A further amendment to the Civil Procedure Rules was laid before parliament this week, less than three weeks before the reforms are to come into force on 1 April 2013.  This affects two key areas of the proposed reforms: costs budgets and the proportionality test to be applied by the courts when determining whether the costs incurred are recoverable.  This article summarises the changes and includes some useful links to the relevant rules and to our previous articles on the proposed reforms.

Costs budgets

It was originally envisaged that the requirement to provide costs budgets in proceedings should apply to everyone, but Lord Jackson’s vision has gradually been eroded.  First the Admiralty and Commercial Courts opted out, followed by other courts who felt that they should also benefit from an exemption from automatic costs management on the basis that it might not always be appropriate, particularly in high value cases.  The latest amendment to the proposed new rules codifies the courts’ discretion when it comes to requiring the parties to file costs budgets.  It is anticipated that a further amendment to the practice directions will remove the requirement to file a costs budget for claims over £2 million.

This latest development may not necessarily dilute the relevance of the reforms for those involved in high value disputes.  It is envisaged that even where exceptions to the rules may apply, costs management orders will be made in all cases except where there is good reason not to do so.  The issue of costs management may become an unwanted complication, subject to the predilections of individual judges.  It is likely to become another weapon in the litigator’s armoury as parties try to argue whether or not costs budgets and other costs management rules (including costs capping) should apply according to the best interests of their client.

The proportionality test

We have known for a while that the proportionality test to be applied when deciding whether or not costs are recoverable on the so-called ‘standard basis’ is going to be changed under the reforms. Whereas previously it was possible to recover costs regardless of whether they were proportionate provided they were shown on an item-by-item basis to be reasonably and necessarily incurred, the new test is more stringent.  It simply requires the court to consider whether the costs were proportionate, taking into account, amongst other things, the sums in issue, the complexity of the litigation, and any wider factors such as reputation or public importance.

The latest amendment makes further changes to the transitional provisions relating to the new proportionality test that will be applied.  It appears that for cases commenced after 1 April 2013, two separate proportionality tests may be applicable depending upon when the costs were incurred by the relevant party.

It is clear that practitioners will need to remain alert to any further changes in the run-up to 1 April 2013.  CMS has been providing regular updates via its law-now service and links to our most recent articles relating to the Jackson reforms are provided below. 

Links to the relevant rules:

Civil Procedure (Amendment) Rules 2013:

http://www.legislation.gov.uk/uksi/2013/262/contents/made

Civil Procedure (Amendment No. 2) Rules 2013:

http://www.legislation.gov.uk/uksi/2013/515/contents/made

60th Update – Practice Direction Amendments:

http://tinyurl.com/bj3mc4w

Our previous articles on the reforms:

Changes to the requirements on costs budgets:

http://www.law-now.comhttp://www.law-now.com/xc.asp?g=C4469F1E-D258-4945-916F-3B95AFE2E09B

Summary of the new costs rules:

http://www.law-now.comhttp://www.law-now.com/xc.asp?g=BE1E2A60-CAFC-45E2-97FD-07BE5D603E2D

The recoverability of costs following the Sylvia Henry case:

http://www.law-now.comhttp://www.law-now.com/xc.asp?g=1717FA56-5323-42AD-BF9F-95DC38617829

Conditional fee agreements and damages-based agreements:

http://www.law-now.comhttp://www.law-now.com/xc.asp?g=6CAE1EA4-87CA-464B-8374-DC331D8C79A9