Solicitors in peril following Court of Appeal ruling on costs budgets

The Association of Costs Lawyers (ACL) has warned that solicitors’ inability to stick to their costs budgets puts them at risk of significant financial losses following the major Court of Appeal ruling in Harrison v Coventry.

In Harrison, the Court of Appeal said that a costs judge on detailed assessment should only depart from the approved or agreed budget if there is “good reason” to do so. This puts pressure on solicitors to get their budgets right. It also means solicitors should be updating their budgets if required as the case progresses.

ACL chairman Iain Stark said: “Solicitors need to sit up and take notice of the Harrison ruling, as too many are not approaching costs budgeting seriously enough. There are likely to be a few painful experiences before the message really gets home that if you want to get paid for the work you do, you need to plan and budget it properly.”

A new poll of costs lawyers conducted by the ACL has found that just 5% worked with solicitors who always stuck to their budgets – although this was up from an even more miserly 2% the last time they were asked, in autumn 2016. Two-thirds (67%) said their solicitor clients “sometimes” went over budget, while 26% said this always happened.

Last November, 18% of costs lawyers said the number of applications to update a budget was increasing; the figure was 23% when the survey was completed by 84 costs lawyers last month.

Similarly, the number of costs lawyers who said they had never seen such an application fell from 32% to 27%.

One problem solicitors face is that budgeting takes place too early on in proceedings, the survey suggested. Half of costs lawyers said that instead of doing it at the first case management conference, as currently takes place, the hearing should be held later, once the course of the litigation is clearer.

On a positive note, more Costs Lawyers are starting to see real benefits from the budgeting process – 24% this time, compared to 15% last year.

However, judges continue to be a problem. Given a set of statements on how costs management is working, the most popular (ticked by 63% of respondents) was that “it depends on which judge you’re before”. Just 10% thought that judges were finally getting the hang of costs management.

“The survey shows that the extra time to get ready for the new bill of costs will benefit solicitors and, indeed, some costs lawyers,” said Star.

“While a lot of lawyers may be happy to continue in the same way they have done for many years, introducing what is essentially a spreadsheet should help both the parties and the judge, making the process fairer as well as cheaper. As the courts head towards a digital future, the world of costs can at least start making better use of open-source spreadsheets.”

Mark Dugdale