Tag: head of costs budgeting

Estimating your legal costs – Why?

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Not only is it prudent and good practice, but it is essential that clients are regularly provided with estimates of their potential legal costs and are appraised in that regard.

The SRA require lawyers to provide their clients with the best possible information regarding the cost of the matter. This should be provided at the outset and reviewed and updated as and when necessary. Estimates of costs up to a particular stage are inadequate to meet the SRA requirements, an estimate of costs up to the conclusion of the claim is required.

The SRA requires lawyers at the outset to analyse whether pursuing the claim is commercially viable. Does the outcome justify the risk of having to pay someone else’s fees? So, an explanation needs to be given to the client of the likely costs of the claim, to include both party’s costs and whether the claim is worth pursuing in view of that. This should be reviewed throughout the lifetime of the claim and updated if appropriate. The reasoning is that the client should be able to make a fully informed decision when deciding to pursue litigation, a partial estimate does not allow this.

This is good practice in any event as it ensures that your client’s expectations are managed and will lead to no surprises. This transparency can lead to less disputes regarding the level of fees and the avoidance of any complaints in law firms which centre around fees.

The type or complexity of the claim will really depend on how sophisticated the estimate will need to be, however scoping the work properly will alleviate any scope creep.

Moreover, preparing an estimate of how much you consider that the claim will cost will assist regarding your approach, a more informed decision can be made regarding this. Providing this information does show confidence in pricing and in any event this more sophisticated pricing is being seen in the marketplace.

In the event of scope creep, a detailed estimate can assist and justify those further costs that are associated with the additional work. It is wise to keep your client informed if any of the out of scope work is not recoverable from the otherside, failure to do so may put you at risk regarding those additional costs.

In addition to identifying out of scope work, it is sensible to monitor your estimate and advise the client if the estimate is subject to change. If a detailed estimate has been provided at the outset it will be much easier to explain why the estimate requires increasing.

The draconian sanctions and restrictions surrounding budgets do not apply to estimates, the estimates are used as a yardstick to measure reasonableness. It is not intended to be straight jacket, that said, they do need to be prepared with care because if the client can show reliance and the matter proceeds to solicitor and own client assessment then your costs are at risk of a reduction as a result of that reliance.

Sue Fox is a Senior Associate and the Head of Costs Management in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622

 

The new statement of costs goes live on 1 April 2019

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I have further updates regarding the new statement of costs following on from our January newsletter. The pilot scheme will operate from 1 April 2019 to 31 March 2021 and will apply to all claims in which costs are to be summarily assessed, whenever they were commenced. There will be two statements of costs which may be used whilst the scheme is in force; the N260A when the costs have been incurred up to an interim application and the N260B when the costs have been incurred up to trial. The N260 will be available in paper/pdf form and in electronic form. Parties are able to use the paper/pdf form only, however if they use the electronic spreadsheet form this must be filed and served in paper form and electronic means. The format has changed and the document schedule now requires the time entries to be dated. 

In cases which have been subject to a costs management order, any party filing the form N260B must also file and serve the precedent Q (which is a summary that details any overspend/underspend for each phase of the budget). Now that the court can identify overspends in the budget, will this additional layer of information result in more costs being summarily assessed and less detailed assessments? Will this assist with applications for payments on account? Will we see the N260B being used at trials that are listed for more than one day, to demonstrate that there hasn’t been any overspend in the budget and resultantly the budgeted costs being allowed in full? Possibly, but only if the incurred costs are identified separately to the estimated costs, please see my earlier blog for a more detailed analysis in that regard.

Sue Fox is a Senior Associate and the Head of Costs Management in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.

 

A new year, a new statement of costs. But why stop at that? A few intended changes to Costs Management too

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The CPR committee have been hard at work again coming up with solutions to the problems that have been encountered by the legal profession since the Jackson reforms nearly 6 years ago.  Following the scratching of many heads, a few of those creases have been ironed out and the following proposals have been made:

Statements of costs

A voluntary 2 year pilot scheme for the new statement of costs will be implemented, starting from 1 April 2019.

