Detailed assessment budget shock leads to settlement

Green: inconsistent approaches to budgeting

Budgeting has extended to detailed assessments, it emerged last week as a costs judge explained how budgets can help both sides take a view on whether a case is worth fighting.

Master Haworth also predicted that litigation was moving towards an era of fixed costs for lawyers and experts.

Speaking at last week’s Expert Witness Institute annual conference in London, Peter Haworth, a judge at the Senior Court Costs Office, pointed out that he tended to come in at the end of cases rather than be involved in costs budgeting at the start of the case.

But he gave an example of a recent case, where millions were in dispute, in which he had required budgets from the parties – both hedge funds – before a detailed assessment took place.

“Both sides came in with budgets of half a million each just for the assessment, let alone the costs of several million pounds,” he said. But each was horrified when they saw the other’s budget, and within two weeks the costs judge received notice that they were going to settle.

“One of the features of having to budget is you can see where the other side are going to spend their money, so the lawyers can take a view ‘is this case worth fighting?’,” he observed.

District judges and costs judges were “getting to grips” with the Jackson reforms, Master Haworth said, predicting that the committee set up under Mr Justice Foskett to review the guideline hourly rates – due to report by March 2014 – would result in fixed costs.

“Hourly rates are likely to be fixed for solicitors within another 12 or 18 months… We are moving to an era, like it or not, of fixed costs for solicitors, probably for barristers in some respects and probably for experts.”

The one-time solicitor said this was a cyclical phenomenon. “I can remember fixed costs from 20 or 30 years ago… and now we’re moving back to fixed costs.”

Master Haworth advised experts to present their instructing solicitor with a variety of costs scenarios, because if the cost was greater than the initial estimate, the solicitor might find it impossible to vary the amount later. “It seems to me that you need to be factoring into your estimates… if the defendants pursue this line [or] that line it’s going to require me to do X,Y and Z and that is going to cost you an extra this or that…

“The reality is there is no point saying to the solicitor it’s going to cost a good deal less when in fact the solicitor will never ever recover the true cost at the end of the day… Anything other than a worst case scenario, I’m afraid, will come and bite you in the backside, or has the possibility to do that”

Master Haworth suggested that the experts assembled read the judgment by Mr Justice Coulson in Elvanite in the Technology and Construction Court, in which the High Court rejected a bid by a successful defendant to nearly double its approved £270,000 costs budget after the case had concluded.

Master Haworth said: “I think that that’s going to be followed by other judges with other budgets”. He continued: “We are in a new era and if the Jackson reforms are going to work there is going to be quite a lot of pain for a lot of lawyers, and of course they might want to transfer that pain, or some of it, on to their experts.”

Also speaking at the conference, Steven Green, head of costs at Irwin Mitchell, said the firm’s experience so far had been that judges had adopted inconsistent approaches to costs budgeting.

Of the seven cases that had been assessed since April, the judges had spent between half an hour and three and a half hours giving figures that would be allowed for each phase, he said.

“I think it’s fair to say it’s been a fairly bumpy ride for the first five months, with some inconsistent approaches… Over the next 12 to 18 months hopefully things will settle down and we’ll get a more consistent approach as to how these budgets should be applied.”