Costs budgeting is a central feature of modern litigation, shaping what parties can recover and, in some cases, determining whether significant costs are recoverable at all.
A recent Technology and Construction Court decision in National House-Building Council v Hodson Developments Ltd & Ors [2025] EWHC 3438 (TCC) is a sharp reminder of just how unforgiving the rules can be when budgets are served late. One Defendant lost the ability to recover most of its costs simply because its budget arrived far too late – despite attempts to fix the problem at the hearing.
This blog by Chris Lacey, Operations Manager at YLC looks at what happened, what the rules require, and what firms should be doing in practice to avoid the same fate.
What happened in the recent case?
In this case, three Defendants were required to file and serve their costs budgets by 30 May 2025.
- Defendants 2 and 3 missed the deadline by one day.
They applied promptly for relief from sanctions and the court granted it at the Costs and Case Management Conference (CCMC). - Defendant 1 served its budget around 20 days late – on the day before the CCMC.
It tried to apply for relief from sanctions “in the face of the court” at the CCMC.
Because there was no proper application or evidence before it, the court could not deal with Defendant 1’s request there and then. A further hearing had to be listed. When the court later applied the well-known Denton test (seriousness, reason, and all the circumstances), it refused relief.
The result? Defendant 1 was treated as having a budget consisting only of court fees. That meant it lost the ability to recover the vast majority of its costs, regardless of what it might ultimately spend.
Two key messages came out clearly:
- Being a little bit late and acting quickly can sometimes be forgiven.
- Being very late and doing nothing until the last minute is likely to be fatal.
Why courts take budgets so seriously
The costs budgeting regime exists to promote:
- Proportionality
- Transparency
- Efficient case management
If parties could ignore budget deadlines and fix things later, the whole system would unravel. That is why the Civil Procedure Rules impose an automatic sanction.
Under CPR 3.14, if a party fails to file a budget when required, it is treated as having filed a budget limited to court fees – unless the court orders otherwise.
That is not a discretionary slap on the wrist. It is an automatic and extremely serious consequence.
The key deadlines you must know
The default position is set out in CPR 3.13(1):
- Where the stated value of the claim is less than £50,000:
Budgets are filed with Directions Questionnaires. - In any other case or if issued on and remains on the DCP:
Budgets must be filed and served not later than 21 days before the first CCMC.
However, this is only the starting point.
Courts often set different deadlines in directions orders. That means:
- You must read the order carefully
- You must cross-check it against CPR 3.13
- If the order is silent, CPR 3.13 applies.
Assuming “it will be the usual deadline” is a risky strategy.
The price of missing the deadline
Failing to file and serve a budget on time leads to:
- An automatic sanction under CPR 3.14
- The party being treated as having a budget of court fees only
- Severe limits on recoverable costs, even if the party wins
Trying to argue later that the sanction is “disproportionate” rarely works. The courts have repeatedly said that the sanction itself is built into the rules and is not, by definition, disproportionate.
Relief from sanctions is possible – but it is never guaranteed.
Relief from sanctions: what makes the difference?
When deciding whether to grant relief, courts apply the Denton test:
- How serious or significant was the breach?
- Was there a good reason for it?
- Looking at all the circumstances, is it just to grant relief?
In the recent case:
- A one-day delay was treated as relatively minor
- A 20-day delay was treated as serious
- The late party had no good reason
- The delay caused extra hearings and wasted court time.
That combination was critical.
The lesson is not that relief is impossible but that delay makes it harder with every passing day.
Why early instruction matters
Costs budgets are not something that should be left until the last minute.
Preparing a proper budget involves:
- Reviewing pleadings and directions
- Understanding the scope of the case
- Breaking work into phases
- Estimating future work realistically and proportionately
Rushing this process increases the risk of:
- Errors
- Unrealistic figures
- Missed deadlines
To avoid this, best practice is to instruct a costs draftsman as early as possible.
As a rule of thumb, wherever you can, you should aim to involve Your Legal Costs at least 14 days before the budget deadline. That gives time to:
- Prepare a robust budget
- Deal with queries
- Make amendments
- Ensure service is on time
- Obtain estimates from Counsel and experts
Last-minute instructions dramatically increase risk.
What if the deadline is missed?
Mistakes happen. The crucial issue is what you do next.
If a budget deadline is missed:
- Do not wait
- Do not assume it can be fixed at the hearing
- Do not hope the other side “won’t mind.”
You should:
- Instruct costs specialists immediately.
- Prepare the budget as quickly as possible.
- Make a formal application for relief from sanctions promptly.
Speed matters. Courts are far more sympathetic to parties who act immediately than to those who delay and try to fix things at the last minute.
When helping with relief applications, Your Legal Costs will also need a clear and honest explanation of what went wrong. Courts expect candour, not spin.
Practical steps to protect your position
To reduce risk:
- Diarise budget deadlines as soon as directions are made
- Check every order carefully against CPR 3.13
- Instruct costs draftsmen early – ideally at least 14 days before the deadline
- Build in time for review and amendments
- Have a contingency plan if something goes wrong.
Budgets are too important to treat as an afterthought.
Final thoughts: timing is not a technicality
The recent TCC decision is not unusual. Courts across jurisdictions take budgeting deadlines seriously because they underpin the entire costs management system.
The difference between being one day late and 20 days late can be the difference between:
- A recoverable costs budget, and
- Being limited to court fees only.
That is not a technical distinction. It can be financially decisive.
How Your Legal Costs can help
At Your Legal Costs, we support firms with:
- Timely preparation of costs budgets
- Strategic input on proportionality
- Assistance with budget revisions
- Support on relief from sanctions applications
To protect your position, please instruct us as early as possible – ideally at least 14 days before your budget is due – via instructions@yourlegalcosts.co.uk
If a deadline has already been missed, contact us immediately. Acting quickly can make the difference between recovering your costs and losing them altogether.
Budgets are not just about numbers. They are about timing – and timing can decide everything.