Hedging Bets on the Future of Costs Management - Everyone’s a Winner?
Costs management, and specifically costs budgeting, has been with us now in the mainstream since the Jackson reforms came into force in April 2013. A polite assessment so far would be that the impact has been ‘variable,’ especially in the county courts. Uncertainty too has been a recurring theme: will a budget be set by phase or a broad-brush single figure? Despite some success, the industry view seems to be that costs management has added considerable time and expense to proceedings and needs more time to bed down. Significantly, there appear to have been very few applications to vary an approved or agreed budget. Despite the implications of Mitchell, parties clearly prefer to take their chances at Provisional and Detailed Assessment.
Fixed recoverable costs – the next phase?
At the beginning of 2016, less than three years in, Lord Justice Jackson - architect of it all - proposed an extension to fixed recoverable costs to £250,000.00, while also resurrecting the idea of a Contingency Legal Aid Fund (CLAF). In his address to the IPA Annual Lecture in January 2016, LJ Jackson said, “Fixing costs is an effective way of ensuring that a party’s recoverable costs and its adverse costs risk are proportionate… parties would no longer have to prepare, agree and/or argue about budgets in claims up to £250,000. This will save both time and costs.”
Fast forward to November 2016 and LJ Jackson was announcing a review of fixed recoverable costs. But by December, momentum seemed to have slowed as LJ Jackson stated that fixed recoverable costs would be beneficial for lower value cases but that he would “keep an open mind.” In March 2017 LJ Jackson used a speech to raise key questions on this ongoing theme, including what streamlining and process changes would be required to make any fixed costs regime effective and whether an ‘intermediate track’ for such cases is a good idea. I was particularly surprised by the idea of an intermediate track – somewhere between fast track and multi-track. Process changes and a fourth track? Sounds like a scatter-gun approach, hoping the right target might be hit along the way!
Notably, in that same speech, LJ Jackson also said, "costs management is now working much better. It applies the new proportionality rule to the circumstances of each individual case." He said defendants and liability insurers are "inclined to accept that costs management controls future costs. But they maintain that fixed costs would be better." He also conceded that his consultation underlined a "frequent message … that one size doesn't fit all. “
Are fixed costs really necessary?
While some of the above could be read as “costs management is now OK and we don’t need fixed costs,” in the last month, in conversation with someone who is close to LJ Jackson, it was suggested that fixed costs are a certainty, coming in as high as £100,000 (certainly there is an incentive to pitch this at £75,000, which would scrap Provisional Assessment and it’s never-kept-to six-week turnaround time).
In this context, it’s worth noting the flurry of recent case law on budgeting, as well as on proportionality - the latter of which didn’t generate any meaningful decisions for almost three years post-Jackson. Recent, robust proportionality decisions include BNM v MGN Limited  EWHC B13 (Costs) in which damages recovered were only £20k against costs claimed at total of £242k. A line-by-line assessment reduced these to profit costs of £62K and total overall of £167K. Proportionality was applied further reducing profit costs to £24k and a total for the costs of £84K.
Surely if costs budgeting is now doing its job, and given new found life being injected into costs management and proportionality via case law, there are adequate ways to control costs without a wholesale extension of fixed recoverable costs. Yes, we have survived upheaval before - the challenges to the old Scale 1 limit, the introduction of written objections to the taxation of costs, the CPR, guideline hourly rates, proportionality, CFAs - however, is it necessary now? A wholesale extension of fixed recoverable costs would require a drastic re-write of the CPR and inevitably give rise to much satellite litigation.
Looked at objectively, there seems to be something rather frantic about the way in which the question of fixed costs is being handled – less calm consideration and more uncertain chatter. And perhaps what comes across the most strongly is that there is a large degree of hedging bets as to what the eventual outcome will be.
This article was written by Richard Allen who brings 30 years of unique commercial experience to Burcher Jennings. He was one of the first professionals to achieve Costs Lawyer status, and is one of a select group of Costs Lawyers to have made partner in a solicitor’s practice. Richard is Practice Manager for the Cambridge office.