Case planning in the age of costs budgeting

Practitioners undertaking multi-track litigation will be acutely aware of the importance of accurate costs budgeting. However, many will be concerned whether they have the in-house expertise to produce accurate budgets.

Many may be tempted to seek assistance from external costs firms offering their services in this area. Caution is needed. Other than some limited pilot schemes, costs budgeting is new to all and those offering their 'expertise' is this field may have no more experience than those seeking assistance.

How should practitioners establish that they are dealing properly with costs budgeting and entrusting any preparatory work to the right people?

The first step is to identify a selection of cases that have relatively recently proceeded to trial. From these cases the relevant documents that would have been available at the time of the first case management conference should be extracted. For each case, a case plan should be prepared setting out what would have seemed the likely future progress of the case. '¨This case planning should be undertaken by a fee earner '¨who was not directly involved in the case.

The purpose of the exercise is to ensure that fee earners are able to produce reasonably accurate case plans. Key issues will be identifying the further expert evidence required, witness statement requirements, the scope of any disclosure, likely length of trial, etc. A crucial part of this is to also identify any "contingencies" if everything does not go 100 per cent to plan.

This case plan should then be compared with the actual course of the litigation. How accurate are your fee earners' case planning skills? You may discover at this stage that there is a skills gap within your firm and that fee earners are poorly equipped to accurately case plan. Where this happens, urgent training is required to bring fee earners up to speed. If you have not yet undertaken a similar exercise within your firm, how do you know whether you have a problem?

Mock budget

The second part of the exercise is to ask your costs specialist (whether in-house or external) to prepare a mock budget based on a realistic case plan that allows appropriate contingencies. This budget should then be compared with the actual spend on the matter to determine the accuracy of the same. There will always be some margin of error and you must decide what represents a reasonable margin: 10 per cent, 20 per cent or 30 per cent or more? At all times you must remember that any shortfall between a costs budget and the costs incurred may be irrecoverable on detailed assessment unless there is a good reason for the court to depart from the budget. This exercise needs to be repeated on a sufficient number of cases to ensure you are confident the mock budgets being produced are within an acceptable margin of error.

It is a mistake to assume that so long as the budget exceeds the costs actually incurred that you will not have a problem. '¨The courts may not approve excessive budgets and may make case management decisions you would not have wished for in an attempt to bring down excessive budgets. At this stage, the purpose of the exercise is to produce accurate budgets. Whether the budgets filed with the court in the future will have some tactical adjustment (so far as consistent with the statement of truth) is another matter.

There is naturally a cost to '¨this exercise, not least where '¨you are asking external '¨providers to prepare the mock budgets. There may be some costs firms offering a costs budgeting service (mine currently does not) who may '¨be prepared to undertaken '¨this task free of charge in the hope of securing your future budgeting work. Others may well insist on charging.

Nevertheless, a few thousand pounds spent now to establish you are able to produce accurate budgets may be money very '¨well spent if it avoids you discovering in a few years that your budgets are out by £10,000s or £100,000s and '¨your firm is having to write-off the shortfalls. SJ