The current proposals are for two new forms of costs statements, namely N260A and N260B which may be used for summary assessment. These new forms will  include a VAT declaration and the forms will now include the signature of a legal representative, which is in line with the rules, as opposed to a company partner. The Form N260A will cross refer to the document schedule in the summary. No model forms are available yet.

Master Howarth has suggested that the precedent Q, the document that identifies whether there has been an under or overspend in a phase of a budget, is incorporated into the statement of costs. This will create transparency at the summary assessment stage regarding the amount incurred in comparison to the approved budget – supporting the need for a well drafted budget.

The committee is to give consideration to lower value cases and the relevance of statements of costs for those cases where there will never be a summary assessment, as there was concern regarding the wasted costs incurred in those instances.

Costs management

The precedent H costs budget will remain the same, but there will be some adjustments to the guidance notes to align costs budgeting with the new electronic bill approach.

There has been many a debate regarding what date the incurred costs should be included up to in the budget and there is tension in the wording of the rules in that regard. The committee have recognised this and have debated the very same problem. They have understood that differing practices appear to be in place and that overall there is value in a consistent approach. It has been advised that this issue should be resolved as part of a future review of the practice direction.

There will be some adjustments to the precedent R, however that is the only guidance that has been provided at this stage, so the amendments remain unknown for the time being.

Sue Fox is a Senior Associate and the Head of Costs Management in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.

 

Voluntary capped costs pilot scheme in the Business Courts

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Following on from my blog and newsletter (see below) over a year and half ago, it has now been announced that the capped costs pilot scheme will go live in January 2019 to coincide with the launch of the disclosure pilot scheme. The capped costs pilot scheme will apply to the Business and Property Courts in Leeds and Manchester (Chancery, Circuit Commercial and the Technology and Construction Court) and the London Circuit Commercial Court.

It is a voluntary scheme that will last for 2 years, with costs capped at £80,000.00.

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Blog published 20.06.17

Fixed Recoverable Costs – the pilot scheme

Following on from my newsletter below, the Civil Procedure Rule Committee meeting notes have been published today. Last month I explained how Jackson LJ had suggested how ‘capped fixed costs’ would work. The meeting notes have now confirmed how the pilot scheme will work, explaining that costs for preaction would be capped at £10,000, for particulars of claim at £7,000 and for defence and counterclaims at £7,000.

Many thanks to John Hyde of the Law Society Gazette who has reported that “Parties can claim up to £6,000 for a reply and defence to the counterclaims, £6,000 for the case management conference, £6,000 for disclosure and £8,000 for witness statements. Expert reports are capped at £10,000, with the trial and judgment costs limited to £20,000.

The working group dedicated to the pilot scheme proposes an overall cap of £80,000 rather than setting an actual fixed amount at this stage.

The proposal, backed in principle by the committee, is to run the pilot in certain specialist civil courts: the London Mercantile Court and three courts in each of the Manchester District Registry and Leeds District Registry. Any cases where the trial will go beyond two days, or where the value is more than £250,000, are excluded”.

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Clarion May 2017 Newsletter

Fixed Recoverable Costs. A taster of how the pilot scheme may work.

The judiciary have released an outline regarding how the fixed recoverable costs regime may work. Jackson LJ attended a costs seminar in Birmingham back in March 2017, which focused on mercantile and business litigation. At that seminar both Jackson LJ and HHJ Waksman outlined their proposals for the fixed costs pilot scheme, those proposals being subject to the approval of the Civil Procedure Rules Committee. The details of their proposals were as follows:

The pilot scheme will run in the London Mercantile court, and Manchester and Leeds specialist courts.

  • It is likely that the pilot will commence in October 2017 and will last for two years.
  • The pilot scheme is optional.
  • There will be a separate fixed costs list.
  • The pilot can be joined at certain stages:
    • The pre-action stage
    • No later than 14 days after service of the defence
    • At the case management conference (CMC)
    • Claimants can commence proceedings in the fixed costs list.

The Defendant has an absolute right to object to this, and if so then the proceedings would be removed from the fixed cost list.

