In this article, our Costs Lawyer, Ian Moxon, talks about Budget overspends and Budget monitoring


Budget Monitoring

So here we are, just over three years after the introduction of the Jackson “reforms”. The costs of litigation are equally as expensive as they were before 2013 (albeit not as much is recoverable between the parties), the litigation process is more complex than ever, the profession is on its knees (Solicitors, Barristers and Judges alike), clients are unhappy (less access to justice and more expensive for them) and insurance premiums haven’t come down as predicted. So have the “reforms” worked? NO.

But what are you going to do about it? You can sit at your desk moaning about the injustice of it all forever, or you can run with the changes and succeed. At PIC we are doing the latter and we hope all will join us:

Costs Budgeting – where are we now?

Back in 2013 we were all faced with setting up systems of work to deal with the new requirement to costs manage multi-track cases. Since then we have prepared lots of Costs Budgets, some of those Budgets have been agreed, many Budgets have been approved by the Court and some claims have settled, prior to the costs management conference. We have, more recently, dealt with many final claims for costs were there is a Costs Management Order in place. Our conclusion, like our friends at Just Costs, is that there have been many overspends. That is, at the final claim for costs stage, many of the individual Budget phases have been exceeded (and it is very difficult to recover costs inter partes over and above the individual Budget phases, under a Costs Management Order).

Why monitor expenditure on the claim as it progresses against any agreed or approved Costs Budget?

It is important to know, as a multi-track claim progresses, whether your client’s costs are still within the individual Budget phases of a Costs Management Order:

Client Care Issues

If your retainer provides that your own client will be responsible for any costs that cannot be recovered from the Defendant at the end of the case, then, in my opinion, you are in breach of your duty to act in your client’s best financial interests, if you do not monitor expenditure on the claim against the agreed or approved Budget, as the claim progresses. The financial outcome of the claim for your client (the Claimant) is the net outcome after payment of your Solicitor/own client costs invoice. It is, therefore, incumbent on you to make every effort to minimise unrecoverable costs, which your client will ultimately be responsible for. Now it might be that you have agreed a cap on unrecoverable costs with your own client but, technically, that does not make any difference and, in a case where the damages are substantial, the Solicitor/own client shortfall costs might well be less than the damages held back. If you are not going to do any Budget monitoring, or if you don’t have the right tools to do the job, you should declare those points to your client at the time of setting up the retainer.

Catastrophic Overspend

If you are doing no Budget monitoring or if you are only using the “manual method” described below, the risk is that you might incur an overspend so large that it could damage your firm. Someone reading this article will, mark my words, incur such an overspend. It is utter folly not to protect yourself from such an event. We are here to help if you need us – don’t ignore this advice.

The Approved or Agreed Budget confirms the recoverable (proportionate) costs for the case

Costs Budgeting has been seen by many Litigators as a pointless exercise, but as I mentioned above – you can run with the changes and succeed if you wish. Once a Budget is agreed or approved that is confirmation of the recoverable (proportionate) costs of the claim. If you come in within that Budget, you can expect near enough 100% recovery of your net base costs (CPR 3.18(b)) – a bonus you have never had before. You would have to be absolutely crazy not to gab that opportunity with both hands; especially when some of your competitors are doing just that.

Profits to compete in the race to the bottom

As I alluded to in my previous e-shot (Get Ready for the Race to the Bottom), Claimant injury Solicitors will soon be competing for new business on price. In other words, new clients will want to know how much of their compensation you can guarantee they will go home with. You need to be ready for that by making your business as profitable as possible (and some of our Solicitor clients here at PIC are gearing themselves up in the most impressive ways). One way you can improve your firm’s profitability is to minimise Budget overspends through effective Budget monitoring.

How to monitor the spend on the claim against an agreed or approved Costs Budget

Time recording under the Costs Budget phases

The key to Budget monitoring is to record your time spent (and disbursements if you can) under the Costs Budget phases. Unfortunately, that is harder than you might think. Besides having to split the work done prior to issue of proceedings between the various phases, it is also often the case that many items of work don’t seem to fit neatly into one particular phase. The Guidance Notes provided with the Budgeting rules are very poorly drafted. Different individuals will allocate tasks to different phases etc etc. Please ask one of our Costs Lawyers at PIC to provide you with training on how to record your time under the budget phases – we are happy to do that on an individual basis or in groups.


