Local Government - June 2009

Civil Litigation Costs Review – What’s In Scope?

Introduction
On the 8 May 2009, the preliminary report of Civil Litigation Costs was published by Lord Justice Jackson. The document invites comments by 31 July 2009 on a wide range of issues which arise in civil litigation. The document is intended to provide a basis for discussion during the consultation period, which forms phase 2 of the costs review and will include numerous meetings and seminars. Lord Justice Jackson will not make up his mind about any of the issues in the report until the end of the consultation period. Phase 3 will run from September – December 2009 and Lord Justice Jackson will consult with his team of assessors and will draft his final report. That report will make proposals for the reform (so far as appropriate) of civil procedure and of the costs rules in order to promote access to justice at proportionate cost.

Looking in detail at the preliminary report, it is clear that the guiding thread of the report is to deconstruct the layering of civil litigation which has increased the costs to the extent that they are now disproportionate. The report is very open-minded and even-handed and demonstrates that the review is very inclusive – nothing has been ruled in or out.

Lord Justice Jackson’s approach is to collect factual and anecdotal evidence of costs behaviours and then to set them against the law and practice. He proceeds to analyse the need for change – what is going well and what is going badly. He suggests how the consultation phase may progress, its structure and the questions he believes need to be answered. This will inform the solution which should drive the correct behaviours.

We have summarised the report below. Any comments in italics are our own observations, and not those of Lord Justice Jackson or his assessors.

1. The funding of civil litigation

1.1 Legal Aid

Three aspects of the legal aid scheme appear particularly relevant to the wider issues addressed in the report:

(i) Contingent funding. The way in which legal aid remuneration is heavily dependent on the outcome of the case, a system which is well established, may be an indication that there is nothing inherently objectionable in remuneration being payable dependent on results.

However, CFAs clearly create a more extreme form of contingent funding than remuneration in legal aid cases.

(ii) One way costs shifting. Legal aid costs protection made one way costs shifting the norm for most personal injury litigation for the best part of 50 years. In light of this it may be harder to argue that one way fee shifting is inherently unfair or undesirable. The right of successful defendants to recover costs from claimants in all categories of case is not sacrosanct and must be considered on its merits.

(iii) Proportionality. The legal aid costs benefit criteria, which enforce proportionality between costs and damages might have well suited mainstream personal injury claims.

The contrast between (a) the range of requirements for a case to receive public funding under the Funding Code and (b) the simpler requirement of good prospects of success necessary to launch a case on a CFA, is striking.

This suggests that it may be arguable that the recoverability of success fees and premiums has allowed litigation to move too far away from considerations of proportionality, which were central to almost all types of funding prior to April 2000.

Comments are invited in the second phase of this review relating to those aspects of legal aid which have a direct connection with costs.

1.2 BTE (sometimes referred to as ‘legal expenses insurance’)

Tentative conclusion. It is in the public interest to promote a substantial extension of BTE insurance, especially insurance in the category where insurers pay solicitors to act for the insured when a claim arises. The cost of litigation in any year by the few insured who need to bring claims will then be born by the many who do not.

The CLAF Group proposal merits serious consideration. The proposal is that compulsory BTE should be introduced, which would cover a wide range of accidents. The mechanism would be as follows:

(i) Motorists should be required to take out BTE insurance in addition to third party liability insurance. Such BTE insurance would cover themselves, their passengers and any pedestrians whom they might injure.

(ii) Employers, occupiers of business premises, operators of trains and others required to have public liability insurance should also be required to take out BTE cover in respect of personal injury claims suffered by themselves, employees, visitors, or customers.

(iii) Such insurance would cover legal expenses only, not damages. Claims would be supported by insurers, subject to a merits test.

(iv) BTE insurers will recover their costs, but no success fee or ATE premium, in respect of cases won. BTE insurers would pay the defence costs in respect of cases lost.

This is a proposal which merits consideration during Phase 2 and Lord Justice Jackson wants comments on the following:

i) Whether stakeholders and court users agree with the above analysis.

ii) Comments on the feasibility and merits of the CLAF proposal.

iii) Suggestions from the insurance industry and others as to how a substantially more extensive take up of BTE insurance may be promoted.

1.3 Funding vehicle

The retraction of legal aid, either CFAs or some other system of payment by results (contingent fee agreements, CLAF, SLAS, third party funding agreements etc.) must exist in order to facilitate access to justice.

The underlying principle of payment by results has been absorbed into our litigation culture over the 14 year period since 1995.

The real issue, therefore, is how CFAs or alternative “no win – no fee” arrangements should be structured, not whether they should exist. We should be aiming so far as possible for structures which provide incentives:

(i) For lawyers to get the best possible results for their clients, whilst discharging their duties to the court and to other parties;

(ii) For clients to propose or accept reasonable settlements; and

(iii) For all parties to keep costs down to proportionate levels.

During phase 2 of the review, further comments and information are invited on the following questions:

(i) Are CFAs in their present form satisfactory?

(ii) If not, what reforms might be made in order to create appropriate incentives for all of those involved in the litigation process?

(iii) What is the impact of CFAs on particular categories of litigation (beyond the impacts already identified-see chapters 25 to 39).

1.4 SLASs and CLAFs (Supplementary Legal Aid Scheme and Contingency Legal Aid Fund)

Self-funding mechanisms remain an interesting option for future reform. Their viability is however heavily dependant on:

(i) Any alternative funding options available;

(ii) The underlying costs regime.

During Phase 2 of the Costs Review the CLAF Group are tasked with developing proposals in detail. Comments are invited from all court users and stakeholders on:

(i) The CLAF Group’s proposal for CCFs;

(ii) Any alternative proposals for setting up a CLAF or SLAS;

(iii) Any objections to setting up a CLAF or SLAS

1.5 Contingency fees

There have been a number of calls in recent years for the ban on contingency fees to be lifted. The case for the introduction of contingency fees in England has been developing slowly and is now a live topic. Views are requested on the following questions:

(i) Should solicitors and counsel be permitted to act on contingency fee agreements?

(ii) If so, and if costs shifting remains, what form should that cost shifting take? In particular, should the losing party pay the additional element of costs (i.e. the amount by which the contingent fee exceeds costs assessed on the conventional basis)?

(iii) If contingency fee agreements are permitted, what form of regulation should be imposed?

(iv) If the concept of lawyers working on contingency fees is unacceptable, do the considerations militate in favour of setting up a CLAF or a SLAS? (see chapters 18 and 19)

2. Should there be a comprehensive fixed costs regime in the fast track?

2.1 A fixed costs system The assessors voted unanimously in favour of trying to achieve a fixed costs system in fast track cases.

During Phase 2, comments have been invited upon seven matters:

(i) Whether some form of matrix of staged fees is the preferred solution.

(ii) Whether there are other types of case that should be included in addition to those in the illustrative matrix at Table 22.2 and at paragraph 2.8.

(iii) Whether there should be more or fewer stages in the matrix, by reference to the two examples at Tables 22.2 and 22.4.

(iv) Whether the proposed “rules” adequately address the additional factors that would need to be built in.

(v) Whether it is agreed that there should be a reduction for early admission of liability.

(vi) How any counsel’s fees (other than in respect of advocacy) should be accommodated in a fast track fixed costs regime.

(vii) What steps might be taken, with the assistance of the Civil Justice Council, to fix expert fees in fast track cases.

Additional data will be sought during Phase 2. See section 2, in particular paragraph 2.15, at Part 5, Chapter 22. Lord Justice Jackson requests the co-operation of both insurers and claimant firms in this regard.

It is possible to devise a fair system of fixed costs for all cases within the new fast track limit.

The first and fundamental question (assuming that fast track costs become fixed) is whether all costs above the fast track should continue to be at large. In other words:

(i) Should the successful party continue to recover its reasonable costs as retrospectively assessed and subject to the restrictions currently contained in the costs rules?

(ii) Alternatively should some limit be placed upon recoverable costs, so that:

(a) The winning party bears more of its own costs;

(b) The burden on the losing party is reduced; and

2.2 High value business claims. – Costs on high value cases are working quite well and there is no reason to alter the present regime.

2.3 Small business disputes and disputes between SMEs. - some form of fixed costs or similar regime may well suit the best interests of court users in this category of litigation.

2.4 Personal injury claims above £25,000. - the present regime of recoverable costs being at large should continue.

2.5 Assessment of recoverable costs

There are three possible approaches to assessing recoverable costs above the fast track:

(i) Introduce some form of fixed costs, tariff costs or predictable costs across the board.

(ii) Leave all costs to be assessed retrospectively by reference to the amount of work reasonably done.

(iii) Divide litigation into categories, with a fixed costs or similar regime for some categories only.

Which of these approaches should be adopted is a question of policy. This question must addressed having regard to the needs and interests of court users generally. Comments are sought from not only the lawyers but the clients who actually have to pay the costs.

