Costs budgets and DBAs
Last week Hailsham Chambers held their annual Costs Group Seminar and it was another excellent, thought provoking event. I understand an audio recording of the seminar exists and hopefully this will be made available as a podcast.
One of the questions from the floor concerned the interrelationship between DBA and costs budgets. The rules do not appear to contain any requirement to advise the other side that a matter is being funded by way of DBA, but consider the following example.
A claimant has a claim for professional negligence and the claim has a full valuation of £100,000. The DBA is set at 50% of the damages recovered. Although a court may not award the full £100,000 if the claim succeeds, it is known that this is the maximum value of the claim. The maximum the claimant can be liable for in legal costs is therefore £50,000. The indemnity principle applies to DBAs meaning the maximum costs recoverable from the other side, if the claim succeeds, is £50,000. For simplicity’s sake, let us suppose there are 10 relevant sections to Precedent H and the solicitors estimate the costs of each section at £10,000. That would give a total budget of £100,000 but the maximum the client would ever pay is £50,000. So what does the solicitor put in the budget, for each section and globally, and what figure should the court allow for each section of the budget, given it cannot allow a total of more than £50,000? (We’ll ignore the fact the solicitors would have been unlikely to take the case on based on these figures.)