The Future Of Costs Budgeting

profile_colin_richmond1 By Colin Richmond

I previously blogged about attending a meeting with Jackson LJ last month as part of his review of the costs management/budgeting process. In that post, I promised that I would report further once Jackson LJ’s recommendations were made public, which he did as part of a lecture at the end of last week.

It is clear from the content of the lecture that Jackson LJ sees costs management as having been relatively successful to date, albeit not without some problems. The issues in relation to which he feels budgeting has been successful include:

  • Both sides know from an early stage where they stand financially
  • Budgeting encourages early settlement, given that parties can see the likely overall costs of a claim and can then weigh up the risks against their own potential exposure
  • When done properly, budgeting can control costs from an early stage
  • It is of benefit that budgeting focuses attention on costs at the outset of litigation
  • Costs management forces parties to take a real interest in case management, including looking at what work is really needed, what disclosure is required, what experts are needed and so on
  • It is fair that parties should let each other know at an early stage what costs they are likely to be claiming
  • Budgeting helps to prevent losing parties from being destroyed by costs when they lose

And the areas where problems exist (along with proposed solutions):

  • Judicial inconsistency (proposed solution – better judicial training)
  • Wide variation in the forms of costs management orders issued by different courts (standard form of costs management order required)
  • Delays and backlog (the courts are too ready to make costs management orders in every case – repeal of recent amendments to CPR 3.15 and PD 3E, with PD 3E setting out criteria to guide courts in whether or not to make a costs management order)
  • No effective mechanism for dealing with costs already incurred (extending the court’s powers to allow judges to not only comment on costs incurred but to summarily assess the incurred costs or set a global budget figure for any phase, including both incurred and future costs)
  • Time for filing and exchanging budgets being too close to the hearing (proposed extension of time for filing budgets to 14 days before the hearing, rather than 7 days)

Jackson LJ also looked at the issue of Guideline Hourly Rates. He is of the opinion that they should be reviewed and that appropriate “complexity uplifts” for specialised areas of litigation should be available. Those views do not accord with recent statements made by the Master of the Rolls, who made clear that a review of GHRs is unlikely to happen any time soon.

With regard to the question of whether or not defendants should be exempt from costs management in QOCS cases, Jackson LJ is of the opinion that they should not, as much as anything else because there are some QOCS cases where defendants will recover costs and claimants are as entitled to the protection of costs budgeting as defendants.

The suggested amendments to CPR 3.15 and PD 3E seem, on the face of it, to give more leeway for judges to opt out of budgeting in appropriate cases. Allowing judges additional discretion does not seem, to me, to be an ideal solution. What is needed, surely, is certainty, particularly given the problems identified regarding judicial inconsistency. Lord Dyson MR was fairly quick to voice his disagreement to the proposal.

One thing that is certain from Jackson LJ’s comments is that costs management is here to stay. It will, in his opinion, be seen as being entirely normal 10 years from now, with people wondering what all the fuss was about.

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