Budgeting – 10 tips to avoid unnecessary pitfalls
Background
Budgeting has been around for 10 years or more and one thing for certain is that it is most certainly here to stay.
The original PD 3E has been revised on a number of occasions most notably October 2019 and October 2020, the latter amendment made wholesale amendments encompassed within CPR rule 3.15A relating to revision of Budgets.
We at PIC prepare many Budgets and it’s rather surprising and somewhat interesting to note the amount of similar drawbacks we find when doing so, we guarantee that at least one of the following tips will benefit you.
Tip 1 – Start Early
The Budgeting thought process should start early. In an ideal world the incurred costs should be kept to a minimum.
The file handler should be live to the costs issues and costs implications throughout and this thought process should commence at the outset.
If incurred costs are high, this only serves as a red flag to the Courts who will inevitably wonder …’why are these costs so high?’
Tip : Case plan from the outset, especially important when there is likely to be proportionality issues relating to claim value and the legal costs.
Tip 2 – Case Management
Start preparing the Budget early – consider incurred time and the issues – were they complex issues?
Properly consider the contents of the Notice for CCMC – clarify exactly what you need to do – remember many Courts adopt a different approach.
Tip – Read the Notice of Allocation for CCMC very carefully.
Tip 3 – Incurred Costs and the Impact on Budgeted Costs
Bear in mind CPR 3.17 (3) the Court may not approve costs incurred up to and including the case management hearing but, may record it’s comments on these costs and take those costs into account when considering the reasonableness and proportionality of all budgeted costs.
Tip : As above – put an explanation as to the difficulties encountered and the reason/s why issuing proceedings was delayed, in the assumptions
Tip 4 – Pre-Action Costs
Do not assume that all incurred costs go in the Pre-action Phase. Whilst much of the work will no doubt be allotted to this Phase, there will inevitably be some that should be allocated to other Phases such as Witness and Disclosure…
Tip : When time recording, give consideration to allocation of time utilised to relevant Phase. Ensure all the incurred costs are allocated to the correct phase.
Tip 5 – WIP ledgers
Do not assume that the WIP ledgers are an accurate reflection of the actual work carried out on the file.
We see many instances where these are incomplete.
We are all after all only human and there are occasions when, for one reason or another, we have not uploaded the relevant document, file note or item of correspondence.
Indeed, when time recording, we may have missed some items as well.
Tip : Do check the WIP ledger very carefully before preparing the Budget.
Tip 6 – Electronic files
We appreciate many firms have switched from paper files to electronic files and the same applies.
As above, do not assume that the electronic files are an accurate reflection of the actual work carried out on the file.
We may have only loaded the last email in a very long chain of emails and the document required has been sent within that chain and will not be captured at the final email in the chain.
Unfortunately, there is a tendency to assume that all the electronic recording is correct – but that is a fallacy. It’s better to be safe than sorry.
Tip : Do check the electronic file and time recording details very carefully before preparing the Budget.
Tip 7: Does the Budget reflect the Directions Questionnaire and the Draft Directions?
This is self explanatory really, but we do receive feedback from the Court’s and the judiciary that suggest this problem is far more widespread than one would initially imagine.
Whilst there may well be a very good reason as to why the Budget differs from the DQ and draft directions, it is vital that the advocate at the CMC and CCMC is fully prepared.
Tip : Do ensure that the proposed directions at least, mirror your Budget
Tip 8 – Partial Budgets
Be extremely careful with partial Budgets eg: for liability only or to prepare a Budget leading to one Phase such as Experts at the exclusion of all subsequent Phases. Just because the parties agree to this approach – don’t expect the Court’s to go along with this approach.
Tip – Obtain the Court’s confirmation in writing that a split budget is needed – don’t assume!
Tip 9 – Contingencies
Pay particular attention to costs that are not included within the Budget, for whatever reason.
The general rule is include all costs that are ‘more likely than not to be incurred’.
Don’t assume that these costs will be recoverable on Detailed Assessment. The Budgeting exercise was specifically designed to reduce and/or significantly curtail the Detailed Assessment procedure. Even if these costs are allowed, they are likely to be significantly reduced.
Tip – If not including costs for aspects which might, but in your opinion probably will not be incurred, then say so
Tip 10 – Revised Budgets
Under the new CPR rule 3.15A (1), Budgets must be revised if a significant development has arisen.
Whilst the rules do not define ‘significant development’ the rules state that revising the Budget is nevertheless mandatory.
Throughout the case you should review all costs since the Budget through to Trial Phase and consider anything that may now be anticipated that was not foreseen beforehand.
Tip – act promptly – failure to do so may be costly
PIC View
Parties should be keeping a close eye on their costs and especially so on their approved Budgets.
We at PIC realise that there is a lot to take in with regards to the rules and the many updates, however, we are here to help.
Do get in touch if you have any questions regarding costs recovery and the Budgeting procedure.
Steve Jepson, Senior Costs Lawyer and Chartered Legal Executive
03.03.22