Cost matters – How to get the budget right on high value cases or where the value is not yet clear

Costs budgeting brings clarity to all parties on their ability to recover costs.  It requires careful attention and preparation to show that the costs already incurred, and the projected incurred costs, are proportionate and relevant to the issues in dispute.

The intention of costs budgeting was to bring both the procedural steps and the costs incurred in complex cases under the management of the court. However, with the uncertainty of litigation and with unforeseen costs often arising, things are not always straightforward, especially in high value and therefore often complex cases.

Here, we consider different aspects of cost budgeting to cover some of the complexities involved.

• What is a high value case?
• The best approach in getting a good budget first time
• How to get it right
• Dealing with difficulties (Recording time, issues relating to causation or quantum, explaining why costs are high, how to persuade the judge)
• How to revise a budget
• Dealing with a bad budget

Why is a costs budget important?

Costs budgeting is important so that at the end of the proceedings the winning party can recover costs under the approved budget within 14 days of the conclusion of the hearing. This is designed to avoid any expense and delay caused when costs cannot be agreed.

It is important to get it right otherwise the consequences can be severe and could mean you pursue a claim without the ability to recover substantive portions of costs.  This would in practice, severely prejudice a client’s ability to continue with their claim as they would be unable to recover their solicitor’s fees.

What is a high value case?

Borderline high value cases are ones that – on the evidence currently available – are likely to be worth circa £100,000 but which could easily be worth £150,000 or more if the evidence falls into place later.

Cases are often issued before the medical evidence is finalised or the claimant can serve a fully particularised schedule of loss. If it is not obvious from the injuries sustained that a case has a certain value, but it is believed that the case can achieve a particular value even if the evidence is not yet available, then it is sensible to plead why we think that and to set out some figures for guidance, even if the individual heads of loss are still to be confirmed.

The importance of filing a “good” budget first time

There is a balance to strike between when to disclose evidence and costs issues, as a claimant’s case can be impacted negatively if the right budget is not achieved. Although an application can be made later to increase the budget, it is preferable to get a “good” budget at first time of asking.

Serious thought should be given to all medical evidence that can be served, being served in advance of the CCMC even if the claimant is serving medical evidence unilaterally.

The judge must be persuaded that the budget proposed is reasonable and it might not be possible to do that if the schedule does not make the position clear and medical evidence that could have been served is held back.

Getting the wrong budget is likely to impact the ability to get additional medical evidence. In addition, a judge is less likely to be persuaded that further different expert reports are required if they are unconvinced about the potential value of the claim.

How to get the budget right

• Make sure the judge has all the information available at the CCMC to make the best decisions possible as to what the budget should look like. This is an important aspect of budgeting and can be overlooked if focussing on the legal rather than costs issues in a case.
• Put yourself in the judge’s shoes when instructing counsel to attend on the CCMC. Make a realistic objective assessment of what the case looks like from that perspective and what value it might have from the documents within the CCMC bundle – this is essential particularly if the case is not obviously of high value.
• Explain why incurred costs in certain phases may be so high. If incurred costs look high in any phase, it is sensible to explain this.

The following examples give some clarity:

1. During the disclosure phase there is no harm in listing in instructions to counsel or in the assumptions, all the different hospitals, treatment providers, DWP, employers that we have had to obtain documents from and those that we will need to update as the case progresses.
2. During the witness statement phase – incurred costs on witness statements can look substantial by the time the CCMC comes around, but there may still be a lot of work to do.

There are likely to be reasons for this. One reason could be if liability was fiercely contested for much of the pre-action period and then conceded later or in the defence or indeed a split has been agreed on liability – then we need to bring this to the court’s attention at the CCMC.

We might have spent many fee earner hours on liability – this needs to be explained and set out.

There may still be a lot to do on quantum – counsel needs to be aware of this so that it is brought to the court’s attention. Ideally, it would be helpful to be able to give the court a breakdown of the incurred time spent on liability issues.

• A judge will be assisted by confirmation as to how estimated costs are being targeted. For example, if the budget is requesting substantial costs for witness and expert evidence, how much refers to new issues or issues that have not been investigated and how much relates to already established issues in the case.

Dealing with issues that may arise

• Recording time

One issue that may arise is how we record time spent speaking with the client and others.

Arguably work can be recorded as factual investigation rather than as work spent on witness statements.  This is true particularly in the initial 3-6 months of the case and potentially in respect to any new issues that arise before moving on to the need for a statement.

Recording time in other phases where possible may assist in making the incurred costs in the witness statement phase look more reasonable at the CCMC. Time spent speaking to the client about their injuries can go in the expert phase, or if about losses, into the issue proceedings phase, even though this information might be placed in a statement.

Alternatively, the time can be recorded as split between all three phases to give the incurred costs a more balanced look.

This will mean three separate time entries but can be explained in the file note of the conversation.

• Issues relating to causation or quantum

It is also helpful to set out any new issues arising in respect to causation or quantum and how this affects witness statements or indeed other phases.

