A get out of jail free card for costs budgeting?

In such a fast-moving world, it is reassuring that some things stay the same. Every year, the Association of Costs Lawyers surveys its members to get a snapshot of how they are feeling about life. Every year, when looking at budgeting, the majority of costs lawyers tick the box marked 'Solicitors think they can do it - and they're wrong'. The recently published 2015 edition is no different.

We could be accused of being self-serving and even a little bitter, but I believe the sentiment is justified. All too often, budgets are being undertaken by those with less experience in budgeting, at higher hourly rates, and for longer than a costs lawyer would reasonably take.

But if you still want to take the risk, here are some key tips to keep in mind.

Multi-stage process

An important starting point is that the headline figure for total reasonable costs in any case should be entirely disregarded.

Budgeting is a multi-stage process. It is not important to have a finalised and acceptable budget from the outset. Disregard the maths and focus simply on the reasonable hours and resourcing levels in each category necessary to bring the case to trial. At the end of that initial stage, you will have a total for the proposed budget and can step back as necessary.

Following exchange, both sides’ budgets can then be analysed and the appropriate amendments made. Any disagreement remaining can be dealt with at the case and costs management conference (CCMC), with further amendment thereafter. 

It is important not to reduce your own budget, based on the reasonable time required in each category, in advance of negotiating with your opponent and applying reductions at that stage and/or following comment from the court.

I will never forget the significant pilot scheme budget that I was involved in where the claimants, against my advice, applied a squeeze on themselves in advance of exchange. They then found the defendant’s budget (prepared in haste as they felt they did not need to budget) was a multiple of their proposed fees.

'Good reason'

A costs budget should not be ignored following the CCMC, and any potential or real overspend in a category should be identified and dealt with in advance. I do not believe that this message could be clearer and yet is being habitually ignored. If I had a pound for every costs claim in a budgeted case that involves pleading on assessment that there was a good reason to depart from the budget, I would be planning my imminent retirement.

By way of a practical example, I am due to undertake a detailed assessment early next year in a budgeted case. My client, the solicitors in the case, prepared the initial budget themselves. The ultimate costs claim exceeds the budget in several categories - these include, by a significant margin, the categories of disclosure, witness statements, and expert reports, the areas where overspend is most common.

There was no effective monitoring of the budget and no applications were made to amend the budget in advance of the costs being incurred. 

Given the size of the claim, the fees for preparing the budget by an external costs lawyer would have been no more than a few thousand pounds at most. The exposure to overspend on assessment, in circumstances where ‘good reason’ does not do the job, is approaching £70,000. 

I am minded to describe this as a false economy, but given that the solicitors’ charges for preparing the initial budget were themselves in excess of what a costs lawyer would have reasonably charged, that is inappropriate. There was, however, a certain false economy in failing to monitor the budget following the CCMC in the circumstances.

I doubt if such a sorry tale is unique or the last of its kind. In my opinion, relying on the relatively new and untested application of ‘good reason’ at detailed assessment as a ‘get out of jail’ default is both naïve and

dangerous when significant sums are at stake. One hopes, however, that given the significant delay in listings at the Senior Court Costs Office, any costs judge reading this article will have long forgotten my comments by the time my case is heard. SJ

Francis Kendall is a council member of the Association of Costs Lawyers @CostsLawyers