A survey highlighting solicitors’ inability to stick to their costs budgets puts them at risk of significant financial losses following last month’s Court of Appeal ruling in Harrison v Coventry, the Association of Costs Lawyers (ACL) has warned.
A poll of the ACL’s members found that just 5% worked with solicitors who always stuck to their budgets – albeit this was up from an even more miserly 2% the last time they were asked, in autumn 2016.
Two-thirds (67%) said their solicitor clients “sometimes” went over budget, while 26% said this always happened.
In Harrison, the Court of Appeal said that a costs judge on detailed assessment should only depart from the approved or agreed budget if there is “good reason” to do so. This puts pressure on solicitors to get their budgets right, the ACL said.
It also meant solicitors should be updating their budgets if required as the case progresses, and the survey indicated a modest improvement.
Last November, 18% of costs lawyers said the number of applications to update a budget was increasing; the figure was 23% when the survey was completed by 84 costs lawyers in May.
Similarly, the number of costs lawyers who said they had never seen such an application fell from 32% to 27%.
One problem solicitors face is that budgeting takes place too early on in proceedings, the survey suggested.
Half of costs lawyers said that instead of doing it at the first case management conference, as now, the hearing should be held later, once the course of the litigation is clearer. Some 29% supported budgeting in stages, according to where the case was at.
At the same time, more costs lawyers were seeing real benefits from the budgeting process – 24% this time, compared to 15% last year.
However, judges continue to be a problem, as shown in previous ACL surveys.
Given a set of statements on how costs management is working, the most popular (ticked by 63% of respondents) was that “it depends on which judge you’re before”. Just 10% thought that judges were finally getting the hang of costs management.
More positively – for costs lawyers at least – was that 42% said the process had brought their skills to the fore.
Another danger heading the way of law firms is the new electronic bill of costs, which the Civil Procedure Rule Committee last month decided would be rolled out for compulsory use in the Senior Courts Costs Office and county courts from April 2018.
Half of respondents said solicitors “haven’t got a clue” that this change was coming, while 43% reported that “some do”.
Though the survey was carried out before the decision to shift the start-date to next year, it is likely to be a popular move, as 60% said October 2017 was too soon.
There remained scepticism, however, that the electronic bill would improve on current practice.
ACL chairman Iain Stark said: “Solicitors need to sit up and take notice of the Harrison ruling, as too many are not approaching costs budgeting seriously enough. There are likely to be a few painful experiences before the message really gets home that if you want to get paid for the work you do, you need to plan and budget it properly.
“The survey shows that the extra time to get ready for the new bill of costs will benefit solicitors and, indeed, some Costs Lawyers.
“While a lot of lawyers may be happy to continue in the same way they have done for many years, introducing what is essentially a spreadsheet should help both the parties and the judge, making the process fairer as well as cheaper. As the courts head towards a digital future, the world of costs can at least start making better use of open-source spreadsheets.”