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Costs management is here to stay

In the first of our guest posts by members of 39 Essex Chambers, Simon Edwards discusses Lord Justice Jackson’s Harbour Lecture entitled “Confronting Costs Management”, which was delivered on 13 May 2015.

The purpose of Lord Justice Jackson’s Harbour Lecture was to review how costs management has worked over the two years since its implementation in the Jackson reforms. To that end, he had conducted informal, but quite far-reaching, consultations.

One of his first conclusions was “when done properly, costs management works well”. He identified a number of benefits:

  • Knowledge of the financial position.
  • Encouragement of early settlement.
  • Controlling costs.
  • Focussing attention on costs at the outset.
  • Making CMCs effective.
  • Elementary fairness.
  • The prevention of legal catastrophes, namely the exposure of “real people” to catastrophic losses if they lose.

He also listed objections:

  • More time spent debating costs, less on the issues.
  • Most cases settling so budgeting takes up time unnecessarily.
  • The need for disproportionate front loading of costs.
  • The complexity of litigation.

He also identified some particular problems, namely judicial inconsistency, unduly long hearings and consequent delay, wide variation in orders made prior to the hearing and no effective mechanism for dealing with costs already incurred.

He had a number of recommendations to make. One was that fixed costs should be extended into low value multi-track cases (those worth up to about £50,000). Indeed, he noted the Senior Queen’s Bench Master’s recommendation that fixed costs should apply in claims up to £250,000.

As regards judicial inconsistency, he stated that the solution to that problem lay in “better judicial training”. That, apparently, was also the solution to unduly long hearings and micromanagement. Specifically, it appears that Lord Justice Jackson is against the practice of the court specifying rates or numbers of hours, saying that at the conclusion of each phase, the court should approve a single total figure for that phase of the proceedings. He stated that specifying rates or numbers of hours added unnecessarily to the length of CCMCs.

In my view, it would be better if this were made specific in a Practice Direction. As Lord Justice Jackson makes clear, the additional training that is being made available is not compulsory (although he recommends that it should be) and, in any event, without clear guidance from a Practice Direction, an individual judge may still feel free to take his own course.

So far as differing costs management orders are concerned, he recommended a standard form of costs management order developed by the MoJ or the CPRC in conjunction with the Judicial College. In particular, he recommended that the rules be amended to specify that costs budgets should be exchanged 14 days before the CCMC, which would ensure that sufficient time is given before the CCMC for discussion, but that costs budgets are not exchanged so early that they need to be revised (at greater expense).

So far as delays are concerned, Lord Justice Jackson identified that delays were most prevalent in clinical negligence cases in London. He recommended that all London clinical negligence cases having CCMCs listed between October 2015 and January 2016 should be released from costs management, and instead short old-style CMCs should be listed at the first available opportunity. He also recommended a change to the rules that, while favouring costs management in most cases, allowed the court to exempt itself from costs management in any case if it lacks the resources so to do without causing significant delay and disruption to that or other cases (Lord Dyson has expressed doubts as to the wisdom of this course).

In my view, the first expedient may help for a while, but unless fundamental changes (including more resources) are made available, the problem will simply reoccur. As regards the latter, that could severely undermine the whole purpose of costs management and lead to yet more inconsistency between courts.

So far as incurred costs are concerned, Lord Justice Jackson recommended a change to Precedent H so that the two are kept separate rather than combined, and giving the court the ability, in a suitable case, not only to comment on incurred costs but also summarily to assess those incurred costs, or set a global budget figure for any phase to include both incurred and future costs.

Lord Justice Jackson recommended other improvements to Precedent H, particularly in relation to contingencies, expert costs and assumptions. He asked the Coulson Committee (a sub-committee of the CPRC, chaired by Mr Justice Coulson, which is reviewing the operation of costs management rules) to look into those issues. Further, he proposed an interim solution pending a new bill (which would fit in with Precedent H) similar to that used in the SCCO, where the receiving party has to lodge a summary of its bill of costs in a format that matches Precedent H.

Lord Justice Jackson specifically endorsed the approach of District Judge Simon Middleton (something of a costs guru) who, in Costs & Funding following the Civil Justice Reforms: Questions & Answers, described his method of approaching costs budgeting as follows:

“I do a short judgment on the relevant 44.3(5) factors and give brackets for overall proportionality of each party’s budget. I then give the individual case management direction for a phase and costs manage all parties’ costs for that phase (i.e. case and costs manage by phase simultaneously). At the end I step back. If the result is still not proportionate, then we re-visit phases to look for a more proportionate direction and spend on it. I find it easier to steer to a proportionate direction if I am doing the costs for that direction at the same time.”

That approach is not, in my experience, common. It will take a lot of judicial training to achieve that type of approach in most cases. Lord Justice Jackson, however, ended with a prediction that, within ten years’ time, costs management will be accepted as an entirely normal discipline and people will wonder what all the fuss was about.

I hope that the problems that many encounter with costs management, whether it is inconsistency of approach or unreasonable delay, will take less than ten years to sort out. If, as Lord Justice Jackson says, costs management is “here to stay”, then the professions and the judiciary will have to roll up their sleeves, cooperate more and, in particular, claimants should not put forward unsustainable estimates and defendants should not object unreasonably. Lord Justice Jackson noted, in this respect, that it was the Senior Queen’s Bench Master’s view that the NHSLA tended to take an unreasonable stance, challenging everything in claimants’ budgets.

It is plain that most of the problems arise in clinical negligence and, to a lesser extent, personal injury claims. If, in respect of the latter, fixed costs were extended into the multitrack, then some of the pressure would be taken off. Otherwise, something of a “culture shift” will be required, both among the professions and the judiciary (or at least in some parts thereof). Training and Practice Directions can help, tweaking the rules will help too. I just hope that it will not take another ten years to bed in.

39 Essex Chambers Simon Edwards

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