As I mentioned above, the key to Budget monitoring is to record costs under the Costs Budget phases. At the time of writing this article there are still many proponents for the use of J-Codes in order to achieve that end. At PIC we do not recommend the use of those codes as our own research has shown them to be ineffective and unnecessarily complex. Simply allocating each task done to one of the budget phases is all that is required in addition to the other information normally recorded.

Fancy New Software

You need the right tools to do any job properly. Try changing the head-gasket of your car engine with a teaspoon and you’ll soon get the picture. You don’t necessarily need the very best computer software to effectively monitor expenditure on each multi-track claim against an agreed or approved Costs Budget, but bearing in mind that, across the board, the average fee earner is probably losing about £5,000.00 per annum on unnecessary overspends, the investment in good software isn’t a bad idea. The Rolls Royce of multi-track litigation case management software, with fancy Budget monitory capabilities, seems to me to be the Legal Connex software, but it isn’t cheap.

Existing Software

Many of our Solicitor clients use either Proclaim or Legal Office (Videss) and those now have the ability to record your time spent under the Costs Budget phases. So, if your case management software now has phase time recording ability, you might as well use that on all your new matters. And, if you can allocate Counsel’s fees and disbursements to the phases, even better still. Ask us for help with that.

Excel Table

If I were a multi-track litigation fee earner I would set myself up a simple excel spreadsheet for each new matter, recording, under various columns, the date, fee earner’s initials, a brief description of the work done, the time spent, the disbursements incurred and the phase under which each entry falls. It would then be a quick and easy task to compare the figures recorded against the Costs Management Order. That self-calculating spreadsheet would resemble a simplified version of the detailed breakdown towards the back of the new format Bill of Costs without J-Codes. Then, at the end of each successful claim, I would ask a good Costs Lawyer to check that spreadsheet, send it to the Defendant and the costs within Budget, would be paid quickly and in full.

Costs Management Reports

Many Solicitors haven’t been recording their time under the Costs Budget phases, despite our various recommendations. Don’t worry. For those matters we can prepare, at little expense, mini-costs management reports which tell you simply how much you have spent under each phase of the agreed or approved Budget so far and how much you have left to spend under each phase. We also provide any relevant costs advice in that report. For most of our Solicitor clients we can do that remotely by accessing your case management system or we will happily attend at your offices so that you can retain the live file of papers.

The Manual Method

Don’t do this (unless you are happy to take the chance of incurring a massive overspend). Don’t just enter the total Budget amount into your system with an alert to tell you when that limit has gone. Not only is that akin to working under a costs capping order (a very negative thing), but you could easily overspend under one or more of the Budget phases to the tune of tens of thousands of pounds (or even hundreds of thousands) before the alert pops up. If you must use this method, only enter the details of the costs from the agreed or approved Budget to the end of the next phase.


Monitor expenditure against an agreed or approved Costs Budget frequently, so that you know, in advance, when the money under a particular phase is running out. This could be my catch-phrase – do you want me to say it again?

What to do if the money is running out

Costs budgeting is not meant to be retrospective. The idea is that you (and the procedural Judge from the allocation stage onwards) plan, in advance, the proportionate work to be done on a claim. You cannot ask for an increase to the Budget once the costs have been incurred.

At PIC we have seen very few Solicitors seek to amend existing agreed or approved Costs Budgets. Now rumour has it that, if you make an Application for the Judge to re-consider the Budget, either that Application will fail or the Judge will somehow take a hatchet to the Budget just to teach you a lesson. Now in my opinion those rumours are nonsense – and if they were true, where are all the Applications (I haven’t seen any). I think the reality is that most Solicitors have no idea, until the final Bill of Costs is prepared, whether their Claimant client is within Budget, over Budget or anything else. Monitor expenditure against an agreed or approved Costs Budget frequently, so that you know, in advance, when the money under a particular phase is running out.

