UK: On A Budget: The New Costs Management Order

Last Updated: 8 November 2011
Article by Richard Langley

This article was first published in the Solicitors Journal on 18 October 2011 and is reproduced by kind permission.

The new costs management order is here to stay, and those firms that master the art of costs budgeting early on will have an advantage, says Richard Langley.

Courts have always grappled with how to manage cases and had a variety of tools at their disposal for this purpose. In 1595, the Master of the Rolls decided in one chancery case that the pleading, at 120 pages long, was eight times longer than it needed to be. The remedy was to order that the pleader be brought into Westminster Hall at 10.00am the next Saturday, whereupon a hole be cut in the middle of the pleading so that it could be placed over the pleader's head, who would then be led around "bare headed and bare faced" before being sent to the Fleet Prison until he had paid a £10 fine (Mylward v Weldon [1595] EWHC Ch 1).

The latest tool is a costs management order (CMO), to be found in the new practice direction 51G, which came into effect on 1 October 2011. For the time being, it applies only to the Mercantile and Technology and Construction Courts, but all litigators need to get their heads around it now.

PD51G requires parties to draw up detailed budgets for the costs they have incurred and estimate to the end of the case. These are set out in an Excel spreadsheet in prescribed form HB before the first case management conference. The judge will consider the budgets and may make a CMO, approving the budget or a revised (presumably cut down) version of it. If a budget should subsequently turn out no longer to be accurate, parties must produce a revised budget, showing the departures and the reasons for that.

Approved costs budgets do not obviate the need for a detailed assessment at the end of the case. The CMO cannot approve costs that have already been incurred (although it may record comments on them), but, with regard to costs incurred in accordance with an approved budget, the court on detailed assessment will not depart from the budgeted figure unless there is good reason to do so.

Solicitors who do not routinely practise in the TCC or the Mercantile Courts may be tempted to take the view that costs budgeting is not for them. That would be a mistake. Costs budgeting is here to stay and will in time become as much a part of the litigation culture as summary assessment and CFAs have over the past ten years.

No one disputes that case management powers in the CPR have failed to reduce costs in the multi-track. This has led Lord Justice Jackson to advocate costs management. Despite the opposition of the circuit judges (who submitted that "judicial productivity would be likely to fall as fast as morale if we are required to do this work"), he concluded that "a powerful case has been made out for introducing costs management in... multi-track cases". He recommended that the introduction be gradual (not least to enable demoralised circuit judges to get trained up) and therefore the pilot should be seen as a step towards implementation across the multi-track generally.

Getting ahead

Form HB (nine pages long) is intimidating, even if it is conceptually simple. Jackson LJ reckons it will take around two hours to complete in most cases. Smarter (and better resourced) firms will invest in software that will automatically populate the form and track actual against estimated time asthe case goes along. Clients will appreciate seeing the sort of detailed estimates that costs budgeting will require. And so those firms that become skilled in costs budgeting will use it not just to comply with their professional obligations but also as a marketing tool.

Will it reduce costs? History suggests not. Every introduction of new procedures creates further work that lawyers are entitled to be paid to carry out. The additional costs are not so much from completing the form as from having to map out the case in so much detail at the outset. Jackson LJ was aware of this but pointed out that quantity surveyors have to be paid to monitor the costs of a construction project, yet no onesuggests that they should be dispensed with to save the costs of employing them. So, modern litigators must add project management to their skill sets. Builders are adept at quoting a fixed price for a job based on certain assumptions. Similarly, they areadept at claiming for the extras (at time cost on a fixed margin) as soon as the project deviates from those assumptions. Solicitors will have to become so adept if they are to thrive in years to come.

Jackson LJ is trusting that judges will also become proficient in active costs management (although one might be forgiven for doubting whether most will have the time, let alone the skills and inclination, to do so). In litigation both parties are usually incentivised to spend more time on a case to improve the prospects of winning it (and thereby recover the costs too). Costs budgeting is not obviously going to reverse that incentive, save in the most actively managed of cases.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Richard Langley
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.