Hello, and welcome to the sixth instalment of my series #askacostslawyer in which I answer questions asked by some of our amazing solicitor clients.

Today, we step into the world of the Precedent H costs budget and look at a question that comes up quite often:

“How would I prepare an accurate and realistic Precedent H costs budget for a costs and case management conference?”

In costs law, creating a realistic and accurate Precedent H costs budget for a Costs and Case Management Conference (CCMC) is a fundamental skill. Hopefully the following article will provide a comprehensive roadmap to crafting an effective costs budget that accurately mirrors the scope and demands of your case.

1. Understanding the Scope of Your Case

It may sound obvious, but the initial step in creating an effective costs budget is to fully understand your case's scope. Consider the case's nature, its complexities, scale, and potential challenges. By assessing factors like potential case value, volume of documents, and the need for expert witnesses, you will be able to create an accurate estimate of costs involved in the case management process.

2. Structuring Costs into Precedent H Phases

Your Precedent H costs budget needs to divide costs into various litigation phases. These phases encompass pre-action, issue/statements of case, disclosure, witness statements, experts' reports, pre-trial review, trial preparation, trial, and ADR/settlement. Understanding the tasks associated with each phase aids in accurate cost estimation. Further, you are required to partition your costs into 'incurred costs' and 'estimated costs' for added clarity.

3. Incurred costs

Make sure the incurred costs element of the budget is accurate. Don’t simply do a tally of time taken and add chunks to each phase. Cost the file as if you are preparing a bill of costs. That way, when a bill is finally required, most of the work will already have been done, and it will also mean that the pre-budget costs in your bill will precisely match the incurred costs in you budget. If you just do a quick tally for the purposes of the budget, the likelihood is that the final costs claim will be different from the budget which will expose you to challenges during the costs assessment process.

4. Time Estimation in Costs Budgeting

Accurate time estimation forms the backbone of the budgeting process for solicitors. Estimating the time required for different tasks related to the case can be complex. A thorough approach that considers your time and that of your support staff will yield more accurate results. This approach must include time spent directly on the case and indirect aspects like correspondence and consideration of prospects.

5. Factoring in Fees and Disbursements

Fees and disbursements related to your case should be included in your budget. These costs payable to third parties can include expert fees, court fees, and travel costs. Remember to include brief fees to counsel within the trial preparation phase, and state costs of interim applications separately, either within the appropriate phases or as contingencies.

6. Building Flexibility and Contingencies into your Precedent H Costs Budget

Considering the unpredictable nature of legal proceedings, your cost budget must incorporate flexibility. You must accommodate unexpected changes and costs for potential additional work, and sometimes these should be included as contingencies rather than in the main phases themselves. That said, the Guidance Note for Precedent H annexed to CPR PD 3D is clear that contingencies should only be included for work which is likely to happen, but which will not fit within any other phase.

7. Regular Review and Revision of the Costs Budget

The creation of a costs budget isn't a one-time task. Regular review and revision are key to maintaining an accurate and up-to-date budget, reflective of the latest developments in the case management process. If there is a “significant development” during the course of the litigation, the parties are now required to file and serve a Precedent T – a varied costs budget. That document should set out details of the significant development and the additional costs incurred in each relevant phase, broken down into constituent costs where possible and practical.

8. Assumptions in Your Precedent H Costs Budget

An effective budget includes detailed assumptions at the end of each phase, justifying the figures included. These assumptions offer an opportunity to explain your case specifics and can be crucial when the budget is reviewed or contested. They should not simply outline what is included, but also explain what is not included with confirmation that, if those excluded items later become necessary, further costs outside of the budgeted costs will be incurred.

9. Compliance and Timely Submission of the Precedent H Costs Budget

Adhering to the costs budgeting rules is critical, as non-compliance can lead to severe consequences. If your costs budget is not filed within the time limits set out at CPR 3.13(1), the budgeted costs will be limited to court fees only and you will not get paid. Ensure you comply with all relevant rules and submit your budget on time. For multi-track cases valued at over £50,000, a costs budget (Form Precedent H) must be filed and exchanged at least 21 days before the first CCMC. If the value of the claim is £50,000 or less, the costs budget must be filed with the directions questionnaire. If you miss those deadlines, you should file an application for relief from sanctions as soon as you realise your mistake.

