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Budgetzilla

Budgetzilla

If you prepared a Precedent H Costs Budget but it isn’t approved or agreed, and you go on to win your case, you may wonder; is that old dusty Budget in my bottom drawer relevant?

Well not only is it relevant but it could be a bigger killer of your costs than an approved, and breached, Budget.

The potential nightmare starts at PD 3.4 to Part 44:

On an assessment of the costs of a party, the court will have regard to the last approved or agreed budget, and may have regard to any other budget previously filed by that party, or by any other party in the same proceedings. Such other budgets may be taken into account when assessing the reasonableness and proportionality of any costs claimed.

 So, dust that budget off.

Be aware of the 20% rule at PD 3.2. If there is 20% or more between your costs claim and the Budget then you need to justify this in a statement of reasons.

More ominously, if there is a difference (irrespective of whether you have a reason or not) PD 3.5 is triggered which, in turn, triggers PD 3.6.

Read in horror PD 3.6:

Where it appears to the court that the paying party reasonably relied on the budget, the court may restrict the recoverable costs to such sum as is reasonable for the paying party to pay in the light of that reliance, notwithstanding that such sum is less than the amount of costs reasonably and proportionately incurred by the receiving party.

Yes, you read the correctly. Even if your Bill is both reasonable and proportionate (therefore even if all of those necessary costs are recoverable and the Court thinks, “all is fine”); if your Budget is not up to scratch and your opponent can demonstrate reliance on it; you could see your “reasonable” and “proportionate” costs reduced to unreasonable levels.

Ouch. It’s like Leigh v Michelin Tyres has mutated, emerged from the North Sea and is now laying waste to the UK.

Of course there are questions – Can your opponent cherry-pick any filed budget? What role do later updates play? Does it mean total budget, or just incurred costs? Does it mean those Phases with incurred costs or everything? What is a “satisfactory explanation” as demanded by PD 3.7? These are all areas to assemble the helicopters from which to construct arguments and drop a few bombs.

So, what can you do? Well, avoid the problem at the outset by making sure your first Budget errs on the side of caution as it’s far easier to come down than it is to go up.  Make sure that your Budget and Assumptions properly set out what you have claimed. Then, if you do fall foul of the 20% rule, make sure your statement is prepared and that it is not just a few generic points.

Luckily PIC pride ourselves on making sure your Budget is not only accurate, but our format is self-justifiable and the reason for any subsequent breach can be quickly identified and explained.

Don’t be a victim of Budgetzilla; if you would like any further advice Lee can be contacted by calling 0345 872 7678 or emailing lee.dixon@pic.legal