A guide to costs budgeting

When approaching the preparation of the budget, a vital first step is to check the date by which it must be filed in order to avoid the draconian sanctions, which limit a party who has crossed the line to a budget comprising court fees only.

Checking the jurisdiction is also important, along with the dates in issue. Budgeting is not usually required for those cases issued before 1 April 2013, but, following the rule changes which became effective this April, very few categories of case are now exempt from the budgeting process, save for those where the value of the claim exceeds £10m.

Noting phased fees

Engaging with one's opponent is an important part of the budgeting process, as well as looking to the other members of your litigation team, including counsel, experts and costs lawyers. All fees incurred must be phased and it is important to keep a note of them.

Pre-action costs include the work of considering alternative dispute resolution and settlement advice. Costs for statements of case include part 18 requests but not the subsequent amendments, which must be provided for under contingencies.

For the first case management conference, the budget should include preparation, comparison and agreement time. Second and subsequent conferences should be identified under contingencies. Do not include applications for specific or third-party disclosure in the disclosure phase.

When addressing witness statements, remember to include not only the time for preparing your client's statements, but also for reviewing those of your opponent. For pre-trial reviews, include work on updating and reviewing your budget; however, the work of assembling and copying trial bundles is not categorised as fee-earning work and under the precedent H guidance notes should therefore be excluded.

Trial preparation will include pre-trial conferences and the solicitor's preparation time, but not counsel's brief fees. In respect of the trial phase consultations, the filing of closing submissions and the review of the draft judgment should be included. Settlement work, for example mediation, should be addressed separately as a contingency item, and any other anticipated costs which are not addressed in another phase should be similarly identified as contingency matters.

Such contingencies must be clearly specified and a vague description is not sufficient. Allocating funds under contingencies in order to create a reserve fund will not be condoned. That said, parties are not expected to have a crystal ball approach to litigation and opportunities to amend and revise the budget will arise at later stages.

Assumptions served with the budget should be used to justify both the costs incurred and the estimated costs so as to define the predicted litigation path. It is just as important to outline what is excluded from the budget as to identify what is included.

Parties can agree on budgets or individual phases of them and the court will record the extent to which such agreements are reached.

At the budgeting hearing, the advocate should take a laptop so that any amendments to the budget can be quickly formatted. The advocate should be thoroughly familiar with his own budget, as well as his opponent's.

Costs must be within the range of what is considered reasonable, necessary and proportionate. A case will only avoid costs management if it can be conducted justly and at proportionate cost without a costs management order in accordance with rule 3.15(2) of the CPR. Most judges will approve the phase totals as indicated in paragraph 7.3 of practice direction 3E; others are prone to tweak the hourly rates, times and individual fees and some are seeking comparison tables.

Justifying costs

The new test of proportionality given in rule 44.3(5) of the CPR is being used to reduce costs significantly and advocates should be ready to justify all costs claimed across the board. Counsel's fees are similarly coming under attack and should be broken down as far as possible.

If the case management directions are not agreed, a budgeting hearing should be attended by the person responsible for the day-to-day conduct of litigation, in addition to their costs lawyer.

The time allocated for budgeting hearings has reduced since 1 April 2013. It is therefore essential that all relevant preparation has been undertaken ahead of the hearing.

However, at that stage none of this will assist when, as happened to me very recently, the costs judge has no papers, despite the fact that these have been lodged, and has never conducted a costs budgeting conference before.

Robert Connelly is a council member of the Association of Costs Lawyers

www.associationofcostslawyers.co.uk