Conclusion

Preparing an accurate and realistic Precedent H costs budget is a vital skill for effective case management. With a clear understanding of your case, structured cost segmentation, accurate time estimates, consideration of fees and disbursements and detailed assumptions, you can navigate this process with confidence. This comprehensive approach fosters transparency and predictability in the litigation process, benefiting all parties involved.

For a more in-depth discussion about this or any other costs-related topic, why not book a discovery chat with us by visiting our online calendar, and choosing a date and time for your free thirty minute discussion.

Welcome to the fifth instalment of my series, answering questions asked by some of our amazing solicitor clients. Today, I am going to discuss the following question which I was asked a few weeks ago

“What information should my client retainer include to avoid my costs being successfully challenged under Section 70 of the Solicitors Act 1975, and how can I protect my firm’s position as the case progresses?”

As most solicitors know, fee disputes can often introduce an element of unwelcome unpredictability in a case. This is particularly the case in costs claims under Section 70 of the Solicitors Act 1975, which empowers clients to challenge the legal costs charged by their solicitor.

So, what can you do to secure your practice against such challenges? Well, there are a few important principal areas to consider.

Clearly defining the scope of work

Imagine you've taken on a case in commercial litigation. The specifics of the tasks you'll undertake need to be crystal clear - drafting and filing the claim, court appearances, negotiations, etc. But it's just as important to stipulate what isn't part of the deal, for example, bringing in a specialist for expert testimony or pursuing an appeal. commercial litigation

Detailing the fee structure

When it comes to fees, there's no room for ambiguity. If you're billing by the hour, don't just state your hourly rate. Give an estimate for the total hours you anticipate the case will take. If it's a flat-fee arrangement, be meticulous about what tasks are covered. And if there's a potential for extra costs, for example if the case goes to trial instead of an early settlement, that should be made clear out from the outset. If you are instructed on an ongoing basis, provide up-to-date costs information on a six-monthly basis if the client is not billed periodically for work already done.

Types of interim bills

Your retainer should be clear as to whether interim “bills” (bills to the client during the course of their instructing you) are final “statute” bills for the period they cover or are invoices on account of costs which can be exceeded when a final statute bill is raised. If they are interim statute bills, they are final for the period and cannot be exceeded when a final statute bill is raised, but they can be enforced if the client fails to pay. If, on the other hand, they are intended as only invoices on account of costs, they are merely requests for monies to cover some of the costs you have incurred. They can be exceeded when a final statute bill is raised at the end of the retainer, however they cannot be enforced as they are not bills in the true sense of the word.

Expounding on expenses and disbursements

These ancillary costs can sneak up on a client and lead to disputes down the line. Court fees, travel costs, expert witness fees, and even things like copying and postage charges all need to be accounted for. If your case strategy might involve instructing Counsel, be explicit that their charges will come as an extra on top of your own. And don't forget to include information about VAT charges. You should also agree all expenses, in particular Counsel’s and experts’ fees, with the client before they are incurred.

Setting down clear billing and payment terms:

Always set out the billing schedule, payment terms, and accepted methods of payment clearly. Remember to specify if there are any charges for late payment, including how and when interest is calculated.

Stating the client's right to challenge the bill

It's not just good practice to clarify this right; it's mandatory under Section 70. Ensure that clients know they have an absolute right to challenge a statute bill within a month of it being delivered, and the right to apply for an assessment within 12 months of the bill being delivered, subject to the discretion of the court. After 12 months, or once the bill has been paid (even if it is within 12 months), that right ceases to exist save in special circumstances. It is therefore vital that the retainer clearly explains the consequences of not challenging a statute bill within the required time limits or before the bill is paid.

