Commercial litigators are busting their budgets without seeking court approval to revise them upwards, new research has shown.
According to the survey by Just Costs Solicitors of 912 commercial litigation partners at the top 200 law firms, some 73% of respondents said they had prepared a Precedent H budget which was either agreed between the parties or approved by the court.
But even though every single one of them said they monitored the costs they incurred to ensure they remained within the budget for each phase, 69% said they had exceeded a budget at some point. This meant there are “obviously flaws” in the process, the survey said.
Of these, just 11% had made an application to revise the budget upwards. Six in ten said they did so because of significant developments in the litigation – which is what the rules specify as the reason for revision – 10% described it as “simple overspend”, and the rest cited both.
Paul Shenton, managing director of Just Costs, said: “This research suggests that the majority of solicitors are either unaware that a mechanism exists for budgets to be revised or believe that any such application will automatically fail so there is no point in pursuing it.
“It is very difficult for solicitors to recover an overspend without applying to revise the approved costs budget upwards. If clients are paying win or lose, this is a potential professional negligence issue – and if law firms are limited to what they recover then they are effectively working for free.”
In a judicial roundtable hosted earlier this year by the Association of Costs Lawyers, District Judge Chris Lethem – a member of the Civil Procedure Rule Committee and Judicial College trainer on costs – said he “hardly ever” saw applications to vary budgets.
He said: “I am deeply uneasy about that desert of applications, because either I have achieved a crystal vision which I thought I did not possess, or the parties are storing up a heap of problems later on down the line because they did not apply to vary, and when they get to the end of the process they are suddenly going to find they have overspent.”
However, Francesca Kaye, a partner at Russell-Cooke and immediate past president of the London Solicitors Litigation Association, said she was “positively avoiding” making applications to vary.
She said: “The risk of making an application to amend or vary a budget is firstly that the proposed amendment, depending on why you are applying to amend, might not be allowed; secondly, we have heard some horror stories of making an application to amend, and the judge taking one look at the budget that previously had been granted, and taking it as an opportunity to have another go at it.”