Practical guidance for practitioners on preparing costs budgets

Whilst cases concerning the pre 1 April 2013 funding regime and the granting of relief from sanctions continue to dominate the world of costs, this article offers some practical guidance for practitioners on preparing costs budgets.

When approaching the preparation of the budget, a vital first step is to check the date by which it must be filed in order to avoid the draconian sanction of limiting a party who has crossed the line to court fees only, if successful.

Checking the jurisdiction is also important along with the dates in issue. Budgeting is not usually required for those cases issued before 1 April, 2013 and following the rule changes effective this April very few categories of case are now exempt from the budgeting process save for those where the value of the claim exceeds £10 million.

Engaging with one’s opponent is an important part of the budgeting process as well as looking to the other members of your litigation team including counsel, experts and costs lawyer. All incurred fees must be phased and it is important to keep a note of them. Pre-action work includes that for considering alternative dispute resolution and settlement advice. Statement of case include part 18 requests but not amendments to same or must be provided for under contingencies.

For a first case management conference, the budget should include preparation, comparison and agreement time. Second and subsequent conferences should be identified under contingencies. Do not include applications for specific and or third-party disclosure under the disclosure heading.

When addressing witness statements, remember to include not only the time for preparing your client’s statements but also reviewing those of your opponent. For pre-trial reviews include work on updating and reviewing your budget; however, the work of assembling and copying trial bundles is not categorised as fee-earning work and under the precedent H guidance notes should therefore be excluded.

Trial preparation will include pre-trial conferences, a solicitors’ preparation time but not counsel’s brief fees. In respect of the trial phase consultations during trial, the filing of closing submissions and the review of the draft judgment should be included. Settlement work, for example mediation, should be addressed separately as a contingency item and any other anticipated costs not addressed in any other phase should be similarly identified as contingency matters.

Contingencies constitute a reasonably anticipated task not falling into another phase. Such contingencies must be clearly identified and a vague description is not sufficient. Allocating funds under contingencies in order to create a reserve fund will not be condoned. That said, parties are not expected to have a crystal ball approach to the litigation and opportunities to amend and revise the budget will arise at later stages.

Assumptions served with the budget should be used to justify both the incurred costs and estimated costs so as to define the predicted litigation path. It is just as important to outline what is excluded from the budget as to identify what is included.

Parties can agree budgets or individual phases of them and the court will record the extent to which such agreements are reached.

At the budgeting hearing the advocate should take a laptop computer in order that any amendments to the budget can be quickly formatted. The advocate should be thoroughly familiar with his own budget well as his opponent’s.

Costs must be within the range of reasonable, necessary and proportionate costs. A case will only avoid costs management if it can be conducted justly and at proportionate costs without a costs management order per CPR 3.15.2. Most judges will approve the phase totals per PD 3 E paragraph 7.3 others are prone to tweak hourly rates, time and individual fees whereas others are seeking comparison tables.

The new test of proportionality at CPR 44.3.5 is being used to reduce costs significantly and advocates should be ready to justify all costs claimed across the board. Counsel’s fees these are similarly coming under attack and should be broken down as far as possible.

If the case management directions are not agreed or budgeting hearing should be attended by the person having the day to day conduct of litigation in addition to their costs lawyer.

The time allocated for budgeting hearings has reduced over time since 1 April 2013. It is therefore essential that all relevant preparation has been undertaken ahead of the hearing. At that stage it will not assist when, as happened to me very recently, the costs judge had no papers despite their being lodged and had never conducted by costs budgeting conference before!

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08 Jun 2016

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