28 July 2022

Back

Costs management may not be loved, but it’s better than fixed costs

Professor Dominic Regan reports from a Civil Justice Council meeting on its costs review and predicts where the wind is blowing for budgeting

Professor Dominic Regan

Everyone will be aware of the consultation about aspects of costs published by the Civil Justice Council on 30 June. On the agenda are guideline hourly rates, pre-action costs, fixed costs and costs management.

A meeting was rapidly convened to take soundings and I attended, with over 100 others, on 12 July. Robert Wright, the lead civil servant in the Ministry of Justice, confirmed to me that the new fixed costs rules will indeed be implemented in April next year. Ever helpful, he told me that there is no government appetite to reform the Damages Based Agreement Regulations.

In this briefing note I want to concentrate on budgeting reform. This is of immediate importance for those in the costs profession.

The consultation paper, which is succinct and brilliantly drafted, frankly accepts that all is not well. It reports that some judges believe that provincial budgets are mean compared to those set in London. One option mentioned is nothing less than the outright abolition of costs management.

One solicitor at the forum asserted that budgeting had driven up costs without any apparent benefit. The conundrum here is that there are no figures to indicate what the costs of a case would have been had it instead been left to detailed assessment alone.

In Smith v W Ford & Sons (Contractors) Limited [2021] EWHC 1749 (QB), Master Davison expressed concerns in strong terms: “QB masters, Chancery masters and costs judges do not necessarily share this defendant's expressed confidence that costs budgeting controls costs better, or more effectively, than detailed assessment. This is a large topic and a complex and somewhat sensitive issue. The present hearing is not, perhaps, the forum to debate it at any length.”

We will never know how many masters and judges share his scepticism.

Master Shulman, who chaired this session at the meeting, declared that, whatever happened, she would always want to know at the outset of proceedings how much had been spent and what future expenditure was proposed. In her world, there would be no return to the old days when costs came as a surprise or shock at the conclusion of a dispute.

Those of you who attended the ACL conference in London last November will vividly recall the Master of the Rolls, Sir Geoffrey Vos, describing a case and costs management hearing in a clinical negligence action. He was bewildered as to why the costs of the defendant were being addressed at all given that qualified one-way costs shifting annihilated recoverability. I anticipate that the days of defendants being required to budget in injury and clinical negligence cases are numbered.

A simple show of hands towards the end of the session favoured the retention of budgeting. Several delegates spoke from the floor. One defendant solicitor thought that the obligation to advance figures for review by the court was helpful and introduced a sense of realism early on.

Those in the costs fraternity were understandably perturbed at the thought that a significant source of work might vanish. Looking back to his 2010 report, as I regularly do, I noted that Sir Rupert Jackson gave the profession a stark choice when it came to costs management, something he believed essential. Either one could budget or else impose fixed costs.

There was a palpable terror in the audience. Budgeting was preferable because each action was priced individually. A fixed costs matrix is ‘one size fits all’. Far better to enjoy the potential leeway that a budget brings.

I do believe that budgeting will survive but adjustments are likely next year. The Master of the Rolls is at one with the late Steve Jobs, whose guiding principle was ‘make it simple, really simple’. No one of sound mind can honestly assert that costs management is simple.

You have until 30 September to submit your views to the Civil Justice Council. I implore you to do so. Who knows more about this subject than those who construct budgets? There is no need to write an essay. If you can think of ways to improve the practice, and I am sure you can, then share your wisdom. A few pithy sentences will do the job.

There are to be three online open meetings in September to further sound out the profession. Details will be published here, where you will also find the consultation.