Establish the reason why the money is running out and do something about it:

Significant change in the case

Imagine, for example, the Defendant makes an Application, after the allocation stage, to file an Amended Defence (perhaps, say, resiling from an earlier admission of liability). At that point in time it should be obvious to you that the agreed or approved Costs Budget (which, say, provided for a quantum only dispute) will no longer be enough. Therefore, at that point in time, you should make an Application to amend the Budget. There will be many other situations when an Application to change the Budget is appropriate – and it is much better, in my opinion, to make such a sensible Application whilst the issue is live, rather than try and argue “good reason” to depart from the Budget at the end of the claim (because, as we have seen from the emerging case law, the “good reason” test is a hurdle no one is ever supposed to get over). At the time of asking for the Budget to be amended you need to be able to show what additional expenditure, over and above the existing Budget, is likely to be required (so get us involved at that stage too).

Opponent’s Conduct

ALWAYS, ALWAYS kick up a stink if your opponent’s conduct is causing costs to be incurred unnecessarily. Always do that, so that, when costs come to be recovered at the end of the claim, we can refer to that correspondence as a good reason why a particular phase of the budget has been exceeded. Better still, ask the Defendant, at the time the unnecessary costs are being incurred, for an increase to that phase of the Budget. Remember, the rules allow the parties to agree amendments to an agreed or approved Budget. If the Defendant askes for an extension of time for exchange of expert evidence (for example), add a line into their draft Consent Order increasing the experts phase of the Budget by, say, £250.00.

Costs outside of the Budget

It might be that you need to incur expenditure on the claim that was not provided for when the Budget was set. For example, you might want to hold a joint settlement meeting, but the agreed or approved Budget did not provide for such expenditure. In those circumstances give the Defendant the option to agree the costs of the JSM in advance or invite them to explain why those costs would not fall outside of the Budget. Be pro-active.


Now it might be that the money is running out faster than everyone anticipated because either you or your firm aren’t progressing the claim efficiently enough. At PIC we are in the privileged position of seeing files from thousands of different fee earners and hundreds of different firms. We have provided many fee earners and firms with confidential and objective feedback as to whether they are efficient enough and where improvements can be made. If you are constantly running up overspends ask us to investigate why.

Also, in this new era, it is inappropriate to record time in the very enthusiastic way that became the norm prior to April 2013 under CFAlite funded injury claims. That style of time recording is not only now against your own professional duties, but the resulting figures make Budgeting and Budget monitoring less accurate. You should be able to look your own client in the eye when recording your times spent.

If something is in short supply use it sparingly

Imagine when you get home from work tonight, you only have half a bottle of milk left in your fridge, but you aren’t going to the shop again for two days. In that case you would use that remaining milk sparingly. You would have toast for breakfast instead of Weetabix. You would just put a splash of milk into your tea instead of the huge glug you normally do. And by doing that, the milk would last just fine. The situation is exactly the same with your litigation claims. If your Budget monitoring tells you the money under a particular phase is running out, you use the costs remaining sparingly. Since it is human nature to do that, you will struggle not to. Monitor expenditure against an agreed or approved Costs Budget frequently, so that you know, in advance, when the money under a particular phase is running out.

And the costs of doing all this Budget monitoring work are recoverable inter partes, albeit limited to the 2% allowance.

CPR 3.18(b)

  • In any case where a Costs Management Order has been made, when assessing costs on the standard basis, the Judge will not depart from such agreed or approved Budget unless satisfied that there is good reason to do so


We’ve been involved, more recently, with lots of final costs claims where there was an agreed or approved Budget on file – and it is dawning on us that CPR 3.18(b) might just be the best thing to happen to Claimant injury Solicitors for many years. This new “good reason” test appears to be a test that no one will ever overcome. If you have won the claim within Budget (and especially if the hourly rates were agreed as well), then there is unlikely to be any good reason why the final claim for base costs should be reduced at all. Historically final claims for inter partes base costs would be reduced by about 15% and sometimes much more. However, you can now expect your final costs claims to be assessed as drawn, provided you have come in within Budget – and that is why you should carry out Budget monitoring….

 Ian Moxon

Costs Lawyer