Costs budgets are your business, not for judges to micromanage

Most lawyers think that hourly rates have a role in costs budgeting. It makes the process absurd if the court does not take this into account. However, the judiciary appears to take
a very different view, as expressed clearly at the Association of Costs Lawyers’ annual conference in May.

During a panel session, district judges appeared unanimous that they were not interested in arguments over hourly rates (paragraph 2.3 of practice direction 3E provides that when reviewing budgets, the court will not undertake a detailed assessment in advance).

The Judicial College teaching was that the rule required the approval of phases, and they should not go into charge-out rates or the time expended.

Judicial training

District Judge Chris Lethem, who has given much of the judicial training, added: “In fact, I will go further – I do not think that we should have to agree phases, and I think the whole idea of phased budgets is a helpful tool, but actually approving each phase, and treating them as if they were hermetically sealed, is something of a myth...

“If you begin to overspend a phase, you will call in a cost lawyer, who will say, ‘Where do you want me to put the money’, quite legitimately, because costing is an art, not a science.”

There was a discussion about whether lawyers would like to have issues such as the hourly rate dealt with at the budgeting stage, to aid certainty, but the judges insisted that to do so would be micromanaging the budget. “We are meant to just say, ‘Look, here is your overall budget, how you want to spend it within the phases is a matter entirely for you,’” said Lethem DJ.

Master Gordon-Saker of
the Senior Court Costs Office added: “It is better that [clients] know in advance that it is going to cost them £500,000 and they are only going to recover £300,000, than they get the nasty shock at the end when
the bill is £500,000 and they have only recovered £300,000.”

Lethem DJ said it can be “very instructive” to go through the phases backwards: “Look at the length of the trial and see what that is going to cost, and you may take the view, ‘I am sorry, this cannot be a five-day trial;
the only proportionate trial is three days’.

“Now we have got to try and fit this trial into three days, which means that we have got to get a grip on the experts, we have got to get a grip on the witness statements, so that begins to inform the nexus between the budget and the directions.”

One problem is that precedent H requires lawyers to provide details on rates, hours and fee earners, and the mood of the meeting favoured simplifying the form to remove this information, given the court
will not address it.

Updated budgets

Away from hourly rates, the judges were asked about the format of revised costs budgets: should you file an updated budget, including the further costs that have been incurred to that stage, or resubmit the original budget that was prepared and ask for an extension on the costs under particular phases?

Lethem DJ said: “The budget has to be remodelled to the date when you are actually making the application, because to a certain extent that may influence the decision that I have to make about the variation.

“You may be seeking
more witness statements, for example, and I need to see what you have already spent on your witness statements.”

District Judge Simon Middleton, a regional costs judge, added that he is also seeing ‘updating budget’ in
the assumptions.

“Really? No one has ordered you to? How do you know there are going to be significant developments? Out that comes. You do not have that automatic right to update, so do not include it in the budget first off.”

You have been warned. SJ

James Barrett is a council member at the Association of Costs Lawyers