Back to basics

As the pressure to reduce the costs of litigation increases, Francis Kendall advises practitioners to look closely at petty disbursements at the budgeting stage

In considering a topic for practical advice on costs budgets, all sorts of interesting decisions are due from the Court of Appeal and Supreme Court on some pretty highbrow and high-quantum topics. The speculation thereon has been widespread and, in my opinion, done to death.

I therefore propose to deal with something eminently more practical, and significantly more basic, based on a position that shocked me when I first started temping in a solicitors’ accounts department in the early 90s.

Having temped in various accounts departments during my university years, I moved positions from a drug company (where one of the tasks of the department was to deal with the significant cash requirements and expenses of the company executives travelling the world securing deals) to a law firm based in similarly prestigious offices but where I had to log on to the photocopier to use the machine.

The reasoning is sound and good business. Lawyers sell time and that is probably the most finite resource known to man. Therefore, profitability is as much based on reducing overheads or waste as it is working long hours and bringing in new business.

How are such petty disbursements dealt with in budgeting or an after-the-event assessment of costs? The answer, as it invariably is, is with discretion, and the key thread throughout paragraph 5.22 of practice direction 47 is exceptionality.

Petty disbursements

On a practical level, and on assessment, there is a relatively arbitrary approach to the use of discretion but, fundamentally, any such disbursements must be properly particularised if a claim is to be successful.

Taking travel as an example, local travel costs are delineated as being irrecoverable, with a guide that a ten-mile radius is local. Is there scope for non-local travel in the case – where are your offices, where is the client and any witnesses (although they should, arguably, visit you), and where are counsel’s chambers? These are generally easy questions for London-centric work, but that is not always the case.

Similarly, where do copying and other petty disbursements fall on the exceptional scale? Given that the default position is that these are assumed to be absorbed in the overhead element of the hourly rates, there must be some sort of quantum relationship between the level of such overheads and the fees claimed (or, arguably, recovered). In a case with hundreds of thousands of pounds in fees, a few hundred pounds worth of such disbursements are unlikely to be exceptional or unusual.

What is the cost of trial bundles? In themselves they are not exceptional in any case, but the level of documents should be considered. A document-heavy case could easily lead to an exceptional level of charges.

In addition, let us not forget the wonderfully quaint approach of charging your opponent for copies, a practice that seems to be a dying art. It is likely that any practice could save a small percentage of overheads in circumstances where an opponent refuses electronic service (a position that can only be out of spite in this day and age) or insists on multiple copies for their entire legal team.

Moving to budgeting, it seems inevitable that overlooking these expenses at that stage will create a significant hurdle to any recovery after the event. There will, inevitably, be difficulty in highlighting and justifying these disbursements as exceptional at the budgeting stage and assumptions are unlikely to justifiably cover such petty issues.

Easily overlooked

At the budgeting stage, one of the key contributions from a costs lawyer is to ask the right questions in order to highlight disbursements that could easily be overlooked.

Counsel and expert charges are no-brainers, but it is not uncommon to overlook other perfectly recoverable disbursements at the budgeting stage: court fees (although these are arguably recoverable even if overlooked); e-disclosure charges and associated document management fees; mediator’s fees (either in the ADR phase or as a contingent); witness expenses; and transcribers’ charges for hearings or trial are all good examples of those that may be overlooked.

In circumstances where there is increased pressure to reduce the cost of litigation, with the inevitable result of reduced profitability for legal practitioners, it seems only natural that a back-to-basics approach of seeking to reduce or mitigate overheads is good business. At the time of preparing any budget, such overheads may not have the appearance of being exceptional but, in circumstances where a budget is reduced by a significant amount, they may become so.

I look forward to the multiple calls on what is a reasonable charge for a photocopy that I have so missed over recent years. SJ

This article first appeared in the Solicitors Journal on 14 February 2017.

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21 Feb 2017

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