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Harrison and the risks of the inability to stick to costs budgets: ACL survey

The Court of Appeal’s recent ruling in Harrison v University Hospitals Coventry & Warwickshire NHS Trust was not so much a gentle nudge to solicitors on the importance of costs budgeting, but a sharp elbow in the ribs.

Demonstrating once and for all the central importance of budgeting in litigation, it established that parties need to show a “good reason” to depart from the budget at detailed assessment.

So the pressure is on solicitors to get their budgets right.

Unfortunately, they have a long way to go, to judge by the latest survey of costs lawyers carried out by the Association of Costs Lawyers (ACL). Rather, solicitors’ inability to stick to their costs budgets puts them at risk of significant financial losses following Harrison.

The poll found that just 5% of costs lawyers worked with solicitors who always stuck to their budgets (albeit this was up from an even more miserly 2% the last time they were asked, in November 2016).

Two thirds (67%) said that their solicitor clients “sometimes” went over budget, while 26% said this always happened.

Solicitors need to sit up and take notice of the Harrison ruling, as too many are not approaching costs budgeting seriously enough. There are likely to be a few painful experiences before the message really hits home that, if you want to get paid for the work you do, you need to plan and budget properly.

Another answer is to update your budget in the event of “significant developments” in the litigation. This has been an underused part of the costs management process, although the survey indicated modest progress. Last November, 18% of costs lawyers said that the number of applications to update a budget was increasing; the figure was 23% this time around.

Similarly, the number of costs lawyers who said they had never seen such an application fell from 32% to 27%.

The survey suggested that one problem faced by solicitors is that budgeting takes place too early in proceedings. Half of costs lawyers said that instead of doing it at the first case management conference, as now, the hearing should be held later, once the course of the litigation is clearer. Some 29% supported budgeting in stages, according to how far the case had progressed.

On a positive note, more costs lawyers are starting to see real benefits from the budgeting process. The figure was 24% this time, compared to 15% last year.

However, judges continue to be a problem. Given a set of statements on how costs management is working, the most popular option (selected by 63% of respondents) was that “it depends on which judge you’re before”. Just 10% thought that judges were finally getting the hang of costs management.

More positively (for costs lawyers at least) was that 42% said that the process had brought their skills to the fore.

Another danger heading the way of law firms is the new electronic bill of costs. In June, the Civil Procedure Rule Committee decided that it will be rolled out for compulsory use in the Senior Courts Costs Office (SCCO) and country courts from April 2018 (it was originally planned to go live in the SCCO only from October 2017).

Half of respondents to our survey said that solicitors “haven’t got a clue” that this change is coming, while 43% reported that “some do”.

Though the survey was carried out before the decision to shift the start date to next year, it is likely to be a popular move, as 60% said October 2017 was too soon.

However, there remained scepticism that the electronic bill would improve on current practice, although there was support for the ACL’s own, more workable version of the Excel-based bill that is intentionally far less rigid than Precedent AB.

Most costs lawyers thought that J-Codes were dead in the water, now that the bill does not mandate their use.

The survey shows that the extra time to get ready for the new bill of costs will benefit solicitors and, indeed, some costs lawyers.

While a lot of lawyers may be happy to continue in the same way they have done for many years, the introduction of what is essentially a spreadsheet should help both the parties and the judge. It should make the process fairer as well as cheaper. As the courts head towards a digital future, the costs world needs to adapt. We’re getting ready. Are you?

Association of Costs Lawyers Iain Stark

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