Outlining termination clauses

It's the provision everyone hopes never to use, but it's crucial to address it head-on. Specify the notice period required, what happens financially if the client chooses to terminate at various stages, and your right to cease acting for the client in specific circumstances. Be clear about the circumstances in which you, as their solicitor, can terminate the client’s retainer.

Agreeing on alternative dispute resolution procedures

It's always wise to have a plan B. Include a provision in your retainer that you both agree to an alternative dispute resolution process, such as mediation or arbitration, before any legal action commences in case of a disagreement over fees. alternative dispute resolution

The client care letter

This is your chance to summarise the key points in a language that's clear and accessible. Reiterate the essential terms of the retainer, explain your fees, and assure the client of your commitment to their case.

Regularly revisit your retainers

These points are important and should be considered when drafting any solicitor/client retainer, but don’t make the mistake of seeing them as just 'one and done' documents. Think of them as living, breathing agreements that need to be reviewed and updated regularly to keep up with changes in the law, your practice, and client expectations. Of course, you can do this yourself, but working in tandem with an experienced costs lawyer when crafting these agreements can prove invaluable. A second pair of eyes and an understanding of the latest legal regulations can ensure that your retainers remain robust, comprehensive, and worth their weight in gold. costs lawyer

So, there you have it. A retainer agreement isn't just a formal requirement, it's your protection against unwelcome, and potentially costly, fee disputes. Remember, communication is king, and a comprehensive, transparent retainer is the first step in creating a lasting, successful relationship with your clients.

At BarnsChapel, having a diverse client portfolio is the backbone of our legal practice, ranging from receiving to paying parties. Our ethos is centred around offering bespoke solutions to meet the unique requirements of each client. This week, we're placing the spotlight on a question that frequently resonates in our discussions with paying party clients:

"How can we reduce the costs that our client might have to pay the successful party in litigation?"

There are a number of steps which can be taken in order to minimise your clients’ costs liability, both during and after the claim, and these are outlined below:

Early settlement of the claim

Consider, early on, whether the evidence supports the claim against you (if you are a Defendant). If it does, make realistic settlement offers as soon as possible. If the parties can agree settlement early on, they might avoid the need to issue proceedings, obtain expert evidence, go through the disclosure process or any other steps up to and including trial. There is absolutely no point in denying liability and forcing a claimant to issue court proceedings if your client knows it is liable and is in a position to make an acceptable offer. Of course, if there is no case to answer, this is less straightforward because other factors may come into play, such as reputational damage.

Costs budgeting

Be careful, when preparing your client’s costs budget, not to underestimate your own costs. To do so might make them look unrealistically low in comparison with the other parties’ costs, and if that occurs, your opponent might succeed in arguing that you produced a low budget to try and obtain a tactical advantage. That, in turn, could result in your opponent’s budget being approved by the court as drawn, rather than reduced to a more reasonable and proportionate level.

Enter into discussions with your opponent in relation to each party’s budget. If your opponent is claiming proportionate and reasonable future costs in any phase, try and reach agreement on those phases before the costs management conference. If their future costs are disproportionate to the value, complexity, and importance of the issues, try and agree reductions to a more proportionate level. If you can’t agree, send your costs lawyer to the costs management conference. Don’t leave it to Counsel to deal with budgets because they will be busy dealing with directions and may also not have a detailed knowledge of costs.

Agreeing costs post-settlement

If details of your opponent’s costs are served informally, i.e., as an outline statement of costs or as a bill of costs without a Notice of Commencement of Assessment Proceedings (N252) attached, if you have sufficient information to do so, try and agree settlement at that stage. Make realistic offers and don’t try and “horse trade”. This will only annoy your opponent and probably encourage them to start formal assessment proceedings early on. If costs can be agreed without service of a formal bill of costs, your opponent cannot charge you for time spent in costs negotiations. If, however, a bill of costs is served with the N252, costs of the assessment process start to run as soon as that bill is served on you/your client, thereby increasing your client’s costs liability straight away. It is best to make one, or no more than two, decent offers which you think your opponent is unlikely to beat at assessment rather than trying to increase your offer by small increments from an unrealistically low starting point.

