The devil is in the detail – a costs budgeting warning

Get the detail right or else

Posted by Darren Naisbitt of Litigation Futures sponsor Just Costs

On 16 April 2013, Coulson J handed down his judgment in respect of the first application to amend a budget previously approved by the Court prior to 1 April 2013. Within the ruling he provided guidance in the circumstances in which a budget can be amended. It followed a hearing on 25 March 2013.

The claimants’ solicitors entered into a conditional fee agreement with each of the claimants, each containing a provision for a success fee. The claimants also obtained an after-the-event (ATE) insurance policy (all signed/obtained before 1 April 2013). It was not disputed that a Notice of Funding was served upon the defendant, giving notice of both the CFA and the ATE insurance premium. The defendant was therefore fully aware of the existence of all additional liabilities at a very early stage.

Prior to the first case management conference before Stuart-Smith J on 1 February 2013, the parties exchanged budgets. Unfortunately, the claimants’ costs budget was not in the correct format (Costs Precedent H attached to the Costs Practice Direction), but as all the required information was contained therein, the claimants’ budget was approved in the sum of £85,000. However, on 8 March 2013, the defendant advised the claimants that the approved costs budget did not state that it was exclusive of a success fee and ATE premium.

The claimants’ solicitors were therefore facing a significant loss due to their failure to complete the budget correctly by using the incorrect form. This mistake could ultimately have proved very costly for the claimants’ solicitors were it not for the instruction of Just Costs Solicitors, who were on hand to identify the error and apply to amend the budget.

This case was considered to be a very special case as this was not a situation in which the defendant could have said to have been misled or confused by the information provided by the claimants as it was accepted that the defendant was fully aware of the existence of the additional liabilities.

The mistake the claimant had made in respect of this matter was failing to tick the relevant box, or more accurately not filing out the correct form and being afforded the opportunity to notice that there was a box there to be ticked in respect to of the exclusion of additional liabilities. It was considered to be in accordance with the overriding objective that the approved costs budget was revised/rectified, or at least clarified, to the effect that it expressly excluded the success fee and the ATE insurance premiums.

In his judgment, Coulson J highlighted that budgets had been exchanged as part of the pilot scheme and the rules under the pilot were less Draconian than those now included within CPR 3. He therefore gave permission to the Claimants to amend their budget.

However, his judgment provides for a warning, post 1 April, he may have reached a different conclusion. All of the above highlights that the devil is in the detail.

Furthermore, costs experts are here for a reason and that is to make sure that budgets are drawn correctly and in accordance with the rules and practice directions. Solicitors should not attempt to go it alone when there are specialists whose sole purpose is to assist in these exercises.

After all, if experts get it wrong, there is the ‘safety blanket’ of their professional indemnity insurance.

On another point, Coulson J noted that the new CPR 3.9 was significantly modified when compared to the old CPR 3.9. Only time will tell if the intention behind the new CPR 3.9 is applied by the courts. In the current, variable and unchartered waters, the world of costs is entering a period of uncertainty where the instruction of a costs professional as part of the litigation team, is essential.

Darren Naisbitt, an associate at Just Costs’ London office, was instructed on behalf of the successful claimant