Tuesday, September 24, 2013

How to Prepare a Budget For a Court Case

Brought to you by our friends at Vannin Capital

The process of preparing a budget for a court case has changed in recent months due to the new rules governing civil cases recommended by Lord Justice Jackson, which became law on the 1st of April, 2013.

Changes to the way cases are budgeted for, and the professional obligation that solicitors face to prepare an accurate budget prior to the case, make the process more transparent than ever before and closer to the heart of litigation.

High Court judge Master McCloud delivered the following statement on the 1st of August, driving home the importance of budgeting and how it relates to solicitors dealing with civil cases:

“Budgeting is something which all solicitors by now ought to know is intended to be integral to the process from the start, and it ought not to be especially onerous to prepare a final budget for a CMC (Case Management Conference) even at relatively short notice if proper planning has been done.”

“The Court must now, as part of dealing with cases justly, ensure that cases are dealt with at proportionate cost and so as to ensure compliance with rules, orders, and practice direction.”

The new rules for civil procedures focus primarily on cost budgets and managing the cost of a court case. Some of the most important aspects of the rules include:

1.      Each party is required to prepare a full costs budget in a standard form, with details of the costs that the party has incurred prior to the preparation of the budget and the estimated costs of the ongoing litigation.

2.      The court will review and approve the budget for each party relatively early in the proceedings. This typically takes place at the first case management conference.

3.      In order to ensure that the case complies with the agreed costs budget, the court will oversee the case.

Given that most lawyers have known about the new rules since 2010, it’s far from surprising that Master McCloud has adopted such a focused attitude to endorsing them.

When the rules haven’t been obeyed, as was the case in the recent dispute between former chief whip Andrew Mitchell M.P. and News Group Newspapers – publishers of The Sun – the results can be disastrous.

The failure of Mitchell’s legal team to comply with orders to file their costs budget before the case hearing left them with a very limited claim. In fact, his claims were limited to the applicable court fees – a remarkably pear-shaped outcome.

While leave was granted in this case and the test case isn’t yet finished, the failure of Mitchell’s lawyers to comply with the requirements and the obvious disadvantage it left him with makes it clear how important strict budgeting is for success.

The new requirements have also been used in defamation cases, as well as several cases in the Technology and Construction Court and Mercantile Courts. Several of these cases have reached the Court of Appeal.

Although the rules apply to almost all civil cases, there are some exemptions. High-value commercial cases are currently exempt from the budgeting requirements, but the stringent cost management rules are expected to soon extend there.

One of the purported objectives of the Jackson reforms was to reduce the growing costs of litigation, as well as the uncertainty of the total cost of a case. A major part of the new rules emphasises that costs need to be proportionate to claims.

This gives a greater amount of certainty regarding costs to would-be litigants. The previous rules made it difficult for would-be litigants to accurately estimate what their costs might be, particularly if losing a case would lead to them paying for the winning side’s legal costs.

Under the reforms, these difficulties have been improved, as the costs that winning parties can recover are specified in the court-approved case budget. Since the case budget must be submitted relatively early in the proceedings – the first budget is submitted six weeks prior to the first case management conference – both sides enjoy a greater degree of certainty regarding cost awards at the end of the case.

A recent ruling of the Court of Appeal helps to explain the new rules:

“The management of costs is the responsibility of all parties to the litigation, and ultimately, of the court as well. The court has a responsibility to manage the proceedings, so it also has a responsibility for managing the costs of those proceedings.

The starting point must be that an approved costs budget is intended to provide ‘the financial limits within which the proceedings are to be conducted’. They are intended to provide some constraint.”

Despite the obvious uncertainties of dealing with a new system, the new rules are clear in their requirements and ethos. Effective costs budgeting and management will now become a major force in civil litigation.

With the rules clear, simple and available for all lawyers to understand and follow, and Master McCloud’s rigid interpretation an obvious statement that they will be enforced strongly, lawyers that fail to follow the rules or advise their clients can expect little in the way of understanding or leniency.

The rules, however, make it easier than ever for lawyers to accurately budget and prepare for a case. With straightforward, accurate rules and an enforced system, it’s now clearer than ever before what lawyers need to do in order to prepare a budget for a court case.  

This article was written by Vannin Capital. Learn more about budgeting for a court case on their website. 

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