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Approved cost budget: don't rest on your laurels

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As if preparing the costs budget is not tough enough, you then have to seek your opponent’s agreement. If your budget cannot be agreed, then you may have to attend a costs management hearing. Unfortunately that is not the end. You will then need to closely monitor your costs budget to ensure that, for each of the phases, your budget remains accurate. If you are likely to exceed your budget then you will either need to seek the agreement of your opposite number or apply to the Court. At the end of the case, you are unlikely to recover any more than your approved or agreed budget.

Mix this new procedure with the tougher approach to compliance with rules and relief from sanctions, and you may feel rather nervous. The prospects of being able to amend an inaccurate budget or seeking an adjustment without merit are slim, if not hopeless.  Monitoring your budget is also crucial; firstly and obviously is to enable you to recognise where costs are reaching the approved level of your budget and  secondly and less obvious is to enable you to collect key statistics for future costs budgets. Many firms do not have the level of data required to cross reference their budgets against historic cases. Even reviewing old bills of costs will not enable you to prepare a precise analysis of work done by reference to the new phases. The sooner you implement changes to your time recording, the sooner you will begin collating comparative data to assist you with costs budgeting.

Many law firms have now adapted their time recording systems to enable them to record work (pre and post issue) under the new phases. Some have gone a step further and have implemented software which will monitor WIP against the budget. Most time recording systems can be adapted and making these changes should not come at a significant cost.  The alternative option would be to code your own time recording. Most time recording systems allow you to enter a narrative against the time you are recording. If you code your narrative to reflect the phases, then you should be able to report/filter based on your coding.

However you approach it, there is a need to find a method which works for you or else you may find yourself in difficulties in the near future. Costs management is here to stay and we can expect a robust approach with reported case law already making it’s way to our desks, in which the High Court rejected a bid by a successful defendant to nearly double its approved £270,000.00 costs budget after the case had concluded; Lord Justice Coulson held that "Everything went pretty much as it might have been expected to go. In those circumstances, it seems to me that the general scope for alleging in this case that there is good reason now to depart from the costs management order is relatively limited.”