This should be made clear to the court and counsel. For example, the claimant may have suffered serious orthopaedic injuries and a subtle head injury. Many hours of fee earner time may have been spent on the orthopaedic injuries, setting out ongoing symptoms and restrictions and likely future areas of concern.

However, the emphasis of the case may change as limitation approaches because the claimant has developed chronic pain, head injury or psychological issues which have not yet been fully investigated and which require additional expert evidence and more detailed witness statements from family, friends, work colleagues etc.

Continued improvement from a head injury can continue for two years post-accident. It is therefore possible that if improvement has not been made as expected then substantial additional work will need to be carried out. Again, this needs to be flagged up to counsel and to the judge at the CCMC.

• Explaining why costs are high

Setting out in detail why the incurred costs are so high and why substantial estimated costs are still needed helps to blunt the standard defendant objection that costs incurred are already unreasonable and that the estimated costs are too high.

Incurred and estimated costs that can be explained are more likely to be considered reasonable particularly if the reason for the level of the incurred costs can be linked to the defendant’s conduct (by say, disputing liability throughout and then admitting or agreeing a liability split, refusing to agree to a JSM or other mediation or failure to make any offers at all on any issue), complexity or potential high value.

A good case summary dealing with the issues, the costs incurred and how the issues impact on the need to incur future costs will help. It is likely to be beneficial to spend a substantial amount of time on the case summary if a case is one of those that it is believed to be worth a substantial sum in damages, but which is not immediately obvious to the court from the documents within the CCMC bundle.

The type of case which probably requires this sort of attention is where there are future risks that require further evidence that is not yet available, but which appears to be likely given what we know about the injuries. For example, claimants who have manual jobs but who have suffered serious orthopaedic injuries and where we expect to plead an Ogden 8 calculation or similar but where we perhaps have not yet been able to finalise the medical evidence, get the correct statements from work colleagues and plead the final calculation. It is worth putting some notional figures in the schedule “for guidance”.

• When the judge is not persuaded to approve the proposed budget

If a judge is not persuaded to approve the claimant’s proposed budget, then there is the option to ask the judge to approve the budget on the assumption that the case is limited to a particular value. In addition, if it is identified that we need to speak to work colleagues, friends and/or family because of issues that are now clear, but which have not previously been dealt with, then this needs to be made clear and an enhanced figure for that part of the budget should be sought as a fallback position with a view to returning if the evidence is supportive.

Such an approach can be effective to get a better budget later if the right assumptions are placed within the budget and the judge is asked to declare that the budget that he has given adopting a particular assumption, say, the budget is limited to the case being currently worth no more than £150,000.

It is also sensible to include provision that the costs for each phase to be assessed with specific assumptions – such as that no surveillance evidence will be served or that estimated costs for witness statements – are limited to updating the evidence of named witnesses just in case a new witness is identified.

What happens when a bad budget is in place?

Once a bad budget is in place and without any ability to ask the claimant to make up any shortfall, it is likely that some level of work and time which will have to be incurred will not be recovered and will be written off.

Clearly, it is worth spending quite a lot of time in advance of any CCMC to make sure that all relevant issues are identified and that the court has the information it needs to assess the budget. Make sure the case summary flags up relevant issues but also those that are likely to explain the costs already incurred and the costs that will need to be incurred moving forward.

The most important point is to make sure that the judge has the information available to give the claimant a good budget.

How to revise the costs budget

Once the budget is received, keep it under review for potential additional work in the future that is not covered in the budget.

“When seeking to revise a costs budget, the applicant must first satisfy the court that there has been a significant development in the litigation since the last approved or agreed budget which warrants a revision to the last approved or agreed budget; and second that the particulars of the variation have been submitted promptly both to the other parties and the court in accordance with CPR 3.15A (2) to (4)”.

Case law and common law have been quite ambiguous on the issue of ‘good reason, and it is well established that a ‘good reason’ is a high threshold to overcome. To be successful in departing from a costs budget, it must be demonstrated that when the budget was prepared, the change in circumstances could not have been foreseen.

For example, if a judge did not allow costs for say a conference with the experts or a JSM in the approved budget, it is helpful to have a note of the reasons for this. If matters develop so that such steps are more urgently required then it may be possible to apply to update the budget if the need for a conference or a JSM, for example, have come about because of new information which contradicts the judge’s reasoning at the CCMC.

In a case where quantum is not clear at the CCMC then when later serving a fully particularised schedule, it is worth looking at value and back at the previous budget to see whether changes to the budget are now required.  For example, the need for a longer trial, a conference with the experts or a JSM particularly if the judge at the CCMC confirmed that the budget was set on the basis that the case value was unlikely to be more than say £100k or £150k.

How to avoid a bad budget

The best protection against a bad budget is to get as much work done prior to the CCMC so that the only steps left are to comply with the court directions, on the basis that we have as far as possible, everything in place that we need.  In those circumstances, the reasons why the incurred costs are perhaps not so important because they will be looked at in detail on assessment. The explanation for the incurred costs can be set out at that hearing.