Seven out of ten (69{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53}) commercial litigation partners have run up court costs above the agreed budget level according to a recent survey.  Only one in ten (11{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53}), however, has made an application to the court to revise the costs budget upwards.  This could leave commercial litigators exposed to potential professional negligence claims according to a law firm specialising in costs.

Paul Shenton, Managing Director at Just Costs Solicitors, which undertook the research, believes that the majority of solicitors are unaware that a mechanism exists for budgets to be revised or think that an application will automatically fail.  He is concerned that their failure to apply to the court for an increase in budget exposes their firms to risk.  “Courts have sent a number of stark warnings to lawyers that a failure to conduct litigation within the confines of the budget is going to result in a proportion of the costs being irrecoverable between the parties.  If clients are paying win or lose, this is a potential professional negligence issue.” he said.

Six out of ten (60{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53}) litigators, who had experienced cost overruns, blamed significant developments in the litigation for the increase in cost.  In fact Mr Shenton says that the rules imply that a revision to the budget will be permitted where there have been significant developments in the litigation.  “The fact that 90{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53} of cases where an upwards revision was agreed involved significant developments bears this out,” he said.

Just Costs Solicitors surveyed 912 commercial litigation partners at the UK’s top 200 law firms.  Three quarters (73{0a6a65c996ed4169444354e707b897cdb00dbefc1d0429e8febb9bf11027ba53}) of the respondents had prepared a costs budget (known as a Precedent H costs budget) which had been approved by the court or agreed between the parties.

Since the Jackson reforms there has been a marked increase in costs budgeting which has helped to reduce the cost of defending claims,” said James Burgoyne, Director – Claims & Technical, Brunel Professional Risks.  “This research shows that many firms are experiencing an overrun in costs but are not asking the Courts for approval.  If they are unable to recover these costs through the Courts and then try to pass the costs onto their clients, they could be accused of negligence for not following the correct procedure.  Litigators should not shy away from asking the Courts for an increase in the costs budget where it can be properly justified. Firms should have internal risk protocols regarding costs budgets, and should audit to check strict adherence to their protocols.”

Details of the research have been published by Just Costs Solicitors and by the Law Society Gazette