The benefits of monitoring the precedent H Costs Budget
There has been an unprecedented change in not only how the legal industry is working, but the country. This alternative working has required a great deal of resolve and in these uncertain times it is understandable if certain tasks are put on the ‘back burner’. It may be tempting to relegate monitoring the budget, however, to avoid being faced with hampering your client’s ability to recover the maximum costs, focus should remain on monitoring the budget in the new world of remote working.
A monitored budget enables the quick provision of up-to-date costs information to (1) the client, thus allowing their expectations to be managed and identifying out of scope work; (2) to the opponent to assist with settlement discussions, whether that is at a settlement meeting or a mediation; (3) to support an application for a payment on account following the trial.
Being in a position to be able to provide parties with up-to-date and accurate costs information can avoid the determination of costs being postponed to a later date.
It is a court requirement, in any event, to revise budgets if there has been a significant development in the litigation. This applies to both a downward and upward revision to the budget. It is therefore imperative that the progress of the litigation is monitored and the assumptions that were made when the budget was approved are reviewed.
In the case of Sharp v Blank and Ors  EWHC 3390 Ch it was found that in accordance with paragraph 7.6 of the practice direction revisions are not optional.
It is not advisable to simply wait until the end of the claim and rely on there being a good reason to depart from the budget. To do so may result in not being able to recover any costs that are in excess of your budget. It is essential that an application is made, or alternatively parties agree to revise the Costs Budget if a significant development has occurred in your litigation.
Monitoring the budget is good practice in any event and is certainly a practice that the courts expect. The CPR includes a provision for the same within the rules and allows 2% of the budget for all costs management work, this includes the costs associated with monitoring and revising the budget.
Costly mistakes: termination of CFAs
Practitioners should be careful to ensure that their standard CFA terms give them full protection if a client decides to terminate the CFA. I have recently dealt with a matter where a client sought to terminate the CFA with their solicitor in order to transfer instructions. The solicitor sought their fees to be paid immediately on termination. However, the terms of the CFA did not have any provision to allow the solicitor to charge if the client terminated the CFA, and they were bound by the general term that fees were only payable conditional on success and at the conclusion of the case.
CFAs and general terms of business are often amended and updated, so it is always worth checking that nothing has been lost over the years which should be in there. Particularly something as important as a termination clause.
Breach of the indemnity principle and sanction for misconduct
Although an extreme case, the recent decision by Deputy Master Friston in Anthony v Collins  EWHC B15 (Costs), serves a timely reminder of what can happen when a defective CFA is combined with an incorrectly drawn bill of costs.
In this case, the Solicitors entered into three separate CFAs with their client. All were ‘bespoke’ agreements drafted by the Solicitor and based on a precedent from Australia. The first two agreements were of no effect because they did not cover the subject matter of the proceedings. The 3rd agreement was found to be in breach of the indemnity principle because a letter which governed the retainer contained a clause which stated that ‘Our agreement is conditional upon you getting insurance cover to cover the risk that you may need to pay the legal costs of the other side, and we must approve the terms of the cover.’ Apparently, no such insurance was ever taken out. The retainer documentation was also unnecessarily complex, the Deputy Master commented that ‘It is undoubtedly true that the Solicitors have created a contractual quagmire in which even they lost their way…”
If that were not bad enough, a number of errors were made in the presentation of the claim for costs. In particular, a bill of costs was served which described the contractual arrangements between the Claimant and his Solicitors as a private retainer; that was simply wrong, but the bill was nevertheless certified as accurate. As the detailed assessment proceedings progressed, two further failed attempts were made to provide an accurate statement of the contractual arrangements. All of those failings on behalf of the Claimant in the detailed assessment led to an application for sanctions under the Court’s powers in relation to misconduct. Although it was recognised that any reduction for misconduct would be of little effect given that the CFA was found to be unenforceable, the Deputy Master nevertheless imposed a 25% reduction to profit costs as a sanction for misconduct.
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