A different costs system with digitisation, vulnerable court users and a properly functioning civil justice system at its heart is the goal of a Civil Justice Council’s (CJC) working party, which recently closed its wide-ranging consultation on areas for possible reform.
As the group of lawyers with the most direct experience of the issues, the ACL has responded in detail to the consultation following extensive member consultation.
Amongst our members there was strong support for retaining budgeting, which we believe is a useful and effective tool for both judges and the parties.
We told the consultation that costs management has achieved what it was created to deliver: to provide judicial oversight on the cost for claims and provide a cap on what could be considered reasonable and proportionate. Nearly three-quarters of costs lawyers say it assists at the detailed assessment, with several reporting that it is reducing the overall number of assessments required.
The alternatives are either “a return to dealing with unmanaged costs solely at the end of the claim”, or further expansion of the fixed costs regime. The ACL considers that neither of these options are suitable and will have a negative impact on access to justice.
The costs management process has been improved over the years but the majority of costs lawyers consider there is still scope for additional reform. Those proposed by the ACL include:
- De-coupling case and costs management so that the court can set out the clear directions that the claim will take and the budget prepared accordingly, know the number of witnesses, type of disclosure, number and specialism of experts, and so on.
- Updating Precedent R to reflect the approach adopted within points of dispute and reply, namely that both parties can include their comments and rebuttals within one document, which is then served and filed with the court ahead of any costs management conference.
- Issuing guidance that sets out clearly where costs are to be considered incurred or budgeted, reducing arguments at the detailed assessment.
- Clarifying the test for varying the cost budget – the current rules say it should happen when there have been ‘significant developments’ in the case, but at detailed assessment the budget can be departed from where there is ‘good reason to depart’. The two tests appear to have different levels and it has been interpreted that the bar is lower to establish a good reason to depart than to significant developments. Therefore, in some circumstances, it may be currently better for a solicitor to decide to not update a costs budget during the case. This is against the spirit of the rules.
Guideline hourly rates (GHR) should continue to be a starting point for summary assessment and, as the description states, a guideline. However, with fixed costs soon to be introduced for most money cases where damages exceed £100,000, the GHR should be amended to reflect that those cases where they apply may be more complex and important than the usual case now.
Our response also argues that complexity of work, rather than where it is done, should be a key factor in setting the GHR. Most members of the ACL believe that home working will in fact have little impact on overheads in the overall scheme of a case’s costs. They also call for the GHR to be reviewed no less than every two years.
Further, costs lawyers should be recognised within the GHR, as was recommended by the 2014 Foskett review. This said they should be eligible for payment at grades C or B, depending on the complexity of the work.
The ACL remains of the view that this recommendation should be included explicitly within the GHR’s ‘fee-earner’ category. Costs lawyers are regulated professionals and are qualified to conduct reserved legal activities pursuant to the Legal Services Act 2007.
In his independent review of legal services regulation in 2020, Professor Stephen Mayson said costs activities should be restricted to costs lawyers to ensure that “harmful dabbling” is avoided and greater consumer protection when dealing with the issues of costs.
The ACL considers that one method of assisting this would be to ensure that costs lawyers are enshrined within the GHR to reflect their specialism and underscore their value to the process. Furthermore, the ACL considers that such an inclusion should not be limited by the recommendations made in 2014 but should be extended to reflect that there are complex costs issues (with key costs cases regularly being heard by the Court of Appeal) that warrant grade A rates.
Without the GHR, a form of chaos would ensue, with less certainty, more satellite litigation and a lengthy evidence-based assessment necessary in almost every case. There may well be alternatives but the existing methodology (that is, average overheads with profit element applied) has proved reliable thus far and for many years.
Our response also suggests extending provisional assessment to all pre-issue costs claims and not just those worth up to £75,000, and calls for a full and in-depth review of the Solicitors Act 1974 and the mechanism for dealing with solicitor/own client costs. The current provisions are archaic and do not reflect the current legal environment, especially post-LASPO.
On fixed costs, judges should have greater discretion to take cases out of the regime. Additional work generated by vulnerability, complexity and parties behaviour should be taken into account, or else would-be claimants could find themselves either without representation or with a greater deduction from damages than a claimant in a more straightforward claim of the same value.
The costs process is not perfect, but it is much better than it was in 2013. We urge the working group not to throw the baby out with the bathwater, and instead look to reform rather than remove costs management.
As with other areas of litigation, there is no substitute for experience and the area of costs is no different. The area of costs is conducted at its best when costs lawyers are involved and can provide their advice and apply their experience to the process. All our respondents considered that costs lawyers provide value to the costs management process and we hope the CJC recognises this too.
