Successful costs budgeting

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Costs Judge Master Haworth’s prediction on costs budgeting, as reported in Litigation Funding, if done properly:

“detailed assessment will become redundant, and I will be able to spend my time fishing”

Senior Courts Costs Office Guide 2013

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The Senior Courts Costs Office Guide 2013 has been published (although may not be on the Court website yet). This is the first update since 2006.

It is not a bad starting point for those unfamiliar with the assessment process, and many who should already be familiar would no doubt benefit from reading this.

The Guide contains a number of interesting comments and observations beyond a simple recital of the rules.

No doubt sick already of misconceived applications to strike out Points of Dispute due to a failure to make an open offer when serving them, the Guide states:

“Section 8.3 of Practice Direction 47 requires the paying party, on serving Points of Dispute (see section 6 above) to state in an open letter what sum, if any, that party offers to pay in settlement. If no open offer is made the receiving party may, by letter request one and, if it is still not forthcoming, may, if appropriate, apply to the court for an order compelling compliance with the Practice Direction.”

So, the best a receiving party can hope for is that if a request by letter fails to induce compliance that an unless order will be made.

Unfortunately, the Guide wrongly implies that there is a duty to make an “open offer”. No, the duty is only to state in an open letter “what sum, if any” is being offered. Again, a party is free to state they have no offer to make.

Charging clients an affront to justice

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I’ve just come across a quote from last year from Karl Tonks, previous president of APIL, writing in the New Law Journal, that the reduction to fees for RTA claims in the Portal meant:

“Lawyers cannot reasonably be expected to run cases at a loss. But if the proposed fees are implemented, the only alternative will be to turn claimants away or take legal fees from a claimant’s damages, which flies in the face of the principles of justice.”

Flies in the face of the principles of justice?

Since when was it official APIL policy that charging clients, for example, solicitor/own client costs was contrary to the principles of justice? Did APIL members not charge their clients success fees pre-1st April 2000 (before recoverability was first introduced)? Do they bar solicitors from membership who undertake employment claims on a contingency basis on the grounds that they an affront to justice?

Drafting costs budgets

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A recent article in the New Law Journal by Richard Harrison questioned one of the common views of costs budgeting:

“It has been said many times that a piece of litigation is like a construction project. However, not many buildings are put up while trying to avoid the malign attentions of a wily demolition expert. The analogy to quantity surveyors in misplaced.”

One does not need to be quite so cynical about the motives of the other side to spot the flaw in the quantity surveyor analogy.

In a construction project, the client decides whether he wants a bungalow or a skyscraper. The architect designs the plans for that building. The quantity surveyor then works out how many bricks, tons of steel, etc will be required to complete the building to the design’s specifications and the estimated costs.

However, in litigation you do not know at the start whether you will end up with a bungalow (ie a matter settling shortly after the defence is filed) or a skyscraper (ie the matter will, several years later, conclude after a 10 day trial). Although the phases part of budgeting is meant to reduce the litigation down to defined stages (rather like building the foundations, putting on the roof, etc) the flaw is that the most parts of the budget do not easily shoehorn into defined stages.

A budget may have been set based on witness statements from 10 witnesses being allowed. However, if the matter then settles after only 4 witnesses have been interviewed, 2 statements fully prepared and 2 statements part prepared, the budget may be of only limited value even if the costs come in “on budget”. What assistance is the budget if the costs claimed, in this situation, are 70% of the amount set in the budget. To what extent should the court on assessment depart from the budget?

Costs lawyer and law costs draftsmen undertaking costs budgeting are not like quantity surveyors. They are more like Mystic Meg – ie making it up as they go along. However, unlike astrologers writing horoscopes, who hope the public will just remember the one time in a hundred when the prediction was uncannily accurate (and forget the numerous other times where it was not remotely accurate), those creating costs budgets may find clients tend to remember rather well those budgets that turn out wrong.

Revising costs budgets

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Costs judge Master O’Hare writing in the New Law Journal on the subject of costs budgeting:

“In costs estimates considered by the courts in earlier years it was common for a percentage to be added to cover for contingencies. In the new regime there is no need for this sort of contingency to be claimed: each guess you make as to future costs will be an approximation which you will revise as the case proceeds.”

Once a budget is set you can revise away as much as you like but it may not do you any good. PD 3E para.2.6 states:

“Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments [emphasis added] in the litigation warrant such revisions. … The court may approve, vary or disapprove the revisions, having regard to any significant developments [emphasis added] which have occurred since the date when the previous budget was approved or agreed.”