by Iain Stark
Chairman at Association of Costs Lawyers
We are more than three years into costs management and it is fair to say that lawyers are still a long way from getting fully to grips with the practice.
In his Civil Court Structure Review report in August 2016, Lord Justice Briggs said that, “depressingly”, there was no sign that it would produce “the large hoped-for falling off in the amount of post-trial detailed assessment”.
He said that this was down to the continuing need to assess costs incurred at the time of budgeting, the “substantial number of cases where reasons (which cannot be dismissed as fanciful) are advanced for departing from the court-imposed or agreed budget”, and the difficulties of marrying the budget to the point at which cases settle.
The results of a recent survey of members of the Association of Costs Lawyers pointed towards the same conclusion that behaviours have not changed as hoped. Just 2% said that they worked with solicitors who always stuck to their budgets. Some 72% said that solicitors “sometimes” went over their budgets, while 22% said that this always happened.
One reason may well be that budgeting takes place too early on in proceedings. Half (51%) of costs lawyers said that, instead of budgeting at the first case management conference as now, the hearing should be held later, once the course of the litigation is clearer.
In the meantime, solicitors should be updating their budgets as the case progresses and if required. However, judges have often complained that this rarely happens, and the survey shows this. Almost a third of costs lawyers (32%) said that they had never seen an application to update a budget, while only 18% reported that their budget was increasing.
Unsurprisingly, judges are part of the problem, as the success of costs management continues to depend very much on how enthusiastic the judge is about it. Indeed, a third of respondents agreed that “judicial inconsistency is killing it”.
The survey also backed up concerns expressed by Lord Justice Briggs about the Court of Appeal’s ruling in Sarpd Oil International Ltd v Addax Energy SA earlier this year. He suggested that the first case and costs management conference was the place to contest the reasonableness and proportionality of costs that have already been incurred, rather than just those to be incurred in the future. It had been thought that these should be left to detailed assessment at the end.
Four in ten costs lawyers said that the ruling had made the first conference much more contested and, as a result, significantly increased the amount of preparatory work. The same number said that there needed to be a rule change (something that is under consideration).
Of course, there could be several reasons why a solicitor goes over budget. It could happen as a result of a conscious decision in the interests of the client, even when they know that the extra expenses might not be recovered. Unexpected developments and uncertainty over when to seek to update the budget, or simply a decision to try and argue at assessment that there was a good reason to depart from the budget, could also result in overspend. Equally, some solicitors have simply continued not to engage properly with the process.
Whichever way you look at it, costs management is not working as well as it should. The principle of giving clients greater certainty of their likely exposure to costs is fundamentally right and it behoves solicitors, barristers, costs lawyers and judges to make it work.
The alternative, as laid out starkly by the senior judiciary recently in commissioning Lord Justice Jackson for another review, is fixed costs for cases worth up to £250,000 (a figure that covers the vast majority of litigation in England and Wales).
Better the devil you know? Maybe this is the shock solicitors need to get serious about costs budgeting. Costs lawyers stand ready to help them.
This article first appeared in the Practical Law Resolution blog on 8 December 2017.