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  • Neil

Blowing The Matter Budget

Updated: Aug 10, 2018

The key issue here is that either Precedent H is inherently flawed, or some law firms need to get a lot better at setting and managing case budgets - or both.


CIP Properties v Galliford Try (and others)

Many types of litigation cases are subject to the Precedent H budget setting process. The whole process has been subject to severe criticism, such as this early comment from Matthew Harman of Harmans:

“The new guidance for Precedent H – with which parties provide costs budgets – is confusing, contradictory and not written by someone with experience of conducting litigation”

Harsh, but some said such comment was fair, as it was believed that litigation was inherently so unpredictable as to be unbudgetable. Either way the regime was imposed and since the law firms have had to deal with it one way or another.

Some firms use case management systems for the more repeatable forms of such litigation, and are fortunate that some case management software vendors (such as Eclipse and Peppermint) have developed Precedent H Matter Budgeting modules to assist with the process.

Others firms are dealing with Precedent H by sophisticated (or even primitive) Excel spreadsheets, and others with bits of paper – and maybe (judging by this case) wet fingers held up in the air.

Having a useful and effective tool for coming up with an initial budget, and thereafter managing the expensive lawyer resources to meet that budget is one thing; but these are necessary albeit inefficient disciplines. What is also needed is some common sense about the intellectual exercise of working out a sensible budget in the first place, and then managing partners’, solicitors’, trainees and barristers’ time in line with that budget.

The initial Precedent H budgets are evaluated and approved by the Judge at a Case Management Conference and the law firms involved are expected to operate within those budgets – unless they can get a later order from the judge for justified variance.

Apart from the charge of not being very good at setting budgets, there is also that claim that claimants are tactically submitting artificially high budgets, whilst defence firms are preparing low-balling their budgets.

Apart from the profession’s unpreparedness and lack of experience in accurately forecasting litigation costs; the other key problem is that the judiciary has occasionally seemed to be equally unprepared. Late last year the Law Society Gazette reported that the lack of suitably experienced Precedent H judges was delaying Case Management Conferences by up to 10 months. The same article also made the point that judges appointed from the bar, as opposed to those that were solicitors, had little experience by which to judge the reasonableness of law firm costs.

Nevertheless we stumble forward and there have been low points and high points in the application of Precedent H to litigation. However, we appear to have hit a new low point in the recent cost hearing in the case of CIP Properties v Galliford Try (and others).

It does not realty matter what the case is about; they key fact is that for a case where the damages are likely to be in the region of £18m, the claimant’s solicitors originally set out a Case Management Information Sheet which their total costs for the case, including some £1.57m already spent, was £3.42m. That is a lot. However, a year later the claimant maintained that it had by then incurred costs of £4.22m and that now its total estimated remaining costs were £5.05m – making a total of over £9.2m.

To give you some examples of where the money has gone:

  • pre-action costs of £1.3m

  • pleadings had already cost £630,000, and were projected to cost some £440,00 more

  • disclosure had cost £779,000 with a further £402,000 estimated

  • £324,880 on dealing with witness statements, the equivalent of 880 hours, including three witnesses to deal with the claimant’s acquisition of the property a topic described by the judge as “entirely uncontroversial”.

At the later hearing the main defendants (who have also commenced proceedings against the other four defendants) had spent only £1.5 million, and estimated incurring future costs of some £3m, making a total a positively parsimonious £4.48m.

Not surprisingly the judge had what could only be fairly described as a ‘fit’.

He attacks the budget, the management of the budget, the hourly cost of the solicitors, a phenomenally high degree of unnecessary work and – as a whole – the totally disproportionate level of costs of the case in relation to the amount at stake.

After reviewing number of options including:

  • ordering a new budget

  • declining to approve the claimant’s new budget

  • setting new budget figures himself and

  • refusing to allow any further costs.

He finds this last option unworkable for technical reasons, whilst recognising that “it would have been the best alternative because it put the risks where they belong, with the claimant”.

Declaring that he finds all the options invidious, he elects the lesser of all evils and elects to set new budget figures himself. As a result, going forward, he assessed the allowable costs for the claimant to be a total of £4.28 million. Thus if the costs proceed as the claimant’s solicitors expect then someone is going to be nearly £5m out of pocket – I think it’s going to be them.

All this seems to underline the cynical variation of the old statement that not only does British Justice need to be done, and needs to be seen to be done, it also needs to be seen to be believed.

The key issue here is that either Precedent H is inherently flawed, or some law firms need to get a lot better at setting and managing case budgets - or both.