Costs budgets – precedent H and some thoughts on the difficulties of completing it

This week I received a question from solicitor about completing a costs budget. This set me thinking about the fact that as we move forward, it is the more detailed points which come to the fore and need to be examined. As I am lucky enough not to have to participate in costs budgeting itself, you may think, why am I writing a blog on it?

Pre-implementation of the Jackson reforms, I reviewed costs budgeting extensively for the purposes of providing LexisPSL DR subscribers with guidance. In doing so I produced the following:

To be honest I became costs budgeted out and I did not even have to complete any.

When the questions came in, I had my own ideas on how to answer them, but I thought I would call on the experience of costs lawyers and judges who deal with costs budgets on a regular basis to get their views as well.  The following sets out a summary of questions I received followed by the views of those I approached to assist me in responding.

Amended Statements of case

The Precedent H guidance states that amendments to statements of case should not go in the Statements of Case phase. So where should they be included?

There are two things to consider with this question (1) are you concerned that such amendments may be required or (2) have such amendments already been made?

  • Maybe required - you need to add such costs into Precedent H as a contingency; applying paragraph 3 of the court guidance appended to Precedent H.
  • Already incurred - these should be added into the Statements of case phase. Yes I know this is contrary to the advice in the guidance but bear with me.  The costs should be added into this phase as incurred costs and explanation should be provided to ensure that the judge can see that the incurred costs include costs for amending a statement of case.  The issue is where to provide that explanation.  Either put as a note in the assumptions for that phase or provide a separate note in which you can explain to the judge what costs have been incurred.

Mediation

The Precedent H guidance states that mediation costs should not go into the Settlement/ADR phase. So where should they be included?

I find this guidance a little odd, surely it would make sense for all settlement related issues to be in one place in the form, but the guidance is what it is.  So if mediation is the way forward in your case how should you deal with it in the costs budget?

This will depend on whether a mediation has already take place or not.

  • Mediation might be appropriate – you need to provide as a contingency which will set out the estimated costs for a mediation
  • Mediation took place pre-action– the general consensus amongst those I  asked was this that the costs should be added into the Pre-action phase as incurred costs.  The view point being that at the pre-action stage there is not the same differential between settlement/ADR and Mediation as there is post commencement of proceedings
  • if mediation occurred after commencement of the proceedings –add as contingent costs, yes even though contingent costs are by definition anticipated costs and you are dealing with incurred costs. In doing so make sure that the costs are provided in the incurred costs box and not the estimated costs box.

Note: as a point of interest the new J codes provide for mediation as part of the ADR/Settlement.  Given the fact that a new bill of costs is in the advanced stages of preparation, it is intended that it will eventually be standard in all court proceedings and it be will be based on the use of J-codes does this mean that we will see mediation brought into the ADR/Settlement phase in Precedent H - the intention being that the cost budgets and the bill of costs work together?   For those of you now worrying about J –codes see our post here.

There will be many other costs scenarios where practitioners worry about where to add costs, either estimated or anticipated, into the costs budget.  The clear advice I received from costs lawyers and judges was that ‘form should not trump substance’.  Judges will take pragmatic and sensible approaches to costs budgeting but for them to be able to do so you need to have provided them with the information they need.  Judges are asked to deal with costs budgets in relatively short hearings but the time being taken to deal with them at CMCs is rising and there are some reports of 10 month backlogs for costs CMCs.  What can practitioners do to help both themselves and the courts?

  • Remember that the guidance attached to precedent H is just that - guidance. It will not cover every eventuality and is not intended to.
  • Make sure you provide properly detailed assumptions for each phase so that the judge, and the other parties in the litigation, can clearly see what you are including in each phase
  • Provide an explanation of what work has been done/included in each phase. It may be appropriate to provide a summary of the incurred costs to accompany the Precedent H so that the judge and other parties can quickly see what costs have been incurred
  • Do think about using a Costs Lawyer especially in cases, such as personal injury, where the costs can or have the potential to exceed the value of the case
  • Always bear in mind that while you have spent time working on a costs budget a judge has to understand within a short time frame and determine whether the costs are proportionate to the value of the claim in issue. The more assistance you provide the court, through information in Precedent H,  the more likely the judge a judge may be to approve the costs budget or work with you to get an approved costs budget you can work with

My own advice would be:

  • if in doubt ask around in your firm, it maybe that someone else has had a similar issue when dealing with a costs budget and can give you an insight as to how the court dealt with it
  • talk to the other parties in the litigation to try and agree how to deal with the more difficult aspects of completing the budget. If all parties record time costs for a particular item of work in the same phase eg both parties have added pre-action mediation costs into the pre-action phase this will assist the court as it will be comparing like with like. If one party adds such costs into the pre-action phase and another adds it as a contingent cost the court is not comparing like with like and inevitably if that happens for a whole string of costs throughout costs budget the judge is faced with an unenviable task of trying to make sense of the costs budgets where the costs for the phases between the parties may differ considerably

Practitioners will always encounter costs scenarios where they have to think twice about where to fit them into Precedent H – it will hardly ever be a quick and easy exercise.  But surely that is part of the point?  The process of completing Precedent H should bring into focus the costs to be expended versus the value of the case.  It provides a moment of reflection during the litigation period to discuss with the client whether there is a better way to resolve the conflict.  You may not like costs budgeting but it is here to stay, turning it into a positive rather than a chore might just make it more palatable.

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