COSTS BUDGETING: IT'S JUST A PHASE I'M GOING THROUGH

One advantage of going to conferences is that it usually gives rise to ideas for the blog. So speaking at the Association of Costs Lawyers conference yesterday has given rise to a whole host of issues which will be explored over the next few weeks.  The first issue is the importance monitoring of the “phases” of each Costs Budget, coupled with the dire consequences of failing to do so.

BUDGET PHASES

It is important that everyone knows the significance of rule 7.10 of the Practice Direction.

“7.10 The making of a costs management order under rule 3.15 concerns the totals allowed for each phase of the budget.”

SO IF YOU ARE WORKING IN EXCESS OF  THE PHASE YOU ARE UNLIKELY TO RECOVER EVEN IF YOU ARE STILL WITHIN THE OVERALL BUDGET

This cannot be said often enough.  It clearly happens in The Dorchester Group Ltd -v- Kier Construction Limited [2015] EWHC 3051 (TCC) the defendant was allowed £120,000 on the budget for disclosure.  When the matter came before the court (on an application for specific disclosure) the defendant had already incurred costs of £500,000 under this one phase.

That is £380,000 in costs which, on any view, the defendant was going to struggle to recover.

SO, OF COURSE, EVERYONE IS CAREFULLY MONITORING EACH BUDGET PHASE…

That is where the ACL conference came in. I asked the question to the numerous costs lawyers present (both independent costs lawyers and in-house) and a handful said they knew of firms monitoring each budget phase (about 2% of those present).

SO IF YOU ARE NOT MONITORING THE PHASES YOU COULD WELL BE WORKING FOR NOTHING…

The difficulties of recovering costs in excess of the budget are manifold. Further it will be difficult to recover those costs on an own client basis unless (i) the client is told that the solicitor is working outside the budget; (ii) the client is told the consequences of working outside the budget; (iii) the client expressly agrees to this.

For this to happen the solicitor will have to be carefully monitoring each phase in any event. Since this appears not to be happening to any great degree the vast majority of litigators may well (inadvertently) be working pro bono.

SOLICITOR AND OWN CLIENT COSTS: A DEVELOPING AREA

One other prediction coming from the conference yesterday was the fact that there was going to be a rapid increase in the number and extent of solicitor and own client disputes.  These could well expose the inadequate nature of many solicitor-own client retainer relationships.  There will be a clear need to justify working outside a  budgeted phase.

SO KNOW THY PHASES OR … GO BUST?

I have to say that I was surprised by the results of my (wholly unscientific but nevertheless significant) poll.  I can express the consequences in on phrase@

“If you are working outside the budget for a phase you are probably working for nothing.”

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