This is the second entry of a three part series on costs management. Part 1 can be read here. Part 3 can be read here.
CPR 3.15(5) confirms that the amount recoverable in respect of preparing the Precedent H is capped at 1% of the approved costs budget but all other costs of the budgeting and costs management is capped at 2% . Twice as much is therefore permitted for costs management as to prepare the costs budget. Why is this the case?
This 2% allows for preparation of Precedents R, all of the negotiations on budgets, analysis, advice, preparation of supplementary documents for CCMC and the costs lawyer’s attendance at CCMC (or drafting instructions to counsel). Following the CCMC the budgets will need to be finalized and agreed before being filed at court. But that is not the end of costs management.
Ongoing monitoring of costs incurred after the budget has been set makes staying within budget significantly simpler, while still achieving a good outcome for your client, and it will mean that problems are identified early and can be rectified.
However, if circumstances change following the setting of the costs budget then CPR 3.15A allows for revision and variation of costs budgets on account of significant developments. Indeed a party must revise its budgeted costs upwards or downwards if significant developments in the litigation warrant such revisions, and must do so promptly. If you know how much scope is left in each phase then it will be much clearer what revisions are required, thereby allowing it to be dealt with ‘promptly’.
If you do exceed your costs budget without a good reason, those costs are not recoverable from your opponent. Of course, you may be able to recover any overspend from your client, depending on the terms of your retainer, but then it is absolutely vital that you have kept your client informed regarding their legal costs throughout the claim.
For example, if you did not get the outcome you wished for at the CCMC it should be common practice to provide a client with a copy of the approved costs budget and an explanation given regarding why the approved costs differs from the filed costs budget.
In ST v ZY [2022] EWHC B6 (Costs) the importance of keeping a client informed regarding their legal costs was emphasized.
This claim involved a fatal motorcycle accident where ST, the deceased’s partner, brought proceedings on behalf of the deceased’s estate, herself and her 4 children as dependents. The matter was budgeted, but when the matter settled the Court ordered that the Defendant should pay ST’s costs of the claim only on behalf of a single Claimant as a dependent, and as administratrix of the deceased’s estate.
Costs between the parties were then settled by agreement between the parties. However, because she was a protected party, an assessment of the Claimant’s solicitor and own client costs was ordered.
At the assessment it was identified that the Claimant’s solicitors had failed to advance any argument to support a good reason to depart from the budget in relation to the majority of the exceeded phases and had offered to accept the approved figures. In doing so they conceded £25,052.69 which they then sought to recover out of the Claimant’s damages. The judge noted:
“Telling the client that some costs might not be recovered from the other side is not sufficient. ST should have been told that the budget was being exceeded by a wide margin and that, as a result, those costs might not (and, indeed, almost certainly would not) be recovered from the other side.”
Focus is often placed on monitoring the budget to identify whether it needs to be revised in the event of a significant development. However, managing clients’ expectations of costs is required, and informing them if a budget has been exceeded is vital. Without this, it is highly unlikely that an overspend will be recoverable.
Given the CPR’s allowance for recovery of costs management fees there is no good reason not to instruct a costs professional to assist with all aspects of costs management following preparation of the costs budget.
You can find out more about our services here or you can contact the Costs and Litigation Funding team at costs.support@clarionsolicitors.com.
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