Decision in SARPD causes costs budgeting rule change

Following the judgment of Lord Justice Sales in the now infamous SARPD case SARPD Oil International Ltd v Addax Energy SA & Anor [2016] EWCA Civ 120, the Civil Procedure Rule Committee has put forward proposals to amend the CPR.

To remind all, the decision of LJ Sales outlined that the correct forum for raising any issues with either parties’ incurred costs was at the first costs budgeting hearing (whether that be a Costs and Case Management Hearing or Costs Management Hearing). He further added that where the Court does make comment on the incurred costs at the costs budgeting hearing, those comments can only be departed from on assessment if the opposing party could show good reason to do so.

This decision had the effect that if there were no objections raised on incurred costs, they were deemed to be agreed. Issues were raised, in particular that costs budgeting hearings would effectively become ‘mini detailed assessments’ where both parties would be required to raise issues with the incurred costs, without which they would not be able to challenge the same on assessment. This was not the aim of costs management and added an extra layer to costs management.

As of 6th April, the CPR are being amended to reverse this decision, whereby the Court can ‘comment’ on incurred costs, and can record the extent to which they are agreed. The rule change puts us back into the position pre-SARPD, in that the incurred costs can be commented upon, but the Court is not to undertake full assessment on these costs.

This rule change is welcomed, and is, in my view correct. A ‘mini detailed assessment’ at costs budgeting hearings would only serve to lengthen hearing times, at a time when the Court’s resources already seem over-stretched.

It does seem a shame however that the rule committee did not take into account one further suggestion from its sub-committee; to decouple incurred costs and budgeting costs completely. The position currently is that incurred and budged costs for each phase, once considered by the Court, are then aggregated to produce on overall total phase. This can cause confusion and difficulty if a budget needs revising or when the costs are eventually claimed at conclusion. If the rules were amended to outline completely that incurred and budgeted costs are separate, and a total given for each, this would give further clarity.

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