A litigation budget and decision points

A litigation budget should support decisions about whether and how to pursue a dispute. In England and Wales, the civil rules address costs orders and the court's discretion; recovering every pound spent is not assured. ^[1]

Budget by the next meaningful stage Separate initial advice, pre-action work, pleadings, evidence, experts, hearings and enforcement. Ask which assumptions drive each estimate: document volume, number of witnesses and contested applications can materially change the work.

Include VAT where applicable, third-party charges and internal management time. Distinguish your own expenditure from potential liability for another party's costs. Ask how fixed recoverable costs or other applicable regimes affect the assessment.

Set points for reassessing the case Agree a review after significant evidence, an expert report or a settlement offer. Compare the remaining cost and risk with the realistic recoverable outcome, including the other party's ability to pay.

Coordinate the budget with any legal expenses insurance and expert instructions. A staged authority to spend helps the business decide consciously whether the next step is justified rather than discovering the total only when invoices arrive.

Define the decision that the first budget must support Ask what work is needed to make the next informed choice. An initial document review, a response to a threatened application and preparation for trial are different commissions. Identify the immediate output and the assumptions behind the estimate. This helps the business avoid approving a vague instruction to handle the dispute without understanding the scope. It also allows the adviser to explain which uncertainties must be resolved before a reliable estimate for later stages can be given.

Separate work already committed from optional next steps. Record the amount spent, invoices outstanding and expenditure authorised but not yet incurred. Those figures answer different questions. A budget that records only paid invoices can understate commitments, while one that treats every possible future hearing as certain can obscure the next practical decision. Use the information to establish who may authorise additional work and when an estimate must be revisited. Financial control should support timely legal action rather than leave the adviser waiting for an unclear approval.

Ask which assumptions could materially change the estimate Discuss document volume, witness numbers, technical complexity and possible interim applications. Ask how a change in each significant assumption would affect the planned work. For example, an unexpectedly large message archive may require more review than the original estimate contemplated, while agreement on a technical issue may remove an expert stage. Do not ask for artificial certainty where the other party's response is unknown. A useful estimate explains the basis of the range and the events that would justify updating it.

Include expenditure outside the main legal fee. Court charges, expert work, translation and other relevant third-party costs may need separate allowance, together with applicable VAT. Consider the business's internal time and operational disruption for its own decision-making, while recognising that those amounts are not automatically recoverable from an opponent. If insurance or funding is relevant, check the actual scope, conditions and approval process. Do not assume that notifying an insurer means it has accepted every proposed expense or the selected representation.

Keep cost recovery distinct from the obligation to pay advisers The business's liability under its engagement terms is different from any amount a court may order another party to contribute. CPR Part 44 provides for judicial discretion and assessment considerations, including conduct and proportionality. Success does not guarantee reimbursement of all expenditure. Ask how the applicable track, fixed-cost rules or other regime affects this particular matter. A private estimate and a recoverability assessment should therefore be discussed separately, even when they concern the same stage of work. [1]

Assess possible liability for the opponent's costs as well as your own spend. Ask the adviser to explain relevant scenarios, including the effect of procedural decisions or settlement offers where applicable. Avoid combining every theoretical risk into a single unexplained worst-case total. Identify which events would make an exposure more likely and when it should be reviewed. The management team needs a usable picture of risk, not a number that appears precise but rests on assumptions nobody has stated or examined.

Reassess the remaining investment at meaningful milestones Choose review points linked to information: receipt of a defence, completion of key disclosure, an expert conclusion or a material offer. At each point, compare the remaining cost with the updated prospects, available remedies and practical recovery position. Money already spent explains the history but does not automatically justify further expenditure. Ask what the next stage is expected to resolve and whether a narrower step could answer the same question. This makes the budget a decision tool rather than a retrospective account of invoices.

Record the resulting instruction and the assumptions on which it was given. Set a proportionate reporting arrangement so material changes are raised before commitments expand significantly. Include enforcement in the later planning where a favourable judgment may still require action to obtain payment or performance. If the business decides to negotiate or stop, ask what steps are needed to implement that decision lawfully and manage existing commitments. Closing a stage should leave a clear financial and procedural position for whoever is responsible for the next decision.