A new practice of “budget brinkmanship” could emerge from the introduction of costs management, according to a leading costs lawyer, who said the interpretation of costs budgets is set to become a central tactical consideration during cases.
Jon Lord, principal costs lawyer at Cost Advocates, claimed that the costs management schemes piloted in the Mercantile, and Technology and Construction Courts, as well as in defamation proceedings, have seen budget forms deployed not just as a prediction of costs but increasingly to have a tactical bearing on the case.
The forms are exchanged between both sides, acting as the benchmark for assessing recoverable costs at the end of a case, meaning law firms can use them to create a profile of the strength and scope of the other side’s case. Lawyers need to see them like this, rather than just as costs estimates, he explained.
Mr Lord said: “Lawyers are required to provide the breakdown for pre-action costs, disclosure, witness statements, expert reports, fee-earners’ time, counsel’s fees, contingents and other disbursements. Trying to calculate these is a very complex procedure.”
“This means there is scope to use the budgets as a way of understanding and potentially influencing the decisions of the opposing side in how to tackle the case. A high budget for expert reports, for example, could suggest a well-built case, while a low provision for counsel fees could imply that the other side is not anticipating heavy involvement from barristers.”
Mr Lord said it is critical too for lawyers to review their own budgets before they are submitted to ensure they are reasonable and proportionate. “This could result in the emergence of ‘budget brinkmanship’, which goes beyond providing predictable costs but undertaking a detailed review of both budgets to anticipate the likely direction of the litigation.”
He added that there is certainly scope to try and use budgeting to have some bearing on the direction of a case. “For instance, if a firm went into litigation with a very high costs budget, then it could scare the opponent into mediation to avoid an expensive case.
“On the flipside, a lower budget may make the other side’s budget look unreasonable and encourage them to trim costs, such as jettisoning expensive witnesses rather than running the risk of footing a large bill.”