Points of Dispute

If you cannot reach early settlement even after service of a formal bill of costs, it will become necessary to serve points of dispute. It is important that this document highlights, in detail (but taking into account that CPR Practice Direction 47.9 paragraph 8.2 sets out the requirement that they should be “short and to the point”) which items in the bill of costs are challenged and why. If you do not include sufficient detail, the court is likely to find for the receiving party, based on the judgment in the case of Ainsworth v Stewarts Law LLP [2020] EWCA Civ 178 in which challenges which provided insufficient detail were dismissed.

If you take issue with a particular general issue – for example hourly rates claimed, proportionality or Counsel’s fees, you should include a preliminary point explaining the reasons for your challenge so that, if the court takes the point, it can be applied to all relevant costs claimed without having to be regularly repeated.

Proportionality

CPR 44.3 sets out the basis of assessment.

In short: Costs claimed on the standard basis will only be allowed if they are reasonably incurred and proportionate to the matters in issue, and any doubt will be resolved in favour of the paying party. If you consider the costs to be disproportionate, make offers based on what you think the court would consider to be reasonable and proportionate costs.

Costs payable on the indemnity basis only need to be reasonable and any doubt as to reasonableness is resolved in favour of the receiving party. Costs recovery in these cases is likely to be much higher than in standard-basis assessments.

Hourly rates

Guideline hourly rates are decided by the Senior Court Costs Office and were updated in October 2021. There are numerous cases relating to hourly rates, but in essence, there has to be a “clear and compelling justification” for exceeding the Guideline rates, therefore if the rates claimed are higher than those, your offers of settlement should factor in a reduction unless you think there is justification for exceeding them.

Costs claimed which exceed the last approved costs budget

It is worth remembering that, when it comes to agreeing costs post-settlement, any costs which were incurred at the time the budget was prepared remain subject to detailed assessment, whereas costs incurred after the budget was approved by the court at the costs management hearing are almost always capped at the level of the approved post-budget costs. If costs in excess of the approved amount for any phase have been claimed, offers of settlement should limit recovery to the amounts approved by the court at the costs management stage unless the receiving party can provide a good reason for departing from the last approved budget.

Non-recoverable costs

Often, whether by accident, design, or simply a difference of opinion, a receiving party will seek to recover costs which you or your client consider to be non-recoverable from the paying party in the litigation. If this is the case, bring those items to the attention of your opponent when making offers of settlement. In order to do this, it is worth checking CPR Practice Direction 47 paragraph 5.12 which sets out some of those costs. The following items are not recoverable and should therefore not be included in any costs claim.

• Time spent dealing with funding or costs issues
• Costs which have already been summarily assessed and paid, or which have been awarded against your client by order of the court
• Perusal of routine incoming written correspondence
• Work done after settlement of the claim, except for drafting and checking the bill of costs
• Local travel expenses – usually within a ten-mile radius of the court dealing with the claim
• The cost of postage and couriers other than in exceptional circumstances
• The cost of making photocopies of documents save in unusual circumstances or where the documents are unusually numerous
• Research, unless it relates to a novel point of law
• Most inter-fee earner communications and discussions
• Photocopying and assembling bundles – not fee earner work
• Administrative tasks – not fee earner work
• Any work which fails to progress the claim, such as solicitor/client updates and non-progressive file reviews

Excessive time claimed

Costs claimed must be both reasonable and proportionate to the claim, taking into account a number of factors including the value, complexity, importance of the matter to the claimant and the conduct of the parties. If time on individual items appears to be excessive, unreasonable and/or disproportionate, it is likely to be reduced at a court assessment if the costs claim proceeds that far and should therefore be offered at a reduced level in your offers of settlement.

So, there you have it. Some tips on minimising your client’s costs liability to the receiving party in litigation .

As ever, if you have any burning questions about law costs, just send me a message or leave a comment.