Costs Budgets – A Useful Tool for the Courts or A Cumbersome Piece of Work for Solicitors?
The Woolf Reforms, which were implemented on 1 April 2013, heralded a change to many aspects of Civil Litigation. One major change to the way litigation is run is the use of the notorious Costs Budget. Lord Woolf’s view on litigation costs was that they were left until the end of a case and there was very little control over costs as cases progressed through the Courts. It was for this reason he initiated the concept of Costs Management in cases valued at £25,000 or more. The Costs Budget is now a key tool to preparing for a costs hearing and both parties to case must prepare one. The budget is essentially a detailed five-page document giving a breakdown of a parties’ costs. There can be serious sanctions against a party if they fail to prepare a Costs Budget. The budget gives details about the each parties’ costs and gives the Court the opportunity to limit the parties’ costs and the liability of the other party to pay them. But has the Cost Budget been a worthwhile invention or is it a creation that solicitors wish to avoid altogether?
My first major encounter with a Costs Budget has been somewhat cumbersome. As solicitors we record our time on an hourly basis and, in preparing the Budget, I found it to take a significant amount of time-recorded time to do this. In addition to the Budget itself, the Court requires parties to communicate with one another and to agree phases of the each other’s budgets and prepare supplementary documents giving an explanation of their costs. The result of preparing for a Costs hearing on a time cost basis does, in fact, add to each parties’ costs and could be viewed as contradictory to the aims of the changes to the legislation that were envisaged by Lord Woolf.
The holding of a costs hearing could also be viewed as unnecessary. No other issues of the case are dealt with at the hearing – it is simply an exercise where a Judge will look at the parties’ budgets and make reductions to them. This, again, adds to the parties’ costs as they require legal representation for the hearing and is an added stage to the case.
If your client wins their case, at the end of it, there is likely to be a shortfall between what is recoverable from the losing party and what your client has spent on a time cost basis. This shortfall can be in the region of 70%. Whilst the Costs Budget would have been a useful aide to the Courts in determining the level of a parties’ costs, a portion of the additional costs incurred by your client in dealing with the management of costs cannot not be recovered from the losing party. Again, this could be viewed as unnecessary expenditure.
In pre-Woolf Reform cases, although costs would be left until the end of a case, costs would have been kept down by both parties avoiding the preparation of Cost Budgets. It is my view that the Costs Management regime should be reformed slightly to reduce the amount of work that is required by the parties running up to a costs hearing. A more simplified version of the Costs Budget would be sufficient, with a reduced amount of judicial and solicitor time, rather than lots of pre-hearing requirements.