Cost budgeting, Precedent H and how to avoid working for free

Chambers: the budget has to be prepared on a ‘worst case scenario’ basis

Posted by Louisa Chambers of Litigation Futures sponsor Spencers Solicitors

Flexing the rules is admired in some circles – it’s part of being unique, thinking out of the box and challenging the status quo.

But unfortunately this is definitely not the case when it comes to our industry. As lawyers we need to bend with the rules not away from them. We need to be agile, and adapt to any changes in the legal landscape.

Kim Tasso touched on this concept at the beginning of the year: “It’s no secret that the legal profession continues to go through a time of profound change. No matter how much we fight it, or pretend it’s not happening, it’s clear that only those firms who are flexible and agile enough to make timely changes to their infrastructure, systems, processes and behaviour will succeed.”

Still the boundaries placed upon us by legislation can sometimes frustrate – even obstruct – what we might consider ‘fair access to justice’.

The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) brought with it a rigid change to costs budgeting in that solicitors are now required to complete the Precedent H form, stating how much can be claimed at the end of the case – and this must be done seven days prior to the case management hearing.

It’s a rule that, as everyone now knows, was broken by Atkins Thomson, representatives of Andrew Mitchell MP, when he launched a defamation action against The Sun newspaper over its reporting of the ‘Plebgate’ affair.

His solicitors submitted their costs budget application less than 24 hours from the hearing. Therefore, it was void, the rule was broken, and the Court of Appeal showed no compassion for the error which is likely to run into six figures of unrecoverable costs.

It’s an exacting stance from the Court of Appeal. It makes a hard job even more difficult by attaching more deadlines and procedural requirements to a hearing.

John Spencer has a similar view on this, yet he also makes the following point in a recent blog post: “Too rigorous an application of court sanctions may in some situations deny access to justice to those who need it – clients, who shouldn’t be punished for the mistakes of their legal advisers.”

It’s a new hoop we must all be agile enough to jump through with professionalism.

Below I’ve outlined how we’ve adapted to the changes and included a few tips that have helped us along the way. But please let me know how you have been approaching the new procedures by leaving a comment.

Adapt to the changes firm wide

At my firm we have updated our case management system and internal procedures to make it as easy as possible for litigators to prepare the budget when they reach the litigation stage. We’ve worked closely with staff involved in multi-track cases to produce a system which is as straightforward and user friendly as possible.

These processes are still being developed both by law firms and the courts. In our experience the stance of the judiciary in relation to human error following the implementation of costs budgeting differs from court to court; therefore we have to allow fluidity in our processes until such time that a unified approach is established by the judiciary.

The process of costs budgeting requires firms to use additional resources and time to prepare and negotiate a budget and subsequently to prepare for and attend a costs management hearing. The process also consumes valuable court time when resources are already stretched.

In theory, court time spent dealing with detailed assessment on concluded cases should be reduced but we are yet to see if this actually happens in practice. It is also apparent that courts dealing with live case management issues have little or no additional time to deal with complex budgeting arguments.

Avoid the Atkins Thomson pit falls

In order to avoid being in the same situation as Atkins Thomson, preparation will be key and not just preparation of the budget. From day one in multi-track cases it will be necessary to have in mind the issue of a costs budget; how many witnesses might there be, what expert evidence is required, what issues may arise etc.

We’ve opted for a process that before any multi-track case is issued, there will already have been at least two reviews considering issues relevant to a future budget. Litigators will also need to record the date by which their budget must be filed in our case management diary (along with all other key dates and deadlines).

Ultimately there will always be room for human error, no matter what safeguards and systems you put in place, but it is important to minimise the risk. Staff levels and capacity to undertake this additional litigation step is bound to be an issue for many firms but with good preparation disastrous situations such as that the one faced by Atkins Thomson can be avoided.

It is also necessary to keep an approved budget under review. If you go over budget and fail to obtain the agreement of the court that the additional work is proportionate and reasonable, you will be undertaking the additional work for free. This is not a position that firms will be able to sustain if they continually fail to have budgets updated, or get the budget wrong.

Calculating the budget

When preparing the budget, it is necessary for the solicitor involved to consider what further steps will need to be taken to take the case to a conclusion. The budget has to be prepared on a ‘worst case scenario’ basis which involved estimating costs right through to and including a final trial.  Each case will be different; requiring differing amounts of work and expert evidence, the task of estimating costs through to a trial can therefore be very difficult, but it must be accurate to avoid recoverability issues.

It is necessary to consider the extent of any future work and any disbursements that will be incurred; we must also consider things that ‘might happen’. The budget must include contingencies; if you fail to include a contingency that was foreseeable, you may be refused permission to amend your budget later down the line.

Both parties must prepare a budget and ideally seek to agree them in advance of the costs management hearing. If there is no agreement, the judge will go through the budget and set it as they see fit.

The whole budget process is quite adversarial; there is no particular advantage to defendants in agreeing a budget, they might as well object and let the judge set the budget because the judge might reduce it – they certainly won’t increase it. The process does not lend itself to co-operation and collaboration between the parties and may actually serve to undermine any good relations established over the early life of the case.

Learn and adapt

We are, as I acknowledged earlier, obliged to bend with the rules and adapt, which is what firms and lawyers will need to do in order to avoid the potentially disastrous consequences of a failure to comply.

Preparation and good diary habits are key, as well as ensuring that you have the right procedures and people in place to make compliance as cost effective and efficient as possible.

Louisa Chambers is a solicitor, member of the Law Society personal injury panel and a senior litigator of the Association of Personal Injury Lawyers. Louisa works within Spencers Solicitors’ complex injury team handling cases that involve serious and catastrophic injuries

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