Cost budget: Once were warriors

I have a quiz for you. How much will it cost to go to court for a four day hearing to fathom this real life disputed final account?

Okay, you need more information. The original contract value was £1.8m. Final account is a little less, around £1.7m. The amount paid to the claimant to date is £900,000. So the balance in the quarrel is about £800,000. Some works, says the defendant, QPR Holdings Ltd, are defective. There are 25 items being argued about. Five are under £1,000, three are between £1,000 and £5,000. Tiddlers.

The quarrelling has already warmed up. The claimant, a project management company, called GSK Project Management Ltd, has gone into liquidation. The liquidator agreed to begin a court action on the account. There are construction solicitors on both sides. Statements of claim, defence and counterclaim, and replies, have all been filed in court. Barristers did all of that.

The case asks what work did the claimant carry out; what is he entitled to be paid for that work; what work is defective? Ordinary. There is nothing in the statements of case to suggest there will be any novel or difficult questions of law. There is only a handful of witnesses. The issues surrounding the 25 items are easily defined, the documentation not excessive. How are you doing with the quiz? How much money would it cost to litigate this final account? One more thing, this litigation has been, and is, “combative”. Does that make any odds?

The lawyers came to court to what is known as a case management conference (CMC). It is a one hour session. They came with the costs budget. The idea is for the judge to look at what each side’s lawyer’s figure is to be spent. As for the anticipated cost expenditure, the idea at the CMC is to reach, with the judge, a broad brush figure which the court is prepared to approve and, of course, the judge exercises a moderating influence on those costs. He asks himself whether the cost is proportionate to the nature of the dispute and complexity. He asks himself if the costs budget is reasonable. He doesn’t get upset, doesn’t fall off his chair in horror, nor, mostly, does his wig blow off.

At the CMC the claimant’s lawyer calmly announced what his client’s bill is likely to be by the end of the trial. It was £824,000. That’s what it is going to cost to argue for the £805,000 final account dispute. Were you close? By the by, the affair up to this early stage in the litigation has already run up a bill of costs for the claimant of £310,000. So, if your chin drops at the prospect of the litigation costing £824,000, think again.

The claimant’s lawyer calmly announced That his client’s bill is likely to be £824,000. That’s what it is going to cost to argue for the £805,000 final account dispute

That chin of yours will drop some more when you learn that on top of the £824,000 is another £450,000 for the defendant’s legal costs. Ah, yes, don’t forget that the sides have become “combative”. Does that make any odds? Bear in mind that the ultimate loser in the litigation pays the winner’s legal costs and his own. This is not combatants waging war about a final account – it’s a war about who pays for all the lawyers’ costs.

The figures for the claimant’s £824,000 legal costs are fascinating. The pre-action costs are £43,000. Compiling statements of case is £267,000. That one hour CMC is £22,000. Disclosure £30,000. Witness statements £75,000. Expert reports £115,000. Trial preparation £90,000. Trial £68,000. Mediation/alternative dispute resolution £85,000. And so on. The judge came down on all of this like a ton of bricks.

Hardly any of it, he found, at all necessary reasonable or proportional. He went through every subheading and carved out a new figure. It came out to less than half what was put up.

I confess to having a smidgen of sympathy for the solicitors who put up the £824,000. Their job was to behave rather like all of you builders have to do when you bid for a job. It’s called “guessing”. The pretty word we use is “estimating”. Of course, builders have got used to running the risk: win some - lose some. That idea fails miserably in pricing building, hence the massive numbers of disputes. Useless commercially. But it’s the way of things and why we go bust best. But it’s a new game for lawyers, so they lump in loads of money to cover the hopeless notion that you can forecast how many hours it will take to do this or that.

And one more thing, how do you price for being combative? The judge here, like his fellow judges in the Technology and Construction Court, makes a serious point. Life for many lawyers is a war of attrition. They trained as baby lawyers with mentors who were trained themselves by fiendishly expensive warrior lawyers who were trying to cut down the opposition.

Listen to what the judge said when echoing another judge two weeks before: “If access to justice is to have any real meaning, the aim of keeping cost to the reasonable minimum must become paramount. Procedural squabbles must be banished and a culture of co-operative conduct introduced in its place. This will not prevent contentious issues from being tried fairly. On the contrary, it should promote it.”

So, does “combative litigation” make any odds? Yes, just double the price, that’s all.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple