Legal Cost Specialists

Statement of truth for costs budgets

The statement of truth used to verify a costs budget will change from 22 April 2014 to:

“This budget is a fair and accurate statement of incurred and estimated costs which it would be reasonable and proportionate for my client to incur in this litigation.”

This amendment was presumably made to deal with some of the problems in-house lawyers experienced signing the old statement:

“The costs stated to have been incurred do not exceed the costs which my client is liable to pay in respect of such work. The future costs stated in this budget are a proper estimate of the reasonable and proportionate costs which my client will incur in this litigation.”

For in-house lawyers no actual payment is usually made.

However, this still leaves the problem of the distinction between inter partes costs and solicitor/own client costs.

Costs budgets are only concerned with what it would be reasonable for the other side to the litigation to pay if a costs order is made in favour of the party preparing the budget. It has nothing to do with what it is reasonable for the client to pay his own solicitor. Solicitor/own client costs have no place in a costs budget but the statement of truth takes no account of this, hence the wording “which it would be reasonable and proportionate for my client to incur”.

There has been some heated debate about whether solicitor/own client costs should be included or excluded in the budget. There are no doubt be grey areas, but what about, for example, costs relating to setting up funding? It may not be recoverable between the parties but should it be in the budget if it is a cost that will be incurred. (We’ll ignore for the moment those costs draftsman who continue to include such work in bills.)

14 thoughts on “Statement of truth for costs budgets”

  1. The whole concept is far fetched

    It simply adds an extra and very expensive tranche of costs to claim

    and invariabley a report comes in two weeks after the budget was drawn and serves to blow the original case plan out of the water

  2. It wasn’t only in-house lawyers who had a problem with the previous version of the statement of truth. If the solicitor was acting under a legal aid certificate or a CFA Lite, the indemnity principle was abrogated, so the costs stated to have been incurred would almost certainly exceed the costs which the client was liable to pay. The solicitor was therefore required to sign a statement of truth that was untrue.

  3. Not sure it offends the indemnity principle?

    “do not exceed the costs” – therefore the actual costs can be less than the incurred costs in the Budget

    This is relevant for cases that will run for a number of years and the limited number of hourly rates that one can input. This invariably means you have to include what you suspect will be the final rate and apply that to all the earlier work.

    Short comings in the court form …..

  4. unfortunately once again decisions have been made without proper thought!
    the costs are those of the clients who will need to comment on the same and maybe raise challenges themselves so surely all work must be included?

  5. The in-house lawyer issue makes an even greater mockery of the budget process.

    I have a current opponent who has prepared a budget that forecasts in the usual way – attempting to be “accurate” to the 10th of an hour, and yet in the covering letter confirms that they don’t time record in any shape or form.

    It will be an interesting budget hearing!

  6. @ Peter Burdge

    respectfully disagree, under both types of funding mentioned the client still has a potential liability for the costs, its simply the ultimate payment of such which is subject to conditions (such as winning) being met.

    @ abcde

    don’t you ask your instructing solicitor what he is expecting by way of evidence, or plan any contingencies, then?

  7. In response to Anonymous at 10:18 am, I accept that with a CFA Lite you can argue in a convoluted way that the client could be considered theoretically liable for the whole of the costs claimed against the Defendant, but only to the extent to which they are actually recovered. Of course, what this means in real life is that he has no liability at all, but let’s not get too closely involved with real life as we’re dealing with the indemnity principle here.

    That argument, however, does not seem to help in the case of a discounted rate CFA, where there is never any liability on the part of the client to pay the profit costs at the market rate claimed between the parties, and only a theoretical liability to pay them at the discounted rate, and even then (in the case of a discounted rate CFA Lite)only to the extent to which they are actually paid by his insurers.

    Nor do I see that your argument applies to the costs of a legally-aided client. There, by virtue of regulation 107B(3) of the Civil Legal Aid (General) Regulations 1989 and its successor regulations, the indemnity principle has been disapplied, enabling the solicitor for a successful legally-aided client to claim costs from the paying party at market rates even though the liability of the legally-aided client in respect of those costs can never exceed the much lower civil prescribed rates. There is not even a theoretical liability on the part of the client for the costs claimed at commercial rates. Those costs actually belong to the solicitor, although of course he is only allowed to get his hands on them once all liabilities to the Fund have been satisfied.

  8. @ Anonymous

    yes – but when you have numerous experts involved its hard to tick all bases. You come up with a viable plan but one throw away sentence in a report can change the game plan completely


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