REUTERS | Dylan Martinez

Our survey says: ACL’s findings on costs budgeting

Costs budgeting, as we know it today, has been around for less than four years. It was only last June in Harrison v University Hospitals Coventry & Warwickshire NHS Trust that the Court of Appeal provided much needed clarification on the approach to be adopted by costs judges on detailed assessment on departing from approved or agreed budgets, if there is good reason to do so.

During this period, litigators and their costs lawyers have had to come to grips with the new regime, and to a good extent they are succeeding.

Last summer, Jackson LJ concluded that a “sea change” in attitudes towards costs management had “eliminated any need” to develop fixed recoverable costs (FRC) for all cases worth up to £250,000.

His report on extending FRC noted that, in the previous 18 months, “the process of accepting and embracing costs management has accelerated”.

This was, he said, for several reasons, including:

  • High-quality judicial training delivered by the Judicial College, which has improved the level of consistency between different courts.
  • Increasing familiarity with the process on the part of both practitioners and judges.
  • Increased willingness by the profession to discuss and agree budgets or parts of budgets before the first case and costs management conference.
  • General acceptance that, one way or another, costs must be controlled in advance combined with a preference by the profession for costs management over FRC.
  • Refinement and improvement of the costs management rules by the Civil Procedure Rule Committee.

Nonetheless, he advocated extending FRC across the entire fast track, introducing a new fixed cost “intermediate” track for certain claims up to £100,000, and a voluntary pilot of a capped costs regime for business and property cases up to £250,000.

Three months after the report was published, the Association of Costs Lawyers undertook its annual survey, to which 155 members responded. In light of the judge’s comments, it is perhaps unsurprising that, while just over half (52%) said it was “fair enough” to extend FRC across the fast track, the majority thought that they should go no further. Nearly 60% said Jackson LJ’s optimism about the costs management process matched their own experience.

Costs lawyers know better than anyone that budgeting is becoming embedded in civil litigation and it will only keep on improving. It is true that many solicitors still need guidance but, with judges now far more confident in exercising their costs management powers, we are positive that it will make a real difference in controlling costs.

That being the case, the question is whether we really need the upheaval and satellite litigation that FRC would cause as claimant lawyers push for the highest fee available. They work on the fast track because solicitors can cope with the “swings and roundabouts” of having some cases that require more work and others that require less than the fixed cost allows. However, that calculation does not work with more complex cases.

Of course, costs lawyers have an interest in maintaining budgeting. However, as a profession, we have worked hard to make the process work and, while there is still some way to go, we are proud of what has been achieved.

However, the survey also showed that solicitors need to up their game. Just 5% of costs lawyers said their clients always stuck to their budgets, 65% said they sometimes went over, while 29% had clients who always exceeded their budgets. In light of the Harrison ruling, this is a major problem.

It also means solicitors should be monitoring their budgets and updating if required as the case progresses. The survey indicated that they still have a long way to go. Just 19% of costs lawyers said the number of applications to update a budget was increasing, while 38% said they had never seen one.

Perhaps publicity around Chief Master Marsh’s recent decision to approve a £1.5 million increase in the budget of the defendants in the huge Lloyds/HBOS case (while the trial was going on) will act as a useful reminder.

The next big change to hit the costs world will come in April, when the new electronic format of the bill of costs becomes compulsory. The survey said there was growing awareness among solicitors about this, but 40% of costs lawyers thought that, however good it may be, solicitors are not interested in the shift.

The wave of reform in recent years has cut both ways for costs lawyers by increasing demand for some areas of work but removing others. The survey found that government reform was seen as the main threat to the future of the profession.

Nonetheless, the large majority thought they would weather the Jackson reforms, even if some would take a hit initially. Costs will always cause arguments among litigators, and costs lawyers stand ready to apply their expertise.

Association of Costs Lawyers Francis Kendall

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