Costs Budgeting: Why the Right Directions Need the Right Costs Budget
Written by Steve Jones, Senior Costs Draftsman
The Ministry of Justice’s April to June 2026 figures show a median of 55.9 weeks from issue to Trial for Fast, Intermediate and Multi-Track County Court cases combined. That is not a Multi-Track-only figure, and it measures cases which reached Trial rather than every claim issued. But even the combined measure is more than a year after proceedings have begun.
That got me thinking about the costs decisions we make early in litigation, and who we ask to argue them.
In a substantial claim, instructing senior Counsel or a KC to deal with difficult Directions may be entirely sensible. If the expert evidence, disclosure or Trial estimate is disputed, you want someone who understands the claim and can explain what is needed.
I think the Costs Budget deserves much the same approach.
Where a case is being Costs Managed, obtaining the Directions is only part of the exercise. Someone also needs to defend reasonable provision for the work those Directions require. Otherwise, the litigation team may leave the hearing with the procedural outcome it wanted and a recovery problem it has not fully considered.
The Directions and the Budget need to work together
CPR 3.17 requires the Court to consider available Budgets and the costs of procedural steps when making case management decisions. Where a Costs Management Order has been made, CPR 3.18 requires good reason to depart from approved or agreed Budgeted phase totals on standard-basis assessment.
The connection matters, but it should not be overstated. Permission to undertake a step does not establish that every proposed cost of doing so is reasonable.
Nor is a Costs Budget a funding facility. The Costs Management Order controls Budgets in respect of recoverable costs. It does not provide the money to conduct the litigation or promise reimbursement of everything spent.
The team therefore needs to understand both what the case is expected to cost and what the Budget reasonably provides for. Where those figures differ, the difference needs managing.
If Counsel is explaining why particular evidence or a procedural step is necessary, the costs argument should explain the resources reasonably required to deal with it. The allowance needs to be defended by reference to the litigation it supports.
The costs instruction should not end with Precedent H
Where a Costs Specialist has prepared the Budget, much of the detailed work should already have been done. The question is how effectively that knowledge is used when the figures are challenged.
The drafter should understand the assumptions behind each phase, the proposed Directions and what the file history tells us about the work still required. The time records, correspondence and discussions with the fee earner may explain demands which are not apparent from the pleadings alone.
That knowledge should inform the Precedent R, the responses to the opponent’s objections and the negotiations which follow. The instruction needs to allow for that work, rather than end when Precedent H is delivered.
The specialist should also be willing to challenge the litigation team. Defending a Budget does not mean accepting every original assumption or resisting every reduction. Identifying unnecessary work, unsuitable staffing or a weak argument before the hearing is part of doing the job properly.
What does a proposed reduction actually mean?
A lower counteroffer tells you how far apart the parties are. It does not necessarily explain the disagreement.
The objection might concern whether the work is needed, its scope, the time allowed or who should carry it out. It might instead reflect a different assumption about how the litigation will develop. Those arguments require different answers.
Paragraph 11 of Practice Direction 3D requires the Budget discussion report to identify the agreed and disputed figures and briefly summarise the grounds of dispute. Useful negotiation starts with those grounds, not merely the distance between the totals.
Before agreeing a reduction, the litigation team should understand what it means in practice. Does it remove work which is no longer needed? Does it reflect a more efficient way of carrying out the task? Or does the same work remain, with less provision for recovering its cost?
Those are quite different outcomes. The first two may justify a concession. The third needs a conscious decision about the risk being accepted.
This is where the Costs Specialist’s knowledge of the file and the calculation becomes particularly useful. They should be able to explain whether the proposed allowance is workable, rather than simply advise whether it is a figure the Judge might accept.
Comparisons with the opponent’s Budget need the same care. A lower Defendant Budget may reflect different responsibilities, work or staffing. I would want those differences understood before treating it as a benchmark for the Claimant’s.
That does not require manufactured objections to the other party’s reasonable figures. It is perfectly possible to accept that their allowance is appropriate for their work while explaining why yours differs.
A concession should be made with an understanding of its consequences, not simply because it brings the parties closer to agreement.
The reasons for additional work need to reach the Court
Some features of a case may be understood by the litigation team but inadequately explained when the Budget is challenged.
The Claimant’s vulnerability is one example. Practice Direction 1A recognises that vulnerability can affect participation, evidence and the ability to instruct representatives.
CPR 44.3(5)(f) expressly recognises additional work or expense arising from vulnerability. Additional work generated by the paying party’s conduct is separately identified in CPR 44.3(5)(d). Paragraph 5 of Practice Direction 3D brings those factors into the Budgeting exercise.
The practical task is to explain what work those circumstances reasonably require and where it belongs.
Saying that the Claimant is vulnerable and the case will take longer leaves too much unexplained. So does a general complaint that the Defendant has been difficult. The submission needs to connect the circumstances to the expenditure being defended.
Neither point justifies an arbitrary uplift. Both may explain why an allowance which appears generous on a superficial reading is reasonable when the work is properly understood.
There is little benefit in having a sound reason for an allowance if that explanation is lost during negotiations or never put before the Court.