  • The CMC will be the last opportunity to join the pilot.
  • Parties will not be able to withdraw from the pilot, apart from the Defendant if the Claimant issues in the pilot scheme (see above).
  • There will be a shortened process with strict case management .

The pilot is currently a ‘work in progress’, however it is envisaged that these proposals will be making their way to the Civil Procedure Rules Committee in June 2017, so these could be public by July 2017. It is currently predicted that:

  • Parties will be required to file their “core documents” (the documents that are relevant to the issues in the claim) with their statements of case, i.e. the particulars of claim, defence, reply and defence to counterclaim.
  • There will be no need for further disclosure, unless parties can justify this at the CMC.
  • If further disclosure is required, parties will need to apply for the same before the CMC. If the parties cannot agree, an order will be made.
  • At the CMC, the judge will suggest Alternative Dispute Resolution (ADR), including Early Neutral Evaluation (ENE).
  • The CMC will be the only interim hearing, this will include setting the trial timetable.
  • Consideration is being given to limiting the number of witnesses, the thoughts are that there will be one factual witness on each side.
  • Costs budgeting will not be required and there will be no pre-trial review.
  • The trial length will be up to two days (excluding judicial reading)
  • Cross-examination will be “very strictly controlled”.
  • An early hearing date will be guaranteed.
  • Judgments will be produced within a short period of time.
  • Pilot participants can expect “active and proactive” case management.
  • Costs will be summarily assessed at the end of trial.

The above proposals were made in March 2017, however since then there have been further proposals, as follows:

  • The pilot will only relate to claims that are less than £250,000.
  • The pilot will only relate to claims where the trial is no more than 2 days.
  • The pilot will only relate to non-complex matters.
  • The maximum costs that will be allowed will be £80,000. The pilot scheme will be similar to the IPEC costs regime. There will be caps for phases of litigation and those phases will be the same as the phases used in costs budgets.
  • Parties can only leave the scheme under exceptional circumstances, examples of those circumstances are; allegations of fraud, if the matter subsequently is listed for a 3 day trial.
  • Judgment will be handed down within 6 weeks.
  • The proposed ‘grid’ is not yet available and it is likely that this will not be available until the practice directions are published, so it may make its way into any July update to the rules. The main benefits of the pilot scheme are that claims will be resolved speedily and parties will be more aware of their potential costs exposure.
  • We will continue to provide updates regarding fixed costs, as well as all costs related law.

Sue Fox is a Senior Associate and the Head of Costs Management in the Costs and Litigation Funding Department at Clarion Solicitors. You can contact her at sue.fox@clarionsolicitors.com and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.

Good news for those that prepare an accurate costs budget

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Following on from the Court of Appeal decision in Jacqueline Dawn Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] WECA Civ 792 where the Court of Appeal found that:

  • The budgeted costs will not be departed from in the absence of a “good reason”;
  • Incurred costs do not form part of the budgeted costs;
  • The good reason test does not apply to those incurred costs;
  • The proportionality test can be applied to the final claim for costs, despite the proportionality test having been applied when the costs budget was approved.

As predicted, we have seen that in practical terms this is good news for those that prepare accurate budgets, but not so for those that don’t. The practical implications of this Court of Appeal decision has an impact on the recovery of your legal fees, as follows:

If the budget has not been exceeded:

  • The budgeted costs will be allowed in full unless a good reason is demonstrated to depart from the budget;
  • A detailed assessment of the budgeted costs can be avoided.

If the budget has been exceeded:

  • The budgeted costs will be restricted to the amount of the budgeted costs that were approved, unless good reason can be demonstrated to depart from the budget.

Win win for those with well prepared budgets. In addition, following approval of the budget, further consideration should be given to the budget throughout the lifetime of the claim. Examples of which are as follows:

Q1. Is it necessary to consider the budget in preparation for the trial?

Answer – yes.

