A-Z on the Precedent Z
Effective from 6 April 2025, the realm of costs budgeting will undergo one of its most significant updates since the introduction of budgeting with the publication of the 179th and 183rd Practice Direction updates.
The new practice directions, PD51ZG1, PD52ZG2 and PD51ZG3 are now in effect, introducing Pilot Schemes for Part 7 multi-track claims issued between 6 April 2025 and 6 April 2028. These new directions launch the simplified costs budgeting precedents: Precedent Z, Precedent RZ, and Precedent TZ.
PD51ZG1
Pilot Scheme PD51ZG1 is applicable to the Business & Property Courts in Leeds, Manchester, and the Rolls Building, as well as to Business and Property cases in the Leeds, Manchester, and Central London County Courts, provided the claim value is under £1 million. It also applies to any other claims where budgeting would typically be required, with a claim value of less than £1 million, in the Central London County Court, and the Bristol and Leeds district registries.
All parties, except litigants in person, must file and serve a simplified costs budget no later than 21 days before the first case management conference. If the claim does not include a statement of value, seeks only non-monetary relief, or if the parties cannot agree whether the claim value is £1 million or more, the claim will be treated as having a value of £1 million or more unless the court orders otherwise.
If the claim value is less than £1 million and a party has been served with a simplified costs budget, each represented party must, and each litigant in person may, file and serve a simplified costs budget report (Precedent RZ) no later than 7 days before the first case management conference. The Court will then issue case management directions at the first case management conference and, unless it is satisfied under rule 3.15(2) that a costs management order is unnecessary, will make a costs management order based on the simplified costs budgets.
For claims valued over £1 million, the Court is generally not expected to manage the parties' costs unless it determines that a costs management order is necessary to ensure the litigation is conducted justly and at a proportionate cost. If the Court issues a costs management order, it will provide directions on whether parties need to file costs budgets using Precedent H or the new simplified costs budget precedent, the filing of a Precedent R or a simplified discussion report, and the scheduling of a costs management conference if appropriate. Unless otherwise ordered, any such hearing should be listed and heard within 35 days of the first case management conference.
PD51ZG2
Pilot scheme PD51ZG2 applies to cases valued at £1 million or less, where neither PD51ZG1 nor CPR44.13 (QOCS) apply, in the County Court at Central London, or the Leeds or Bristol District Registry. Unless otherwise ordered, parties (except litigants in person) must serve a simplified costs budget no later than 21 days before the first case management conference (CMC), and file and serve Precedent RZ no later than 7 days before the first CMC. The Court will issue case management directions and, unless it is satisfied under rule 3.15(2) that a costs management order is unnecessary, will make a costs management order based on the simplified costs budget.
PD51ZG3
Pilot scheme PD51ZG3 will apply to Part 7 multi-track claims proceeding in the Manchester and Birmingham District registries where CPR 44.13 (QOCS) applies. All parties (save for litigants in person) must file and serve a Precedent Z no later than 21 days before the first case management conference. However, only the Defendant is required to file and serve a Precedent RZ no later than 14 days before the first case management conference, unless there are directions for a split or preliminary issues Trial, or a party seeks directions to manage costs using Precedent H. The Court will not make a costs management order for the Defendant’s costs unless it is satisfied that the litigation can only be conducted justly and at a proportionate cost if such order is made.
Importantly it is noted that this pilot scheme will apply to personal injury matters by reference of the QOCS provision. This wasn’t expected and Personal Injury Practitioners will need to make themselves aware of this process and the new court documents.
Relevant procedure to all Pilot Schemes
When the Court issues a costs management order using Precedent Z, the provisions of rule 3.15 (Costs Management Orders), rule 3.15A (Revision and Variation of Budgets), rule 3.16 (Costs Management Conferences), rule 3.17 (Having Regard to Budgets), and rule 3.18 (Assessing Costs on the Standard Basis) shall apply with necessary modifications. References to a "budget" in these provisions shall include Precedent Z, and references to Precedent T shall include Precedent TZ.
If no costs management order is made, the provisions of paragraphs 3.2 to 3.7 of Practice Direction 44 will apply, with references to a budget interpreted as references to Precedent Z and any Precedent TZ. Unless otherwise ordered, parties must file and serve an updated Precedent Z no later than 28 days before the start of the trial, the start of the trial window, or any pre-trial review, whichever is earlier. The Court may also order a party to file an updated Precedent Z at any stage of the proceedings.
Practicalities
With the rules disapplying budgeting for cases with base profit costs over £1 million, the presumption is that budgeting will not apply by default. Therefore, if any party believes that budgeting should be implemented, they must convince the Court of its necessity. In situations where there are significant concerns about proportionality, submitting written arguments is deemed beneficial.
The costs of preparing the precedents and conducting costs management work are still expected to be limited to 1/2%, although there are no specific rows on the Precedent itself and no guidance has been provided in judicial training. At this early stage, it is unclear whether there will be any issues regarding the recovery of budget preparation fees. The general consensus is that this will largely depend on arguments and decisions made at the case management conference.
While Precedent Z includes formatted assumption boxes on the second page, questions have been raised regarding the detail of these assumptions. Although there is no formal guidance, it is believed that as the work involved in simplified costs budgeting is similar to that in Precedent H, it may be beneficial for the court and other parties to provide additional pages with detailed information to assist if necessary.
There is also a question about what relevant information should be included in Precedent Z without following the current Precedent H process, such as providing a breakdown of hours or an expert table. Deliberate steps have been taken to remove this information from Precedent Z, however it could be helpful to the court and Defendants, as it is likely to be challenged or discussed during negotiations or hearings. It is believed that including such information will be subject to judicial preference, but it is likely that this information will be retained in the background to aid oral submissions by advocates. The judiciary has expressed concerns that the new process might deviate from its goal of offering a concise overview of assumptions, especially without formal guidance on the required information. Practically, it is believed that background information can be maintained, and advocates should present a more detailed breakdown of costs during hearings.
An area of contention with the new simplified costs budget is the inclusion of interim application costs. At the budgeting stage, it can be challenging to determine costs related to interim applications, which is why the current rule (CPR 3.17(4)) states that these costs are additional to the budgeted costs. It is still unclear how interim applications will be budgeted under the pilot scheme, but this seems to complicate the process somewhat. A sensible approach might be to continue dealing with application costs separately, given the many variables involved in the costs of applications.
It is noted that the Precedent RZ denotes Judges’ comments on time costs and disbursements separately, raising question as to whether parties can agree global figures for phases in the simplified budget. Although there is no formal guidance on this issue, it is believed that, in practice, parties will still be able to agree global figure for phases as opposed to splitting out across time costs and disbursements, with any split in the costs to be determined by the solicitors.
It will be interesting to observe the changes introduced by the pilot schemes over the next three years, particularly regarding whether the scope of claims covered by simplified costs budgeting will expand. As the pilots progress, further clarity is expected, which should address many practical concerns. The rules and comments so far emphasize the importance of accurate costs budgeting, even in a more concise format, due to the inherent risks for costs recovery. This underscores the crucial role of costs professionals in this area of law.