Prepare the advocate, not just a bundle of paperwork
Where someone else will argue the Budget, the Costs Specialist should provide a focused briefing on the outstanding disputes, the concessions already made and the reasons for maintaining the remaining allowances.
That is different from routinely filing additional material with the Court. Subject to exceptional circumstances or a contrary order, paragraph 3(a) of PD 3D expects only Precedent H and the Budget discussion report to be lodged. Paragraph 10 also restricts additional assumptions documents.
The advocate needs the detail behind the argument. The Court needs concise submissions which explain the real disagreement.
A useful briefing should identify the assumptions that matter, answer the substantial objections and make clear where there is room for agreement. Sending over the Budget and competing figures without that analysis leaves the advocate to reconstruct work which has already been done.
Who should argue the Budget?
Budgeting is not a Detailed Assessment in advance. Under paragraph 12 of PD 3D, the Court considers whether the proposed costs fall within a reasonable and proportionate range. CPR 3.15(8) concerns phase totals, not approval of the hourly rates used to calculate them.
The person attending needs to use the underlying detail selectively. They should be able to explain why an allowance is reasonable and what an objection overlooks, without taking the Court through every entry in the calculation.
The Costs Draftsman who prepared and negotiated the Budget may also be the best person to argue it. Where they have the necessary advocacy skills and can properly appear at the hearing, there may be little benefit in asking someone else to learn the same material again.
Other cases will benefit from specialist Costs Counsel working with the drafter. The choice should depend on the dispute and the people involved.
Entitlement to appear remains a separate question. Professional authorisation is not the only route: statutory exemptions and permission from the Court may also apply, subject to the requirements of the particular hearing.
Equally, Counsel dealing with the Directions may have the costs expertise and preparation to handle both parts effectively. There is no reason to duplicate that work.
But “Counsel is already attending” is not, on its own, a sufficient reason to decide who should argue a substantial Costs Budget.
Counsel may have been selected for their expertise in the damages claim. The costs arrangements should give them room to concentrate on that work while ensuring that the Budget receives proper attention too.
This becomes particularly important when Directions change during the hearing. Someone needs to understand what that means for the disputed phases and be ready to explain the revised allowances. The Budget should not be adjusted through hurried concessions made without understanding what the remaining figures need to cover.
A later variation is not an answer to every concession
There may be a proper basis for revising a Budget as the litigation develops. I would not rely on that when deciding whether to concede an allowance at the first CCMC.
In Bassey v Whittaker & Anor [2026] EWHC 2126 (KB), Cavanagh J confirmed at paragraph 60 that, at least absent agreement between the parties, a significant development is a necessary precondition to varying a finalised Budget. The Court has no general discretion to increase it merely because further expenditure has arisen. The position where the parties agree was left open.
Paragraph 79 emphasised whether the development could reasonably have been anticipated when the earlier Budget was approved. Additional work and a significant development are not necessarily the same thing.
At paragraph 81, the judgment recognised that an argument for departure at Detailed Assessment may remain available, but described that later exercise as an “uphill battle”.
The lesson for negotiations is straightforward. A proposed reduction needs to be understood when it is made. The possibility of a later application is not a reason to avoid properly defending foreseeable work now.
Is specialist attendance worth the additional fee?
This is a fair question, particularly where Solicitors and Counsel are already preparing for the hearing.
The answer should depend on the recoverability risk the instruction may help manage. The fact that the claim is valuable does not, by itself, make every additional fee worthwhile.
Does the instruction bring expertise which is otherwise missing? Does it avoid unnecessary duplication? Is it likely to improve the team’s ability to defend the disputed allowances? Those are more useful questions than whether another representative is always needed.
There is also a distinction between the value of the instruction and recovery of its fee. Under CPR 3.15(5)(b), save in exceptional circumstances, all other recoverable Budgeting and Costs Management costs are limited to 2% of the total incurred costs agreed or allowed on assessment and Budgeted costs agreed or approved. That is an aggregate limit, not a separate allowance for each representative.
Even where the attendance fee is not fully recovered, the instruction may still be commercially worthwhile.
If specialist input secures materially better provision for properly justified work, its value may substantially exceed the fee. On a substantial claim, the cost of one attendance can pale into insignificance beside an avoidable shortfall in recovery.
A larger Budget does not guarantee a larger recovery. Nor should success be measured solely by how much is added to the figures. A sensible agreement, an unnecessary concession avoided or an unsustainable argument withdrawn can all have value.
The aim is a realistic Budget and an informed decision about any remaining shortfall. Depending on the retainer, that shortfall may affect the firm, the client or both. It should not emerge as a surprise after settlement.
Keep the knowledge on the file
After the hearing, the litigation team should understand what was allowed, what was conceded and the assumptions behind the final figures.
Keeping the Costs Specialist involved helps the team monitor expenditure against the work still required and identify developments which may warrant revision. Where they do, CPR 3.15A requires prompt action.
For me, this comes back to choosing the right support for the litigation. We give careful thought to the expertise needed to secure the Directions. The decision about who negotiates and defends the Costs Budget deserves the same attention.
The person best placed to do that may already have prepared it.
For support with a forthcoming CCMC, including Costs Budget negotiations, responses to Precedent R, preparation for the hearing or specialist Costs representation, please contact Steve Jones at Kain Knight.
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