Costs may cause chaos

Lawyers risk losing thousands of pounds in fees and legal costs unless they get a handle on litigation funding, costs lawyers and barristers have warned.

A panel of experts recently reviewed the costs-management pilots in the mercantile courts and technology and construction courts at The Future of Costs Seminar, co-hosted by 3PB Barristers and Cost Advocates (CA). The pilots require lawyers from both sides to provide a detailed estimate of incurred and future costs in the litigation via a nine-page Precedent HB form.

The panel estimated that lawyers in the pilots are spending an average of 2.5 hours filling out a Precedent HB form, and warned that getting budgets wrong could be disastrous.

They highlighted the case of Henry v News Group Newspapers Ltd [2012] EWHC 90218 (Costs), where the budget for disclosure and witness statements was approved at £23,737. The final amount claimed in the bill of costs was £316,447, resulting in a loss in costs of £292,710.

Jon Lord, principal costs lawyer at CA, said: “The Precedent HB form looks straightforward enough but the thought process behind it is a lot more complicated. Lawyers are required to provide the breakdown for pre-action costs, disclosure, witness statements, expert reports, fee earners’ time, counsel’s fees, contingents and other disbursements. Trying to calculate these is a very complex procedure.”

Emilie Woolley, senior costs solicitor at CA, said: “Law firms need to be prepared for the shift from exchanging broad estimates of costs already incurred to prospective budgeting. Lawyers need to be prepared for the strategic and tactical deviousness that may become apparent, and be ready to scrutinise their opponent’s budgets without divulging their own secrets.”

However, costs budgets could lead to greater certainty and transparency if lawyers prepare ahead of the reform, she said.

Graeme Sampson, barrister at 3PB, warned firms that failure to follow costs-management procedure could result in adverse costs orders.