If you win and your budget has not been exceeded:

  • Ask the court to order that the budgeted costs claimed are allowed in full;
  • Only incurred costs will be assessed by way of detailed assessment;
  • If the trial is less than one day, ask the court to summary assess the incurred costs. The court may assess the budgeted costs, however if the costs fall within budget, these should be allowed in full. Present your budgeted costs in phases to demonstrate to the court that the budget has not been exceed on a phase by phase basis;
  • Assess any potential good reasons that your opponent may raise to depart downwards from your budget and be ready to defend those arguments;
  • Ask for a payment on account of the incurred costs, these remaining costs being subject to assessment.

If you win and your budget has been exceeded:

  • If no good reason can be demonstrated to depart from your budget, the court should limit your claim for costs to the approved budget amounts;
  • Therefore establish a good reason to depart from the budget so that the costs can be assessed by way of detailed assessment rather than being restricted to the approved amount of the budget. This will provide you more of an opportunity to justify your costs and overspends;
  • Request a payment of the approved costs, payable within 14 days;
  • Request a payment on account of the remaining incurred costs, payable within 14 days.

If you lose and your opponent’s budget has been exceeded, their budgeted costs should be limited to the budget:

  • The winner can obtain costs in excess of the budget if they can show a good reason to depart from the budget, so be ready so defend any good reasons that the winner may raise to depart from the budget.

If you lose and your opponent’s budget has not been exceeded, their budgeted costs should be limited to the budget:

  • A good reason is required to depart from the budget, therefore if you can identify a good reason to depart from the winner’s budget you can secure a reduction to the winner’s budgeted costs.

Q2. What are examples of a good reason?

Answer – examples of a good reason to depart down are:

  • Did the winner undertake all the work that was provided for in the budget?
  • Were there any adverse costs orders, amount needs to be excluded from the budget?
  • Proportionality test – does the proportionality test that was applied at the CCMC require revisiting?

Q3. Why raise those good reasons at the trial?

Answer

  • Defers the assessment of costs to detailed assessment, if deemed beneficial;
  • Minimises the amount of the payment on account;
  • Minimise the amount of budgeted costs payable.

Remember, incurred costs are subject to detailed assessment in the normal way – ensure that the court is aware that this is only applicable to budgeted costs.

Q4. What role does the budget have in securing a Payment on Account?

Answer – the court will scrutinise the amount that was approved in the budget when determining the amount of the payment on account.

  • If the court refuses to order the payment of your budgeted costs in full, and opts to order a payment on account instead, request the following amounts:
    • Thomas Pink Ltd v Victoria’s Secret UK Ltd [2014] EWHC 3258 (Ch) (31 July 2014) – POA of 90% of budget;
    • Cleveland Bridge UK Ltd v Sarens (UK) Ltd [2018] EWHC 827 (TCC) – POA of 70% incurred costs and 90% estimated costs.
  • Be ready to defend any good reason to depart from the budget that your opponent may raise, this will assist in securing the maximum payment on account, conversely remember to raise any good reason arguments to depart down if you are payer rather than payee.

Q5. What role does the budget have at the mediation or settlement meeting?

Answer – the budget enables parties to be fully aware of their costs exposure, so an informed decision can be made when determining whether to settle. Update the budget for the ADR meeting so that costs may be agreed at the same time and be ready with the same arguments in terms of departure from the budget that would be applied at the trial.

Any questions? Please contact me at sue.fox@clarionsolicitors.com or call me on 0113 336 3389.

Be costs ready at trial if your claim is being heard in the SHORTER AND FLEXIBLE TRIALS SCHEMES

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In the 100th update to the CPR, PRACTICE DIRECTION 57AB for SHORTER AND FLEXIBLE TRIALS SCHEMES has been published and is implemented from 1 October 2018. This Practice Direction supplements CPR Part 57A.

A claim in the Shorter Trials Scheme may be started in any of the Business and Property Courts.

Costs are to be assessed by way of summary assessment, save in exceptional circumstances. Furthermore, the court can order, or parties can agree that costs management applies and if a costs management order is made costs will be summarily assessed on a phase by phase basis.

