Some of the more worrying changes that lie ahead for litigators in 2017 are Jackson LJ’s review of the extension of fixed recoverable costs and the potential increase in the small claims limit. However, the new spread sheet based bill of costs is particularly noteworthy.
In Jackson LJ’s Final Report, he decided that the current bill of costs:
- Was expensive and cumbersome to prepare.
- Did not make use of available technology.
- Was not easy to digest.
At paragraphs 106 and 107 of Jackson LJ’s recommendations he concluded that:
“A new format Bills of Costs should be devised, which will be more informative and capable of yielding information at different levels of generality.”
“Software should be developed which will (a) be used for time recording and capturing relevant information and (b) automatically generate schedules for Summary Assessment or Bills for Detailed Assessment as and when required. The long term aim must be to harmonise the procedures and systems which will be used for costs budgeting, costs management, Summary Assessment and Detailed Assessment.”
The requirements of the new bill of costs were to ensure that it would be inexpensive to produce, there would be more transparency and it would be more user-friendly.
Alexander Hutton QC was appointed to chair a committee tasked with developing a new format bill of costs to meet Jackson LJ’s recommendations. The structure of the new bill of costs requires it to be presented in the order “phase [identical to those set out in Precedent H], task, activity”.
According to these proposals, the bill is divided into “phases”; each phase is broken down to identify different tasks. A summary sheet lists the profit costs and disbursements in respect of each task in each phase. In the body of the bill itself, each task in each phase is set out in chronological order, with an indication of the time spent and the amount claimed. One of the advantages is said to be that a bill in this form could easily be transmitted in electronic form, provided that all those involved had compatible IT software. If bills were to be prepared along the lines suggested, and dealt with electronically, there could potentially be large savings in time and costs.
In order to achieve Jackson LJ’s goals, the Hutton Committee adapted the Uniform Task-Based Management System, an international standard for e-billing (overseen by LEDES) for use in UK litigation (EW-UTBMS) and introduced time-recoding codes, known as J-codes, to be used in conjunction with the new bill.
Following these recommendations, a pilot scheme was introduced on 1 October 2015. Our first experience of the new spread sheet-based bill of costs (then in its first incarnation, Precedent AA) was last year. It was not a success. The use of the new bill had increased the time spent dealing with costs by 100%. The claimants’ lawyers had to spend 96 hours retrospectively applying J-codes to the work that had been billed to the client.
The dispute at our detailed assessment, which concerned whether or not the claimants’ lawyers should be permitted to exceed their budget under CPR 3.18, should have been straightforward to resolve. However, the use of the new bill allowed the receiving party, in effect, to go back to the drawing board, thereby ignoring all the work that was previously done when the case was budgeted.
The experience showed that the new J-codes were too complicated, that dealing with such costs is too labour intensive and that the time spent dealing with costs under the new scheme is increased by at least 100% on what they would have been otherwise.
Thankfully, a revised Practice Direction (PD) 51L with a “new” spreadsheet bill of costs (Precedent AB) came into force on 3 October 2016, allowing any receiving party in the Senior Courts Costs Office (SCCO) only to use the new bill format instead of the existing model. The Hutton Committee listened to the complaints regarding over-complication and the activity codes are now much simpler.
Further, the pilot scheme, in its amended form, was implemented with a view to establishing a mandatory form of bill of costs to apply to all work done after 1 October 2017 for inter partes costs recovery. It will not apply, as I understand it, to solicitor-own client, Court of Protection and publicly funded matters.
Why should this concern litigators and can it not just be left to the costs professionals? The new bill format now has a choice of time recording codes, none of which are mandatory although the committee recommends use of the J-codes. That way the time recording contemporaneous work can be assigned a code (adapted by the committee to apply to English and Welsh litigation) so that it is categorised contemporaneously as time recording within the Precedent H hierarchy of phases. Therefore, if fee earners are not recording time properly, the J-codes will have to be applied retrospectively. This could increase the cost of preparing a detailed bill, as per our initial experience. However, if time is recorded properly, the cost of drawing the bill will be significantly reduced.
A Law Society survey showed that very few law firms currently use the J-code tagging system (or similar) to record their time. The new format can be used by those who do not have a time-recording system or any billing software but obviously some of its advantages will be lost to them.
The committee says that it is no longer safe to ignore the J-codes (or similar phase-based time-recording) for this project; litigators are strongly recommended to record time under Precedent H phases as soon as possible and get used to using spread sheets to produce bills of costs (if you are not already used to doing so). I don’t see the courts reverting back to the old style bill of costs any time soon.
The Association of Costs Lawyers has produced its own version of the new format bill of costs.
Some of the challenges regarding the new spread sheet based bill of costs have been the indemnity principle and interim statute bills (invoices by which solicitors can sue their clients if they do not pay, as opposed to interim or requests for payments on account of costs), partial/issue-based costs orders, and multiple parties of which only some are paying. The new bill has tried to accommodate most of these, but there may well be other scenarios where it is not cost effective or practical to use the new format bill of costs.
The bill can be served electronically (see PD 51L 3.2) although no doubt the court will also require it to be served in paper form. One of the advantages of using a new style bill (Precedent AB) is that the client will receive an expedited hearing date in the SCCO. The hope is that as many bills of costs as possible will go through to detailed assessment, in order to determine how the pilot and new bill is working.
Preparing a multi-phased bill is nowhere near as cost effective as preparing a one part bill, but where the case has been costs managed, the bill will have to be prepared in several parts/phases (see (CPR 47.6), PD 47.5.8 and 13.2 (m)). However, if litigators adopt J-code or similar time-recording, fee earners’ time recording should, in time, become more accurate and, with the use of innovative technology, I foresee there being costs savings with the preparation of bills of costs.
For more information, please contact Matthew.Kain@kain-knight.co.uk