Getting your budget right


Burcher JenningsBy Legal Futures’ Associate Burcher Jennings

Preparing a Precedent H costs budget is a crucial step for any litigant who is looking to recover their inter-partes costs in a Multi-Track claim. Getting the budget right the first time is essential, as any application to correct mistakes or omissions is extremely unlikely, and will not amount to “good reasons” to depart from the approved budget. The following points should be kept in mind when preparing your costs budget.

1. Know the rules

  • The rules in relation to Costs Budgets are to be found at CPR 3.12 to 3.18.
  • Those rules are supplemented by Practice Direction 3E.
  • Annexed to Practice Directions 3E are (A) Draft Form Precedent H (B) Guidance notes for Precedent H and (C) Draft Form Precedent R Budget Discussion Report.

2. Use the Guidance Note for Precedent H

  • Read the Guidance Notes carefully and try to follow them when completing the Precedent H.
  • Whilst the notes discourage the filing of any supplemental documents, consider including a schedule of disbursements with the precedent H so that the Court can clearly see how the total in each phase has been determined.
  • Try to stick to the tables when allocating work and take note of what work should not specifically be included in any particular phase.
  • Note the definition of contingency phase and consider if any contingencies that would fit the description need to be added.
  • Do not repeat the contents of the tables in your assumptions boxes and keep them brief to include only points which impact on the amount to be allowed.
  • Remember that the time for preparing the budget and associated documents (e.g disbursement schedule) are not to be included in any phase, this work will be included on the front page as either £1,000.00 or 1% of the budget total and will be confirmed once the budget has been approved.

3. Make sure the budget is in the correct format and is populated accurately

  • You can use the Precedent H form from the MOJ website, create your own Excel form or use a costs software package. If using your own Excel form, note the requirements in PD 3E paragraph 6 and ensure that all cells in the spreadsheet are properly formatted and that all of the underlying calculations and formulas are correct.
  • Accuracy in completing the various cells in the Precedent H form is absolutely vital. In a routine precedent H form with four grades of fee earner and two contingencies there are a possible 240 individual cells that need to be competed and 65 totals boxes on page 1 that should be automatically populated based upon the figures inserted into the various cells. An error in completing any one cell will cause inaccurate figures and totals elsewhere in the form H and can lead to an incorrect or inadequate amount being approved upon the CCMC.
  • Having completed the Precedent H, carefully check it through line by line and column by column to look for any errors in the figures or for cells that have not been completed.

4. Costing Incurred Work

  • Have the Guidance note to hand and follow it as far as possible when allocating incurred costs to the correct phase.
  • Consider separating out single items of recorded time and disbursements that cover work in more than one phase but remember to mark the file note or disbursement voucher.
  • Be aware of the need to spread incurred costs across different phases to avoid any one phase becoming inflated and therefore influence the amount the Judge will allow for the estimated costs in that phase (but also see below about the pre-action phase).
  • The Pre-action phase does not include any estimated costs so the incurred total for that phase will not directly influence the estimated costs to be allowed. Therefore, try to include work up to the issue of proceedings in the pre-action phase where possible.
  • Check that all incurred disbursements have been included and accounted for and, in particular, check that fee notes from Experts and Counsel are up to date.
  • Bear in mind that the final bill of costs should match the approved costs budget. If possible, mark any file/attendance notes to show which phase they have been allocated to and, if the time has been separated over two or more phases, how much time has been allocated to each phase. Up until the date of issue the assumption is that that all work done is pre-action unless it relates to a specific phase so only items that have been allocated to a phase other than pre-action need to be marked. Once the claim is issued a similar assumption arises that work will be in the issue/statement of case phase so only other work allocated to other phases needs to be marked and the same applies in respect of the CMC phase as soon as the Notice of Proposed Allocation is received.

5. Completing the Estimated Part of the Budget

  • As far as possible, get firm estimates/quotes from Counsel, Experts and any other potential suppliers. If time restraints for filing the budget prevent that then it will have to be an educated guess but try finding a similar ongoing or recently settled claim to get a steer on the level of expert fees and similar. If experts come back and simply state their hourly rate go back and ask them for typical/average hours spent on a report, questions, joint meetings. Most experts should have a fixed daily or half day rate for attending conferences and trials, make sure you also enquire about travel expenses as some will charge those on top and many expect first class rail travel, which can be very costly!
  • Consider preparing a standard checklist for the most frequently incurred disbursements in each phase.
  • Remember to include all of the minor/supporting disbursements such as travel expenses to conferences and hearings, telephone conference call fees and possibly courier or copying fees (if justified).
  • Include time not only for the initial drafting of the principal documents but also amendments, revisions and updating as well as collating any attachments and enclosures
  • As well as the drafting of your own principal documents in any phase you will need to consider the opponents documents e.g list of documents, witness statements etc.
  • Bear in mind that in each phase, as well as the drafting etc of principal documents and specific attendances, there needs to be time included for “the glue” ie. all of the routine and non-routine communications with the client and all of the other parties, general updates on progress, file reviews, diarising etc.
  • If the principal fee earner with conduct is grade A or B, think about including some time for tasks which should be delegated to grade C or D fee earners such as trial bundle collation, obtaining medical records etc.

Upcoming Changes

The CPR committee have proposed some changes to the Precedent H Guidance Note to align costs budgeting with the new electronic bill approach. They have also proposed some small changes to procedure.

At the moment, the CPR committee have only confirmed the outline of what they are proposing, they have not published details of the amended form and rules or when it is likely to be implemented. Keep an eye out for these changes and make sure that you obtain and use the updated guidance note.

Final Reminder

Once a costs budget has been agreed/approved and a Costs Management Order made the Court will only allow revisions to the approved budget due to a significant development in the litigation. Discovering that there was an error in the original budget as drawn or that the amount estimated was simply inadequate for the work needed to be done will never be accepted as justifying an upwards revision to a budget and is very unlikely to be considered a good reason to depart from an approved budget upon assessment. Therefore, it is vitally important to get the budget right first time as errors and omissions leading to a shortfall in recoverable costs will ultimately have to be borne by the Solicitors.

This article was written by Nick Kitchen is a Legal Executive and senior costs practitioner working at the Exeter branch of Burcher Jennings.

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