Costs

2.56 – CPR 3.12 shall not apply to cases in the Shorter Trials Scheme, unless the parties otherwise agree. If at the outset of the proceedings the parties agree that Costs Management should apply, they should seek an order to that effect at the CMC and apply for directions as to when budgets should be subsequently exchanged, discussed and submitted for the court’s approval.

2.57 – Within 21 days of the conclusion of the trial, or within such other period as may be ordered by the court, the parties shall each file and simultaneously exchange schedules of their costs incurred in the proceedings.

2.58 – Such schedules should contain sufficient detail of the costs incurred in relation to each applicable phase identified by Precedent H to the Costs Budgeting regime to enable the trial judge to be in a position to make a summary assessment thereof following judgment.

2.59 Save in exceptional circumstances—

(a) the court will make a summary assessment of the costs of the party in whose favour any order for costs is made; (b) rules 44.2(8), 44.7(1)(b) and Part 47 do not apply.

Any questions? Please contact me at sue.fox@clarionsolicitors.com or call me on 0113 336 3389.

The Disclosure Pilot Scheme – what roles do costs estimates and precedent H costs budgets have?

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Details of the disclosure pilot scheme are now available on the MOJ website, with a large focus of the scheme centring around saving costs – accurate costs estimates are essential (PRACTICE DIRECTION 51U – DISCLOSURE PILOT FOR THE BUSINESS AND PROPERTY COURTS).

In terms of costs, the pilot scheme reveals that costs estimates are now required to support different disclosure proposals; costs estimates of the intended disclosure exercise are required; estimating the costs of disclosure can be deferred until after the precedent H costs budget; costs don’t necessarily follow the event and be prepared for adverse costs orders being made. Be ready to be able to justify any estimates at a hearing and ensure that the estimates are accurate enough to be transferred across to the precedent H costs budget. Please see below some important paragraphs of the pilot scheme that relate to costs and estimates:

Costs don’t necessarily follow the event.

Para 9.9 – In an appropriate case, the court may order that the question of which party bears the costs of disclosure is to be given separate consideration at a later stage rather than the costs being treated automatically as costs in the case;

Para 10.3 – The parties’ obligation to complete, seek to agree and update the Disclosure Review Document is ongoing. If a party fails to co-operate and constructively to engage in this process the other party or parties may apply to the court for an appropriate order at or separately from the case management conference, and the court may make any appropriate order including the dismissal of any application for Extended Disclosure and/or the adjournment of the case management conference with an adverse order for costs.

Costs estimates are required to support different disclosure proposals.

10.6 – Having agreed the List of Issues for Disclosure and exchanged proposals on Model(s) for Extended Disclosure, the parties should prepare and exchange drafts of Section 2 of the Disclosure Review Document (including costs estimates of different proposals, and where possible estimates of likely amount of documents involved) as soon as reasonably practicable and in any event not later than 14 days before the case management conference.

Costs estimates of the intended disclosure exercise are required.

22.1 – The parties are required to provide an estimate of what they consider to be the likely costs of giving the disclosure proposed by them in the Disclosure Review Document, and the likely volume of documents involved, in order that a court may consider whether such proposals on disclosure are reasonable and proportionate (as defined in paragraph 6.4). These estimated costs may be used by the court in the cost budgeting process.

Estimating the costs of disclosure can be deferred until after the precedent H costs budget.

22.2 – In cases where the cost budgeting scheme applies, if it is not practical to complete the disclosure section of Form H in relation to disclosure prior to the court making an order in relation to disclosure at the case management conference, the parties may notify the court that they have agreed to postpone completion of that section of Form H until after the case management conference. If they have agreed to postpone they must complete the disclosure section within such period as is ordered by the court after an order for disclosure has been made at the case management conference. Where possible the court will then consider (and if appropriate, approve) that part of the cost budget without an oral hearing.

If the approach to Extended Disclosure is not fully agreed, the parties should be ready to provide more detailed information at the CMC as to how their global estimates were arrived at and the impact upon them of particular requests for Extended Disclosure.

Any questions? Please contact me at sue.fox@clarionsolicitors.com or call me on 0113 336 3389.