UK: Confronting Costs Management – Issues Arising From Lord Justice Jackson's Harbour Lecture

Last Updated: 2 October 2015
Article by Clyde & Co LLP

On 13 May Lord Justice Jackson delivered a paper providing his views on how the new costs regime is working in practice and considered how the rules might be developed in light of experience.

After gathering views nationally from judges and practitioners, Jackson expressed his broad support for the principle of costs management and, despite the considerable teething trouble of the new regime, which has now been in force for two years, predicted that within ten years it will be accepted as an entirely normal principle. Jackson addressed several of the main criticisms levied at the reforms and provided his view on how these issues can be remedied.

Delay

A central criticism was that of the significant delays created by the backlog of case management hearings, which is clearly contrary to the aims of promoting access to justice at proportionate cost.

In response to this issue, Jackson rather boldly recommended a repeal of the presumption in favour of costs management as a means of easing the backlog. If such an amendment is secured, there is likely to be significant 'bedding in' time, leading to further inconsistency, at least in the short term. Forum shopping is also likely to result, with claimant firms choosing those courts where costs management is not practiced in a bid to increase their costs further.

Incurred costs

A further pivotal issue raised was that presently all that Courts can do in respect of incurred costs is merely "comment" on them. This allows Claimant solicitors to incur high levels of costs prior to issuing proceedings/ CCMC in order to place these costs away from scrutiny, thereby inflating the costs claimed.

Jackson recommended that where there is sufficient information, courts should be able comment on the incurred costs and summarily assess the same. This will negate the present Claimant tactics in relation to incurred costs and will incentivise the Claimant's solicitors to stop claiming disproportionately high costs.

Lack of consistency amongst courts and judges

Experience has shown that some judges have embraced the process, whereas others give the impression of being keen to avoid budgeting if at all possible. Although many judges scrutinise budgets very carefully, others take a much more broad-brush approach, to the extent of simply providing an overall figure for the whole budget on the basis that a party should then divide it among the phases as it sees fit. From a defendant's perspective this clearly lacks the desired consistency and certainty.

Jackson has recommended that a compulsory course of costs management training should be provided to all judges, which it is hoped will encourage a more consistent approach, thereby allowing lawyers to accurately advise their clients.

Lack of consistency in initial directions

There has been a severe lack of consistency in courts' approach to hearings. Some courts seemingly require very little to be filed in advance of the first costs hearing, while others require large amounts of paperwork to be placed before the judge.

Jackson recommended that a set of "standard" directions should be used by courts across the country. It is proposed these will be developed by the Ministry of Justice and Judicial College.

Separate hearings for directions and budgeting

Many practitioners feel that budgets can only be prepared accurately once the parties know what directions are in place, e.g. what disclosure is likely to be required. This has led for some to call for an early directions hearing to allow issues between the parties to be narrowed before budgeting. Indeed, the County Court at Sheffield presently list a short directions hearing to begin with (possibly by telephone) with the budgeting hearing then arranged for a later date.

Jackson was not receptive to these arguments and has recommended that courts conduct a case management and costs hearing at the same time, i.e. procedural directions are given and then the costs budget approved.

Date by which budgets should be filed

There has been much debate over the date when budgets should be filed. Jackson initially suggested that, in his view, 7 days before the hearing was appropriate, however this was criticised as it did not allow the parties sufficient time in which to reach agreement.

Jackson recommended that 14 days is a sensible compromise subject to discretion where a specific case requires it.

Hourly rates

An issue that many practitioners considered prevented agreement of budgets was the difficulty in deciding the appropriate hourly rates for solicitors, leading to an inability to agree the costs of phases or the budget as a whole.

Jackson LJ suggested that a full review of Guideline Hourly Rates may be required, with the possibility of the rates not only taking into account geographical factors but also allowing for the possibility of increased rates by way of a "complexity uplift" in certain cases.

Fixed recoverable costs

Lord Dyson in his lecture reiterated Jackson's plea for an extension of the fixed recoverable costs regime to all fasttrack cases as well as to the smaller multi‐track cases. In a candid statement, Dyson stated that in his view, the time had come for the Ministry of Justice to say that it accepts in principle that the fixed costs regime should be extended.

Next steps

Jackson's recommendations have now been passed to a sub-committee to consider any possible amendments to the rules.

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.

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