Litigation can be expensive, but do you know what you should and should not be doing in order to maximise the recovery of costs for your client? With a new Fixed Costs regime on the horizon, the Courts are taking even more interest in what a party can or cannot recover from the other side.
Judge Carr, in the appeal case of Merrix v Heart of England NHS Foundation Trust, considered cost budgets under CPR 3, and whether this affects the decision of the Costs Judge at a later date when assessing costs under CPR 47.
When making a Part 7 Claim, CPR 3 will usually apply and the parties will have to complete a cost budget in the form of Precedent H. This is a detailed form that must be separately completed by both the Defendant’s and Claimant’s solicitors, in which they must set out costs already incurred and an estimate / forecast of future costs. Both solicitors will then exchange and agree the cost budgets.
Judge Carr held in Merrix, that where parties have agreed a budget under Precedent H, the Costs Judge when assessing the costs at a later date will not depart from this budget; unless they are satisfied there is good enough reason to do so when looking at the reasonableness and proportionality of the costs. This applies where the budget has overvalued or undervalued the costs.
This means that it is imperative that the solicitor, when providing the estimate / forecast of costs in the budget, is as accurate as possible. If they undervalue future costs and win, then it is unlikely the client will be able to claim back from the other side anything beyond the agreed budget. With this in mind, as well as being accurate with cost estimates from the start, it is also important that if at a later date costs increase, then Precedent H should be amended to take into account these added costs. Moreover, the opposite may also be true; that should they lose the case the client may be forced to pay more than the other side’s actual costs, because their solicitor has agreed a Precedent H that has overvalued costs.
In summary, a solicitor must be as accurate as possible in their estimates and both sides must agree to the budget and any amended budget, as if the budget isn’t agreed then the Costs Judge will have the discretion to reduce / increase costs. An agreed budget is less likely to be overruled by a Judge. Finally, by agreeing to Precedent H the parties agree that they will have to pay those costs should they lose.