Key among the recommendations of Lord Justice Jackson’s costs review is costs management, which looks likely to transform case management on the multi-track. Rules will eventually be established with the aim of controlling costs throughout the life of a case as opposed to detailed assessment at the conclusion. Two pilot schemes have been commissioned.
Initial views on these pilot schemes have now been revealed and coincide with the latest consultation paper published by the Ministry of Justice in November 2010.
The Pilot Schemes
The first pilot was a voluntary pilot project in the Birmingham Mercantile Court and TCC, which ran from 1 June 2009. The second pilot was made mandatory by a Practice Direction and applied to defamation proceedings in London and Manchester. It applied to proceedings where the claim started on or after 1 October 2009 and runs to 31 March 2011.
In both pilots, the Court has regard to the budget estimates and to any view previously expressed by the Court. Unless there has been a significant change in circumstances the judge will approve as reasonable and proportionate any costs claimed which fall within the last previously approved budget.
The first pilot in Birmingham ran beyond the completion of Jackson LJ’s final report so it only deals with events up to the end of October 2009. Whilst the majority of parties chose not to participate, 11 cases were subject to the process where the value of the cases ranged from £50k to £450k, with costs budgets in those cases ranging from £20k to £158k on the Claimant side and £18k to £121k on the Defendant side. It has been deemed a useful exercise as it enables clear focus on cost/benefit and knowing the costs being incurred by the other side also enabled better advice on cost/benefit to be given to the client. Of the cases involved, some settled shortly after the first case management conference, apparently assisted by the costs budgeting process. In two cases that went to trial, costs were agreed broadly in line with the approved budget.
The Mercantile Judge, HHJ Simon Brown is a strong supporter and stated that the costs schedules were “wonderful tools for both costs and case proper management – indeed essential”.
In respect of the Defamation pilot, responses to the consultation which took place after the publication of the preliminary report revealed that whilst Circuit Judges were opposed to the scheme, District Judges were largely supportive as were the Bar, the Law Society, the majority of solicitors and clients. Third party litigation funders, for whom litigation is a project where budgets are essential, expressed strong support for the requirement of clear rules and training for all involved from solicitors to judges.
Following on from the schemes in Birmingham and in defamation cases, Jackson LJ is also considering piloting costs management in other Mercantile and TCC. He is also in discussion with the Judicial Training Board about costs management training for judges from spring 2011. The rules on costs capping would also need to be changed so as to harmonise with the new approach to Costs Management. In particular the requirement that capping should only take place in “exceptional circumstances” should be removed from section 23A.1 of the CPD.
Nothing can be certain about the precise form that costs management will take and the cases that will apply until the new Rules are published. At it stands, costs management will not apply to the small claims track or the fast track. It looks unlikely to apply in the Commercial Court, at least as a matter of routine. Publication and Mercantile and TCC cases are likely to continue to be subject to costs management. It is expected that the costs budget will automatically restrict what is recoverable at the end of the case.
Given the inevitable introduction of costs management it will be more important than ever to ensure that the most accurate estimates possible are prepared as the Court may restrict the costs that are ultimately recoverable at the end of the case. If you require advice or assistance in the preparation of estimates and budgets please contact us.