Costs Budgeting: What is it & What is it for? | Things to Consider When Taking a Claim

Most claimants when they are dealing with a case do not realise that the court has an obligation and desire to restrict their legal costs. In principle, that sounds fine. No one thinks that it is appropriate to run up enormous costs fighting a case that may be worth only a small amount in value. The issue is where does it apply and where is the cut-off point? The other issue is does it affect the way a claim is run?

So what actually occurs in cost budgeting?

Costs budgeting is a supposedly transparent process employed in the vast majority of clinical negligence cases. Stages in the claim are defined and a budget is approved by the court. That includes preparing and reviewing witness statements, disclosure of documents, expert evidence, trial preparation, certain court stages, trial and then any settlement negotiations. Each stage is given a budget for the work the solicitor does and the work for experts and barristers.

The problem with a cost budget analysis is that there is a substantial difference usually between claimant and defendant costs. It is not supposed to affect how a claimant’s budget is settled but the reality is very different.

So why is there such a difference in costs budgets?

The claimant solicitor usually gets paid only if the claim succeeds and therefore carries the risk.  It is the responsibility of the claimant to put together the case. That is to investigate, collate evidence and draft the highly technical documents setting out what the claim actually is.  What may have been the issue for the claimant may not in fact be the case that ultimately goes forward. There may be a number of areas of investigation. There may be significant medical records to sort, to interpret and to identify for experts. There may be numerous witnesses of different events.

Court fees (often £10,000+) are largely the responsibility of the claimant. 

By contrast, the defendant reacts to events – they have a case to investigate and refute (or not).  The groundwork has been done in considerable detail by the claimant.

The billing and expense system varies significantly between the two different legal sides but also a large factor is that the defendant firms can obtain good quality expert evidence at lower rates than a claimant solicitor because a limited group of firms control the contracts and work.  There are a large number of claimant solicitors and individually that power does not exist.

Lastly, a claimant needs insurance to protect against legal costs. A defendant is supported by the NHS or a private body. The insurance for a large claim can be a significant cost which if a claimant succeeds should be repaid.

The reality is that although the costs vary for all sorts of reasons there is always an argument raised that the two are so very different. The hours estimated for various stages may be similar but the defendants (and often the court) will reduce the claimant times or reduce the level of experience of the person able to deal. Thus it is possible for a defendant to have a partner deal with much work but the claimant will be expected to have more junior fee earners dealing with quite a lot of the work.

Likewise, a budget for expert work (always contentious) will often be reduced so that the claimant’s experts can end up with less time to deal with future work than the defendant. The difference in hourly rates is often a source of dispute.

Lastly, some defendants just limit areas of a budget to such reduced levels that there is no reasonable way a claimant could compete even if minded to do so.

It should be noted that there has been and remains a process by which disputed costs can be resolved. There is a detailed assessment process available at the conclusion of the case which worked and continues to work well with experienced costs judges dealing with the issues. It should also be noted that solicitors on both sides often work together identifying stages and issues in the case which potentially reduces costs.

Smaller claims are also subject to fixed recoverable costs in some areas.

A claimant has a difficult battle to take a claim forward – not least that it is their job to establish the claim. The imposition of costs budgeting has not aided the process. Nor indeed has it in fact seemingly reduced costs overall.

As early as 2021  Master Davidson commented in Smith v W Ford & Sons (Contractors) Ltd that many judges were not convinced of the merits of the system.

More recently Civil Justice Council (CJC) published the Final Report in its Costs Review. Its recommendations are numerous but include an extension of fixed recoverable costs  (due in October 2023) but a lighter touch for larger claims where there is a significant amount of negotiation and agreement between the parties.

It is difficult enough for a claimant to understand and work through difficult and technical information for a claim. It can be distressing to have personal information available and reviewed by both sides. To then realise that the nature of the claim and how it is run may be limited by finance imposed by the court is an additional concern. It remains important that claimants understand the system that they are working with but how that translates to the work that can be done can cause unnecessary worry when claimants may be at their most vulnerable.

It remains to be seen whether the more claimant-friendly aspects of the report will be adopted. What is apparent is that claimants need frequent advice on how the system works and the effect on what can actually be done within the budget.