It was announced in November 2024 that the legal costs sphere would see the introduction of Simplified Costs Budgeting, referred to as Precedent Z, to come into play from the beginning of April 2025. The pilot scheme was provided in more detail with the recent publication of the 179^th Practice Direction update.

The scheme seeks to trial a Simplified Costs Budgeting regime for claims valued up to £1m, lasting three years (unless varied) from 1 April 2025 to 31 March 2028. Although, it is believed that we will witness the scheme being used more widely after its initial release irons out teething problems.

The CJC Costs Working Group was tasked to review costs budgeting after 10 years of its practice. Recommendations were made for “a more flexible approach to costs budgeting,” acknowledging that since the initial introduction of the costs budgeting framework, the proportionality of costs had improved. However, many respondents agreed that a new approach was needed to enhance the effectiveness of the process further, allowing for more proficiency and accuracy.

What is Simplified Costs Budgeting?

The new pilot scheme aims to make for a streamlined costs budgeting technique, compared to the current practice. A new Precedent Z, now with two pages (as opposed to the previous Precedent R), Precedent ZR (simplified budget discussion report) and Precedent ZT (simplified Precedent T for variations made to approved/agreed costs budgets) will be followed for qualifying cases for the duration of the pilot scheme.

The Simplified Costs Budget has also produced two new Practice Directions, PD51ZG1 and PD51ZG2.

What claims does it apply to?

The Simplified Costs Budget has produced the following three pilots to apply in respective circumstances:

1. Business and Property Courts (BPC): Certain claims in the Business and Property Courts and Business and Property work in the County Courts of Manchester, Leeds and Central London. Claims issued between 1 April 2025 and 1 April 2028 with a value of less than £1 million. Claims in the BPC were said differ calling for special provisions as in this case “one size does not necessarily fit all.”
2. Costs Budgeting Light: claims with a value of up to £1 million which are issued on or after 1 April 2025 and before 1 April 2028 to which budgeting applies, and to which take place in the Central London County Court or at the Leeds or Bristol District Registries.
3. QOCS: In cases in the High Court District Registries at Manchester and Birmingham that involve QOCS. There is no current maximum limit on the claim value.

What is the difference in procedure?

Where pilot schemes apply, the changes in procedure will be as follows:

1. Simplified Costs Budget: Must be filed 21 days before the first CMC unless the Court says otherwise.
2. Simplified Budget Discussion Report: Must be filed 7 days before the first CMC.
3. Variations of Costs Budget: If a CMO is made, either party can apply to change their budget if there is a significant development.
4. If No CMO: Parties must be filing an updated Simplified Costs Budget 7 days before the trial starts, the trial window begins or before any PTR – whichever should come first.
5. Court Orders Updates: If no CMO is made, the Court can order parties to file updated budgets anytime.
6. Non-Compliance: Parties who do not comply may face sanctions, with the possibility of Court fees only.

At the first CMC, the Court can either make a costs management order (CMO) or decide that under CPR3.15(2) a CMO is not necessary.

If no CMO is made, the parties must file an updated Costs Budget at least 28 days before the trial or trial window, or 7 days before the pre-trial review. CPR PD 44 3.2 to 3.7 will also apply should the party’s costs exceed the budget by 20% or more. This must be justifiable; with an unsatisfactory explanation the Court can limit the recoverable costs.

There lies an exception in the Business and Property Court for claims which have an uncertain value or seek non-monetary relief. Here, the claim will be treated as worth over £1 million unless the Court decides otherwise.

The Court, as always, retains its discretion to order updates at any point of the case and impose sanctions, including limiting recoverable costs to Court fees.

The new Precedent Z, Precedent ZR and Precedent ZT – What has been updated?

The Simplified Costs Budget (Precedent Z), modelled on the original Precedent R, consists of two pages, a front sheet and an assumptions tab, with the incurred and budgeted costs broken down into time costs, counsel fees and other disbursements. Hourly rates are also no longer addressed in the budget documents.

There is space given for the value of the claim, counterclaim and any additional claim, placing emphasis on the sums a costs management exercise will focus on.

The Precedent ZR does not adopt much change despite the fact that it features an extra column to split the budgeted costs claimed and offered by time, counsel, and other disbursements, allowing parties to keep the breakdown out of written submissions. Judges’ comments are also split between time and disbursements to allow for a more apparent impression of the judge’s perspective.

Lastly, Precedent ZT has two separate tabs. The Budget Front sheet includes five sections for incurred costs, previously budgeted costs, variation sought, new total and the total budget approved by the Court after variation. The Variation Particulars consist of a table that breaks down the additional costs by time, counsel, and other disbursements. Precedent ZT adds a space for an aggregated explanation of the variation and opposing parties’ comments and offers.

Additionally, there is a section for any extra expert fees, with space to detail the expert type, report fees, conference fees, and joint statement fees. It also shows the total variation and previous budgeted costs for each expert.

What does it mean going forward – what are the possible challenges?

As the Simplified Costs Budget is yet to be rolled out, legal professionals that it will impact are getting to grips with the new formats and information provided. Though the presentation has been broadened and simplified, the process may not feel much change. Hourly rates are no longer laid out in the budget documents, which may cause discrepancies in how the Court arrives at the proportionate figure.

The pilot scheme is expected to develop in the years it is in place, with a potential expansion to cover more claims. It is clear that justification and reasoning remains paramount in the costs budgeting process, with an emphasis on having an effective costs budget prepared. Although the Simplified Costs Budget appears to be less focused on a breakdown of reasoning, by having this prepared, parties will reduce the risk of amounting costs at the end of a claim.

How can Greener Costs assist?

Greener Costs are a team of expert law costs draftsmen with many years of experience in the field of legal costs. A costs draftsman from our team can assist by drafting your Precedent Z Cost Budget, once the pilot is actioned, and by engaging in negotiations with the other party to reach an agreement as to costs. We can facilitate from the outset of a case by assisting in the drafting of retainers, right through to the settlement of a case by drafting bills of costs, points of dispute, and points of reply. We can assist receiving parties, paying parties, and litigants in person.

In addition to our drafting services, at Greener Costs, we are actively doing everything we can to ensure our business benefits the environment.

We are doing this through carbon offsetting of our staff, becoming completely paperless and carbon offsetting through each instruction.

For a free, no obligation discussion, get in touch using the form at the bottom of the page.