CIVIL PROCEDURE BACK TO BASICS 89: THE 2% CAP ON COSTS BUDGETING: SOMETHING TO WATCH OUT FOR

Some draft orders for CCMCs I have seen recently included, towards the end a provision for the 2% cap on the budgeting process to be be applied.  Anyone faced with such a draft should point to the provisions of CPR 3.15(3).

THE WORDING OF THE DRAFT ORDERS

The wording usually reads.

“The 2% cap in relation to the recoverable costs of Costs Management shall be disapplied”

THE STAKES CAN BE HIGH

In one case I was involved, and representing the party likely to be the paying party,  in the costs claimed in the budget were in excess of £2 million (nearer £1 million after budgeting ), so the sums allowed for budgeting are already high.

CPR 3.15(5)

The first point that needs making is that parties should look out for this type of provision, it may be being included as a matter of course. The second point is that the lifting of the cap is not a matter of course.  A party seeking to disapply the 2% cap must satisfy the court that there are “exceptional circumstances”. 

THE RULE

(5) Save in exceptional circumstances—

(a ) the recoverable costs of initially completing Precedent H (the form to be used for a costs budget) shall not exceed the higher of—

(i) £1,000; or

(ii) 1% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted costs (agreed or approved); and

(b) all other recoverable costs of the budgeting and costs management process shall not exceed 2% of the total of the incurred costs (as agreed or allowed on assessment) and the budgeted (agreed or approved) costs.

[CPR 3.15 (5) only permits the court to exceed the 2% cap in “exceptional circumstances”. The Defendant does not accept that there are exceptional circumstances here, this is a perfectly normal budgeting process. ]