Confronting Costs Management – Lord Justice Jackson delivers a lecture on the progess and development of costs budgeting

In May this year, Lord Justice Jackson gave a speech at Gray’s Inn Hall in London in which he identified a number of problems to have emerged as a result of his reforms. His paper can be found here.

We agree with several of Jackson’s LJ’s observations. Less so with others.

First, the good news: Lord Justice Jackson offered a generally positive overview of how his reforms were working in practice. Those involved in litigation now had better knowledge of their financial position, he said, early settlements were being encouraged, and costs were being controlled. Even solicitors and judges were now generally supportive of costs management, he added – albeit with varying degrees of enthusiasm.

Yet, despite this generally upbeat message, Jackson LJ also explained that new challenges had emerged as a result of his reforms. Perhaps not surprisingly, Jackson LJ was happy to share his thoughts about how these problems could be addressed.

The first problems identified by Jackson LJ related to the judiciary: notably, judicial inconsistency, and also the tendency for some members of the Bench to micromanage costs budgets. To address both problems, Jackson LJ suggested that formal costs management training “should be compulsory for all civil judges”. He also offered specific advice regarding what he regarded as unnecessary micro-management – specifying rates or the number of hours permitted.

One can only hope that certain members of the judiciary take notice of Jackson LJ’s comments, and modify their practice accordingly.

Costs management orders (CMO) was raised at two points in Jackson LJ’s speech – firstly in relation to the wide variations between courts regarding the forms of CMOs now being made, and secondly in relation to whether CMOs should be the norm – a default position not contained in Jackson LJ’s initial reforms. To overcome variances between courts, Jackson LJ suggested that a standard form of CMO be developed, either by the Ministry of Justice, the Rule Committee and / or the Judicial College. On the second point, he suggested that recent changes to CPR 3.15 and PD 3E should be repealed, and judicial discretion – subject to official guidance – should be restored regarding whether or not CMOs should be made.

The Master of the Rolls, Lord Dyson, speaking alongside Jackson LJ, expressed some misgivings about any “opt-out” option. We agree, if costs budgeting is to become the norm, it should be embraced fully by the courts. Given the judiciary a discretion to opt parties out would likely lead to considerable uncertainty, unfairness and potentially yet further satellite litigation.

In relation to the filing and exchanging of budgets, Jackson LJ suggested that the CPR should be amended so that it became the norm – and not merely the default position – for costs budgets to be filed 14 days before the CCMC. This reform, he said, would prevent situations where practitioners were given as little as seven days to discuss and agree budget ahead of a CCMC. However, he added that any reform of this issue should allow a court to retain its discretion to specify a different period for lodging budgets when circumstances required.

Also on the subject of CCMCs, Jackson LJ noted that different courts had different approaches in relation to whether case and cost management conferences should be combined. His preferred approach was that the court should deal with both issues in a single hearing: first giving case management directions (CMD), then budget the costs and finally revise the CMDs if costs are still thought to be disproportionate.

Jackson LJ suggested that detailed assessments was proving problematic in some cases, because approved budgets could not be “married up” with the final bill of costs. To overcome this challenge, Jackson LJ suggested that courts should follow the approach taken by the SCCO and some of their peers, and order the receiving party to lodge a summary of its bill of costs in a format which matches Precedent H. In light of Jackson LJ’s endorsement of this approach, it is possible that more orders of this nature may be made, going forward.

Unfortunately, until such time as practitioners develop their practice of recording work in line with the budget phases this would prove extremely problematic and impractical in many cases, not to mention costly.

Also on the topic of Precedent H, Jackson LJ said he agreed it could be improved. In particular, he suggested that its provisions regarding assumptions and contingencies “may need attention”. Further guidance on how to deal with expert costs would be helpful, he added. That said, Jackson LJ also acknowledged that successive changes to Precedent H might be unhelpful, given that legal practices had adapted their IT systems to allow them to complete the form. He therefore suggested that, because the new form bill of costs would require yet more changes to Precedent H in any event, it might be sensible to delay further changes to it until the new form bill of costs was finalised.

We agree with Jackson LJ’s statement that cost budgeting is generally helpful to all parties. However, we also agree with his observations that new problems have arisen as result of his reforms. We hope that those now responsible for updating the civil justice system take notice of Jackson LJ’s observations, and also his suggested solutions. In our view, only once changes are made do we believe that Jackson’s vision of justice being delivered efficiently, and at a proportionate cost, can be fully realised.

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