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Paul Bunting, Partner, Aspinall Wright Solicitors
We suspect that there are not many who truly relish the whole notion of costs budgeting? But please fight the urge, once you have agreed your budget or had the court approve it, to bury it away in a dark cupboard and hope it will never see the light of day again!
In all seriousness, we would strenuously urge all of our clients, once a budget has been agreed/approved, to regularly refer back to it. Stick a copy to the front of the paper file as you would a legal aid funding certificate or, in the paperless era, set up a rolling diary prompt as a reminder to review the budget periodically. You need to be asking yourself at every stage, post-budget, do I have scope to be undertaking this work and/or do I have scope to incur this item of cost? If the answer is no then consideration should be given to amending the budget otherwise you run the risk of not recovering that element of the costs inter partes.
In the first instance you should submit your amended budget to you opponent (PD3E 7.6) and invite their agreement. If there is good reason for the departure from the original budget then they may be willing to agree the revision or at least negotiate with you at a figure someway between the original budget and the newly proposed total. If you cannot negotiate an agreement, application should be made to the court. (This all assuming that time permits. If the unexpected happens and time does not allow for a revised budget to be approved before those costs are incurred then there may well be an unexpected interim application and PD3E 7.9 would apply which allows the costs of such application to be sought in addition to the approved budget). Our previous blog on Elvanite v AMEC on this issue can be found here.
Ploughing on regardless with the original budget in force where there has been a significant development in the case is likely to have serious and detrimental consequences in terms of costs recovery. To date, phased bills of costs that coincide with the budget have not been mandatory although that does not mean that a paying party will not scrutinise your claim for costs and identify aspects of the costs that are over budget. If you are found to have exceeded the scope of the budget then in all likelihood the Defendant will not pay those costs and you would struggle to recover them on assessment. CPR 3.18 confirms that when assessing costs on the standard basis, where a costs management order has been made, the court will have regard to the last approved or agreed budget and not depart from such approved or agreed budget unless satisfied that there is good reason to do so.
From 1 October 2015 some form of breakdown of the costs between the various phases will be required to be served with the bill to enable paying parties to compare the costs being sought as against the budget in place. There is, as we have previously blogged about here, a voluntary pilot phase-based bill of costs for the SCCO also being introduced from 1 October 2015 which will become mandatory in the spring 2016 with the intention of making the new format mandatory in all cases where there is an order for costs made after April 2016. (Master Gordon-Saker in BP v Cardiff & Vale University Local Health Board  EWHC B13 (Costs) has already decided that where there is a costs management order, bills need to be split into phases even before the formal upcoming changes). Accordingly, whilst of course it was always important not to exceed a costs budget, the forthcoming changes will only serve to allow paying parties to be better able to scrutinise whether you have indeed overspent!
Of course amending a budget does assume some material change in direction of the case. Where the case progresses as predicted, the need to get the budget right in the first place cannot be stressed enough and it will be extremely difficult to persuade a court that any inadequacies or mistakes in the budget, which is then approved by the court, should be substantially revised and rectified. In Stokes –v- Neil Dowlman Architecture Limited  EWHC 872 (TCC), Coulson J said “the courts will expect parties to undertake the costs budgeting exercise properly first time around, and will be slow to revise approved budgets merely because, after the event, it is said that particular items had been omitted or under-valued… any other approach could make a nonsense of the whole costs management regime”. Whilst we appreciate that all fee earning time is precious, given the significant implications an approved budget will have, please invest sufficient time to the budget preparation process to get it right in the first place. You know your case and client better than anyone therefore work with your costs draftsman to determine how the matter will likely proceed. A well crafted budget reasonably agreed/approved should mean that ultimately the costs recovered are not diminished as a result of the budget in force.
The drafting team at John M Hayes have extensive experience of preparing costs budgets. Get in touch if you would like to learn more about the service we can offer.
Sharon Smith has worked in the legal costs arena since 1996 and specialises in complex personal injury and clinical negligence claims as well as having vast experience in the preparation of costs budgets.