Practico Blog: The challenges of costs budgeting in group litigation
The challenges of costs budgeting in group litigation
Costs Budgeting can be a minefield if approached casually, as we have seen in extreme cases such as Mitchell and Harrison. If you are dealing with Group Litigation, the complexities with budgeting multiply. Get the approach wrong or apply a different approach to your opponent and you can end up spending more time debating form than content.
Whilst the normal phases will generally apply to a common costs budget there are additional phases (such as lead claim selection and group co-ordination) which do not lend themselves to contingent costs because they are certain rather than potential workstreams. Problems arise when parties tend not to agree which additional phases are required or attempt to shoehorn that specialist work into the normal phases. The result is two budgets that do not even start on the same page and are never likely finish on the same page.
The period the budget is supposed to cover is also a tricky area. Common costs work in group litigation is for ever changing and is difficult to predict with any degree of certainty. Under Part 3 of the Civil Procedure Rules the parties can of course request amendments to the budgets and seek approval from the Court but in practice this is not a quick process and it is highly likely that by the time one amendment has been approved another would be required.
There are two possible solutions to this.
- Prepare the first budget to conclusion but revisit it at a certain point (each year for example) when both incurred and future costs will be updated. This requires adding columns to the normal Precedent H so that each period of incurred costs has a separate column and the future costs are adjusted to reflect the position going forward.
- Prepare a budget for a set period only and once that period has ended a new budget is required for the next period (generally these would be set around the end of a phase of work - witness statements exchange for example). The incurred costs would not be adjusted from the first budget, but you would seek future costs only for each subsequent budget.
The issue with the first approach is that the line on incurred costs is constantly moving and therefore which line do you use when dealing with detailed assessment? Some of those originally budgeted costs are now incurred, so do you always deal with them as budgeted costs or do they become incurred costs to be dealt with by detailed assessment? Master Marsh opted for the pragmatic solution in Sharp v Blank whereby even the incurred element of the reasonable additional costs fell within the ambit of the approved variation. It is likely that both parties (and potentially the Court) will have their own views on how best to approach the scope and case specific elements of budgets. The solution is to ensure that you begin discussions between the parties early, agree common ground on phases, format and period. There are also advantages to involving the Court at an early stage and agreeing a directions order so that debate can be better focused.
Individual budgets within a group structure, while much more straightforward in terms of format) create their own problems of scale. A group litigation with potentially thousands of Claimants creates cost and timing problems in preparing budgets, not to mention that the Court will not want to want to consider a multitude of separate budgets many of which are likely to have similar future costs. The alternative is template budgeting based on groupings of claims with broadly similar characteristics. These tiers of complexity are inevitably specific to the particular range of issues found within the cohort and cannot usefully be devised at too early a stage. It is important not to make the criteria too vague or overcomplicated but something that will be applicable to all the claims and that will be representative of the various sub-groups of claims.
Some claims may have unique characteristics that fall outside of the general range completely and are appropriately dealt with by bespoke budgets. The larger the overall group, however, the less desirable it is to allow too many exceptions, lest it defeats the primary objective of keeping the costs of the budgeting exercise proportionate.
There is a tipping point with any given group where it becomes too costly and time consuming to all parties to deal with individual budgets. There is no magic number and it may be that if the claims are reaching that stage in waves rather than all at once that number is higher than if you are dealing with the collective in one go. Ultimately it is something again to discuss with the other side, ideally way before budgets are required.
It is vitally important in dealing with budgets in group litigation to establish and maintain communication between the parties and to involve the court at the right stage – sufficiently early to have an effect on controlling costs but not before the issues have crystallised. To undo or argue over how the budgets are being prepared after the event is ultimately likely to be far more time consuming and costly than disputes on the figures will ever be.