Commercial litigators are incurring costs over and above agreed budget levels

Over two-thirds of commercial litigators have incurred costs over and above the agreed level, with just 11 per cent admitting to making an application to revise the agreed costs budget upwards, a new survey has found.

Just Costs Solicitors surveyed 912 commercial litigation partners at the UK's top 200 law firms.

Commenting on the findings, Paul Shenton, managing director at Just Costs Solicitors, said: 'This research suggests that the majority of solicitors (89 per cent) are either unaware that a mechanism exists for budgets to be revised or believe that any such application will automatically fail so there is no point in pursuing it.

'It is very difficult for solicitors to recover an over spend without applying to revise the approved costs budget upwards. If clients are paying win or lose, this is a potential professional negligence issue - and if law firms are limited to what they recover then they are effectively working for free.'

The survey also found that 73 per cent of litigations have prepared a precedent H costs budget which has subsequently been either approved by the court or agreed between the parties.

Shenton remarked that costs management is playing an increasingly important role in litigation.

'The proportion of solicitors who have had an involvement in costs management increases every time a survey is released. It cannot be too long before 100 per cent of commercial litigators will report that they have been involved in a case where a costs budget was approved by the court or agreed between the parties,' he added.

Costs monitoring

In addition, all 912 lawyers confirmed that they monitored the costs they incurred to ensure they remained within the budget for each phase of litigation where a costs budget was approved.

'Courts have sent a number of stark warnings to lawyers that a failure to conduct litigation within the confines of the budget is going to result in a proportion of the costs being irrecoverable between the parties,' said Shenton.

'The fact that every one of the respondents has confirmed that they monitor their ongoing costs indicates that solicitors are aware of the need to ensure that litigation is conducted within the budgeted amount. However, if solicitors are monitoring their costs on an ongoing basis, there are obviously flaws in the process due to the overspend in so many cases.'

Some 60 per cent of respondents to the survey said that significant developments in litigation were the main reason they had to revise costs budgets. Just under a third admitted the primary reason was a combination of litigation developments and simple overspend.

'The rules imply that a revision will only be permitted where there have been significant developments in the litigation,' said Shenton. 'The fact that 90 per cent of cases where an upwards revision was agreed involved significant developments bears this out.'

John van der Luit-Drummond is deputy editor for Solicitors Journal
john.vanderluit@solicitorsjournal.co.uk | @JvdLD