not be included in the main costs budget phases if the work does not materially progress the case.

At the budget discussion stage of this serious personal injury case, several costs management issues were narrowed, but there was no reconciliation between the parties as to whether case management and MDT meetings, and attendances on deputies for health, welfare and finance could be included in the budget.

The Claimant argued it was the practice of the Masters to include these costs and that:

“attendance by a fee earner at these case management meetings etc are reasonably necessary to progress the litigation because they assist in maintaining the Schedule of Loss as the claim goes along. It is [] something of a ‘live feed’ from the Claimant’s care and treatment at medical-professional level and the deputies, to the lawyers. What is claimed in the budget is about 1 hour each week with the Case Manager and 1 hour each week with each of the two Deputies, totalling 3 hours a week in the Issues and Statements of Case phase, as part of work on drafting and updating the Schedule of Loss on an ongoing basis.”

The Defendant argued the contrary submitting that:

“as a matter of principle such attendance charges ought to be ruled as inadmissible in a budget. They are not progressive of litigation any more than, say, having lawyers attend every medical treatment appointment would be. They are not properly included. In addition, whether or not in principle ever allowable in a budget, they do not fall within the guidance as to the categories of matter to be included in the Issues and Statements of Case phase in any event. Furthermore, their experience in contrast with that of the Claimants is that such charges are often rejected for inclusion in budgets.”

Master McCloud acknowledged this to be a grey area and appeared to make an example, albeit rife for challenge, in her decision to side with the Defendants.

Reference was made to Practice Direction 3D 10. (b) and the fact case manager attendance costs in this case formed a part of the maintenance of the Schedule of Loss. It was found that these specific types of costs did not materially progress the case, and therefore not budgetable or a recoverable head of costs in principle.

“In my judgment having a fee earner attending rehabilitation case management meetings is not progressive in the above sense and does not fall within the notion of ‘costs’. Likewise a fee earner attending on deputies so as to seek input into the ongoing drafting of the case in the form of the Schedule, when deputies do not properly play a part in such work, is not progressive.”

Master McCloud did indicate that these costs may be recoverable in damages but failed to elaborate, apart from to say it is for the Claimant to consider whether at trial those costs may be claimable as damages. 

The argument that attending on case managers and deputies was integral to producing the Schedule of Loss was described as “weak” by the Master.

The Master went on to clarify that information about case management or incurred expenses could be achieved by the occasional letter to the case manager or deputy or from obtaining documents for later disclosure. Furthermore, in their witness statements and that these costs could be included in the budget as they are “qualitatively” different things from attending meetings for input into a schedule of loss. It was decided that if they were allowable in the budget, then they are best placed in ‘contingency phases’.

Although this decision hinders budgeting time spent in case manager, MDT and deputy  meetings, Master McCloud allowed permission to appeal and invited the Rules Committee to provide guidance in the very same judgment. It seems then that the intention of this ruling is to ‘flush out’ some clarity. 

Anna Lockyer is a Senior Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com

Reforming Budgeting, Guideline Rates, Pre-action/Digitisation and Consequences of Extended FRC

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The Civil Justice Council have published their costs consultation responses and recommendations:

Click to access Civil-Justice-Council-Costs-Report-FINAL-May-2023.pdf

Although four key areas were considered, costs budgeting was the focus.

Costs Budgeting

The overarching finding was that budgeting is useful and should be retained, but ought to vary between different areas of civil justice.

Despite a wide range of responses, a clear outcome from the consultation was expressed in the following statement:

“Since costs budgeting was adopted, there is now evidence of real and sustained progress in the discipline and understanding around costs and this has consequently improved case management and the proportionality of costs”

Although a handful of respondents suggested the abolition of budgeting, most recognised that visibility of meaningful costs estimates is useful and should be retained, but  “a fresh, more nuanced approach” to budgeting was recommended.

It has been proposed:

  • Front sheets replace full budgets for Defendants where QOCs apply, but the courts will still have the power to order a full budget at its discretion. It is unclear how this will be of benefit given the fact a full budget is still required in order to produce a front sheet.
  • A ‘costs budgeting light’ scheme is introduced applying to claims valued between £100k and £1m. A separate ‘light touch’ approach to claims of £1m+ in the Business & Property Courts is adopted. These ‘light’ schemes are yet to be defined.
  • A staged process between directions and costs management is introduced where directions are contentious. Some costs information would however still need to be filed before directions. It is not yet clear what this information would consist of.
  • Mesothelioma and Media and Communications claims (and perhaps other specialist proceedings) are to adopt more bespoke practice arrangements for conducting budgeting.
  • Timescales for exchanging budget discussion reports are extended to allow for meaningful negotiation. It is hoped this will reduce the amount of budgeting hearings.
  • The budget variation process (Precedent T) is simplified. Details of a more straightforward process have not been provided.
  • There should be penalties for those who default on aspects of the budget timetable leading to a wasted court resource.
  • Hourly rates and incurred costs in the budgeting process are reviewed further.

Guideline Hourly Rates

The general consensus of respondents took the view the GHRs had a useful role in that they were a starting point for assessment and broadly reflect market rates.

In the short term, recommendations are:

  • A new band for complex, high value, commercial work is introduced, whether in London or elsewhere.
  • Hourly rates are subject to yearly reviews linked to SPPI on the 1 January each year. A retrospective uplift to the 2021 figures is to be applied and a detailed review should take place every 5 years. 
  • Counsel’s fees should be capable of being assessed by reference to GHRs, separately to solicitor GHRs.
  • A clearer test is introduced to allow for departure from GHR. No details of this proposed test are provided.

Costs under pre-action protocols/portals and the digital justice system

The aim of pre action processes, digital or otherwise, to settle claims without the need for litigation  or to narrow the issues where possible, should be encouraged and any reform should further this aim. 

Key proposals are:

  • Changes to pre-action costs; specifically the extent of recovery for new digital pre-action protocols. These should not impact recovery of pre-action costs post-issue.
  • A review of the Solicitors Act 1974 in view of the digitisation of dispute resolution.

Consequences of the extension of Fixed Recoverable Costs

As the extension of FRC regime is already underway, the general implications were not addressed in any depth. The only recommendation of note is:

  • The introduction of a costs cap of £500k into the Shorter Trials Scheme for patent cases.

Next steps…

The CJC will now consider how these recommendations are taken forward.

Look out for further commentary from the Clarion Costs Team.

Anna Lockyer is an Associate in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact the team at civilandcommercialcosts@clarionsolicitors.com