Category: Claims handling · Reviewed by Amy Price, Account Executive · Last reviewed 2026-06-11
A costs management order (CMO) is an order made by the court at a case management conference recording the parties’ costs budgets and either approving them or fixing alternative figures for each phase — the operative document that caps recoverable costs in multi-track litigation.
The CMO is the procedural outcome of the costs budgeting exercise. Once made, it controls the parties’ recoverable costs for the remainder of the litigation. Departures from the approved phase totals require either the consent of both parties or a successful budget revision application; absent both, the unrecovered excess is borne by the party that incurred it.
CMOs are routine in multi-track cases of significant value. They were introduced in 2013 as part of the Jackson reforms and have substantially shifted the economics of litigation by making cost recovery predictable and bounded.
The CMO regime is contained in CPR Part 3 Section II and PD 3E. Key provisions include:
The “good reason” gateway has been the subject of substantial case law. Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792 established that good reason is a high threshold, not lightly crossed. Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB) confirmed that approved budgets are binding at assessment, subject only to the good-reason test.
The CMO regime sits within the overriding objective (CPR 1.1) requiring proportionate cost. The court has power to impose budgets even where the parties’ positions are agreed if the agreed figures appear disproportionate.
Following filing of Precedent H budgets, the parties typically attempt to agree as many phases as possible before the CMC. Agreed phases are recorded in the CMO; disputed phases are argued and resolved by the judge.
At the CMC the judge will:
The judge has wide discretion. Phases may be reduced where they appear excessive (high hourly rates, unrealistic time estimates, duplicative work). Phases may be approved as proposed where the figures are within the range of reasonable judgment.
Once the CMO is made, both parties operate within its limits. Time is recorded to the phase categories of Precedent H; expenditure is monitored against phase totals; supervising partners or claims handlers receive regular budget-versus-actual reports.
If a phase is exceeded, the party should apply to revise the budget — usually before the costs are incurred. The application must show a significant development warranting revision. A late application after the costs have been incurred is more difficult: the court may refuse on the basis that the party should have applied earlier.
At settlement or judgment, costs are assessed against the budget. If the matter is settled, the costs payable as part of the settlement are usually capped at the budgeted phase totals up to the phase reached. If the matter goes to judgment and detailed assessment, the costs judge will award costs up to the budgeted phase totals subject to standard assessment principles.
The CMO interacts with Part 36 offers. Where a Part 36 offer is accepted, the costs consequences (recovery up to the date of acceptance, costs after) are calculated by reference to the budget. Where Part 36 is exceeded by the winner, the enhanced costs sanctions apply within the budgeted limits.
“Agreed CMO” — where both parties’ budgets are agreed in full and the court simply records them. Common in straightforward multi-track cases.
“Partial CMO” — where some phases are agreed and others fixed by the court. The most common outcome at contested CMCs.
“Imposed CMO” — where the court fixes phase totals against the parties’ positions, typically in cases of evident over-budgeting.
“Revised CMO” — issued following a successful budget revision application. The revised CMO supersedes the original.
“Tomlin / Schedule” approach — where the parties settle, the CMO informs but does not necessarily control the costs element of the settlement schedule.
A construction professional negligence claim with a £900,000 quantum proceeds to a CMC. The claimant’s budget totals £490,000 (incurred £80,000 + estimated £410,000); the defence budget (insurer-funded) totals £420,000 (incurred £62,000 + estimated £358,000). The parties have agreed pre-action, statements of case, CMC and PTR phases. The defended phases (disclosure, witness statements, expert reports, trial preparation, trial, ADR) are argued for 90 minutes. The judge approves disclosure at £42,000 (each), reduces expert reports from £75,000 to £62,000 (each, reflecting that two experts rather than three are proportionate), reduces trial preparation from £85,000 to £70,000 (each), and approves trial at £110,000 (each, reflecting the seven-day trial estimate). The CMO records the agreed and approved phase totals: claimant £461,000; defence £393,000. The matter settles at the JSM nine months later for £540,000 plus £210,000 of costs against a budget-to-that-point of £224,000.
By Matt Bartlett, Director, on 2026-06-11. Next review: 2026-12-11.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-11. Apex Insurance Brokers Limited, FCA FRN 724952, Companies House 07014570. Not regulated advice — consult your broker on your specific position.
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