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16 October 2018
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Litigation Funding - September 2018

Article for litigation funding by Francis Kendall, vice-chairman of the Association of Costs Lawyers

We are five months into the compulsory electronic bill of costs and so far all is quiet. Obviously it will take time before cases affected by the change hit the courts, but research undertaken by the Association of Costs Lawyers has shown that many solicitors and judges were not ready for the new bill when it became compulsory in April and few are keen on it now. 

Lord Justice Jackson, who recommended its introduction, is confident that this will, in time, change. Speaking in March, he said it was “bound to save time and costs” and soon “people will be amazed that we had put up with the old paper-based bill for so long.” 

He added: “The current form bill of costs is based on a Victorian account book and makes no use of modern technology. The proposal for a new form electronic bill of costs have been long – too long – in gestation, but they will be implemented this year. 

“Practitioners will take time to adjust; there may be some teething troubles; there may be irate articles in the legal journals (with the usual friendly comments posted by readers). In the long term, however, the new form electronic bill of costs is bound to save time and costs. I predict that in three years from now people will be amazed that we had put up with the old paper-based bill for so long.” 

First a quick reminder: the new bill is required for all multi-track claims, except those in which the proceedings are subject to fixed costs or scale costs, where the receiving party is unrepresented, or where the court has otherwise ordered. 

It is in the form of Precedent S, although practitioners can use any other spreadsheet format so long as it meets the requirements of paragraph 5.A2 of revised Practice Direction 47. They can choose how to present any work done before 6 April 2018 – that is, in the old or new format – but any work done from today must be an electronic bill. 

But there is a get-out clause – either on application by the parties or of its own motion, the court can disapply the requirement for an electronic bill. With some judges yet to receive training and/or the technology to view the bill from the bench, we suspect that this could initially be a popular course. 

It is inevitable that the new bill will be a work in progress for some time – for judiciary, practitioners and the rule committee alike. The practice direction is likely to need updating quickly. 

Only 10% of the Costs Lawyers we polled said all the solicitors they dealt with were ready when the new bill came into force, compared to 56% who said none of them were. 

Asked what solicitors’ reaction had been since, half said there was either a lot of last-minute panicking (13%) or had asked the Costs Lawyer to sort it out for them (37%). One in six solicitors preferred to stick their head in the sand and just put off dealing with it. Just 6% of Costs Lawyers said their solicitors had managed a smooth transition to the new regime. 

Things were no better on the bench. Just 16% of Costs Lawyers reported that “some” judges were ready for the new bill, while only 5% found that the courts were “keen to get going” with it. Some judges would use their discretion to waive use of the bill for as long as they could, Costs Lawyers said, while others could not get going even if they wanted as they had still not received the training or technology required. 

It is perhaps no surprise that many solicitors are struggling to come to terms with the new bill of costs, with many yet to have either the technology or the time-recording processes in place. But the time will come, sooner rather than later, when they will literally pay the price for their failure to adapt. 

Most district and costs judges will not have yet dealt with an electronic bill, due to the time lag in them reaching court, which is fortuitous given some of the delays in providing training and technology. But both judges and lawyers will have to get on top of it – this is, without doubt, the future. 

With the culture of compliance that has sharpened since the Jackson reforms, I would not be surprised to see judges clamping down on those who wilfully ignore the electronic bill. 

There is clarity on one point, however. There was initial confusion over the need to file electronic copies of the bill at court when notice of commencement is served on the paying party. There were questions over this arising from the apparent tension between paragraphs 5.A4 and 5.1A of practice direction 47. 

5.A4 provides: “Where a bill of costs otherwise falls within paragraph 5.1(a) but work was done both before and after the Transition Date, a party may serve and file either a paper bill or an electronic bill in respect of work done before that date and must serve and file an electronic bill in respect of work done after that date.” (Emphasis added.) 

5.1A says: “Whenever electronic bills are served or filed at the court, they must also be served or filed in hard copy, in a manageable paper format as shown in the pdf version of Precedent S. A copy of the full electronic spreadsheet version must at the same time be provided to the paying party and filed at the court by e-mail or other electronic means.” (Emphasis added.) 

This led to questions on whether it was necessary to file an electronic bill at court at the point that the bill is served on the paying party, at the N252 notice of commencement stage or, as had been the case, when a hearing is requested by filing an N258 request for assessment and a fee paid. 

Stressing that this was just his personal view, the Senior Costs Judge, Andrew Gordon-Saker, told the ACL: “Electronic copies of the bill should not be filed at court when notice of commencement is served on the paying party. It is fair to say that you are not the first person to raise this, but for my part I think that the answer is tolerably clear. 

“PD 47 paragraph 5.2 continues to prescribe what should happen when the receiving party commences detailed assessment proceedings. There is nothing there about sending things to the court. 

“Paragraph 13.2 prescribes what should be filed at court when a detailed assessment hearing is requested. 

“Paragraph 5.1A simply provides that when you serve or file an electronic bill you must serve or file a paper version. Whenever you serve or file an electronic bill you have to provide the full electronic spreadsheet version by email or other electronic means. 

“The second sentence does not require the receiving party to file an electronic bill when it serves it, it merely indicates the means by which you serve/file the spreadsheet version. 

“Paragraph 5.A4 provides that when work is done before and after the transition date, you must serve/file an electronic bill for the work done after, but may serve/file either a paper bill or an electronic bill for the work done before. 

“As I read them, in none of these provisions is there a requirement to file when you serve (or vice versa).” 

The judge said the answer was to start with paragraphs 5.2 and 13.2 “and work backwards”. But he added: “There may, however, be a case for clarifying the second sentence of paragraph 5.1A if that is what is causing confusion.” 

For those practitioners yet to get on top of the new requirements, it is important not to panic or bury their heads in the sand.  The least they should be doing is downloading and playing with it. They need to upskill on basic Excel. 

Lord Justice Jackson’s long-term vision is that fee-earners will record their time and then press a button to send the bill off to the court. 

This “utopia” is probably a very long way away. Somebody is always going to have to monitor the data input and strip out those costs that aren’t recoverable. The theory behind the electronic bill is that it should be capable of being prepared directly from a firm’s case management system with minimal effort. This is an understandable aim. 

However, the reality is somewhat different. Some firms of solicitors were more prepared than others, with sophisticated systems already in place for recording work by phase, task and activity. Others continue to work with traditional paper files. 

In all cases, the ability to generate a bill of costs directly from a case management system is some way off. Issues such as client privilege, interlocutory costs orders and apportionments, among others, are likely to mean that it remains so for some time. 

It is inevitable that there will be teething problems – in all likelihood significant ones – with such a huge change to the world of costs. It happened before, with the Woolf reforms, and everyone survived. 

None of the problems will be insurmountable. It’s about getting the message out not be scared of this.

This article was first published in the September 2018 issue of Litigation Funding.

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