Drafting costs budgets
A recent article in the New Law Journal by Richard Harrison questioned one of the common views of costs budgeting:
“It has been said many times that a piece of litigation is like a construction project. However, not many buildings are put up while trying to avoid the malign attentions of a wily demolition expert. The analogy to quantity surveyors in misplaced.”
One does not need to be quite so cynical about the motives of the other side to spot the flaw in the quantity surveyor analogy.
In a construction project, the client decides whether he wants a bungalow or a skyscraper. The architect designs the plans for that building. The quantity surveyor then works out how many bricks, tons of steel, etc will be required to complete the building to the design’s specifications and the estimated costs.
However, in litigation you do not know at the start whether you will end up with a bungalow (ie a matter settling shortly after the defence is filed) or a skyscraper (ie the matter will, several years later, conclude after a 10 day trial). Although the phases part of budgeting is meant to reduce the litigation down to defined stages (rather like building the foundations, putting on the roof, etc) the flaw is that the most parts of the budget do not easily shoehorn into defined stages.
A budget may have been set based on witness statements from 10 witnesses being allowed. However, if the matter then settles after only 4 witnesses have been interviewed, 2 statements fully prepared and 2 statements part prepared, the budget may be of only limited value even if the costs come in “on budget”. What assistance is the budget if the costs claimed, in this situation, are 70% of the amount set in the budget. To what extent should the court on assessment depart from the budget?
Costs lawyer and law costs draftsmen undertaking costs budgeting are not like quantity surveyors. They are more like Mystic Meg – ie making it up as they go along. However, unlike astrologers writing horoscopes, who hope the public will just remember the one time in a hundred when the prediction was uncannily accurate (and forget the numerous other times where it was not remotely accurate), those creating costs budgets may find clients tend to remember rather well those budgets that turn out wrong.