Commercial litigators could be opening themselves up to potential professional negligence claims over costs budgeting failures, a survey of the sector suggests.
More than two-thirds of 912 commercial litigation partners at the UK’s top 200 firms reported incurring costs over and above the agreed budget level. But only 11% made an application to revise the agreed costs budget upwards.
The survey was conducted by cost specialist Just Costs Solicitors. Of those who revised the budget upwards, more than half of respondents cited significant developments in litigation. Nearly a third said it was because of a combination of developments and 'simple overspend'.
Managing director Paul Shenton (pictured) said it was ‘very difficult’ for solicitors to recover an overspend without applying to revise the approved budget upwards.
He said: ‘This research suggests the majority of solicitors are either unaware that a mechanism exists for budgets to be revised or believe any such application will automatically fail so there is no point in pursuing it.
‘If clients are paying, win or lose, this is a potential professional negligence issue. If law firms are limited to what they recover, then they are effectively working for free.’
Earlier this month, Lord Justice Jackson, the architect of controversial costs management reforms, said costs budgeting had worked well and brought ‘substantial’ benefits for court users since it was introduced as part of civil litigation reforms two years ago.
He predicted that costs management would be accepted as an ‘entirely normal discipline’ within 10 years.
Nearly three-quarters of respondents to the Just Costs survey said they had prepared a Precedent H costs budget, which had subsequently been approved by the court of agreed between the parties.
Shenton said: ‘Courts have sent a number of stark warning 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.
‘The fact that every one of the respondents has confirmed that they monitor their ongoing costs indicates that solicitors are aware of the need to ensure that litigation is conducted within the budgeted amount.
‘However, if solicitors are monitoring their costs… there are obviously flaws in the process due to the overspend in so many cases.’