Finally, if fixed costs are rejected as a way forward, Lord Justice Jackson should be interested to hear views concerning benchmark costs.

3. What should be the upper limit for personal injury cases on the small claims track?

One method of addressing the disproportionate costs in lower value personal injury claims would be to increase the small claims limit for such claims.

There are essentially four options to consider:

an increase to the small claims limit from £1,000 to £5,000;
a lesser increase to the limit (e.g. an increase to £2,500);
an increase in line with inflation; and
no increase to the limit

Lord Justice Jackson wants to hear the views of all those concerned on these options and the possible safeguards set out at Part 6, Chapter 24, Para 4.2.

4. Should there be one way cost shifting for personal injury claims?

In Phase 2 views and statistical data relating to the issue of one way cost shifting are invited.

Any new claims process now being developed will require amendment, if one or more of the following reforms are the result of the present review:

The upper limit for personal injury damages in the small claims track is raised above £1,000.
Success fees and/or ATE premiums cease to be recoverable as costs.
A comprehensive fixed cost regime is introduced for all cases in the fast track (as recommended by Lord Woolf thirteen years ago, but not yet implemented).

Comments are requested from all concerned on three matters:

(i) How the proposed new claims process would be affected, if any of the reforms canvassed in this report were to be adopted.

(ii) How the new claims process might be built upon, in order to embrace all personal injury claims within the fast track limits.

(iii) Any other constructive suggestions for co-operation between claimant and defendant solicitors, which might facilitate the swift and fair resolution of that vast mass of low value personal injury claims where:

(a) There is no defence on liability and

(b) Quantifying damages is straightforward.

5. Assessment of general damages

Software used by insurers is being considered.

If it is the case that our present system of evaluating personal injury claims is (a) expensive and (b) sometimes resulting in under-settlements, then it may be reasonable to look towards radical reform.

If as a result of future reforms to cut out “middlemen”, medical reporting organisations (“MROs”) no longer function, there is no reason why individual general practitioners and consultants should not write reports in a format compatible with whatever software system is then in operation.

The proposal upon which comments are invited is focused upon the use of such a software system for assessing general damages in personal injury claims falling within the small claims track and fast track (i.e. all claims up to £25,000 in value). Higher value claims are less susceptible to a mechanistic method of valuation.

Nevertheless use of a points-based system has proved effective overseas, even in relation to serious personal injuries claims. It may, therefore, be possible at a later date to develop a points-based software system for achieving at least a preliminary valuation of general damages in the higher value cases.

6. Housing claims

There is no general problem of disproportionate costs being run up in housing cases.

7. Disclosure

Lord Woolf’s reforms were designed to limit the scope and consequently, the costs of disclosure. But, the cost centre of disclosure has spiraled over the last 10 years.

7.1 The Issues - Those being considered during Phase 2 include:

Is the current scope of standard disclosure the right benchmark?
How can the desire to do justice in all cases be balanced against the need to keep costs proportionate and reasonable?
How can the cost centres be reduced, and not merely shifted from one party to another?
Can “justice” be achieved even with a more restrictive scope of disclosure?
Should there be sanctions for those who provide too much and/or duplicative disclosure?
In relation to cases with a substantial amount of e-disclosure, how can parties be made to co-operate from the outset in determining how the information should be assimilated and what searches should be run?
Is there a way to condense the various processes so that the documents are not reviewed en masse so many times?

7.2 Specific disclosure applications - The burden of proof in specific disclosure applications should be reversed.

One solution which has been suggested is that the costs burden of specific disclosure requests should be shifted. If a specific disclosure application is successful, the costs of the resulting disclosure exercise should be met by the requesting party unless documents of real value emerge.

This technique has been used on occasion and as flexibility already exists within the rules, this may be an approach which should be considered by judges, but which need not be entrenched by rule changes.

8. Controlling the costs of litigation

8.1 Disclosure - Consideration of the burgeoning costs of e disclosure /disclosure generally and how witness statements can take a life of their own in Litigation. It is suggested that cost sanctions be applied if evidence requested, collated is irrelevant or otiose. (Page 407 -Ch42- 6.2)

This may mean imposing costs sanctions on any party that adduces evidence that is irrelevant or that does not go to the facts in issue. In particular, in appropriate circumstances, it may mean the use of wasted costs orders against the legal profession where the rules have not been adhered to. If such an approach were adopted (unpalatable though that may be for both judges and lawyers), it would not take long for a significant reduction in irrelevant content to be effected.

8.2 Expert evidence

Expert evidence has been identified in the Phase 1 submissions as a substantial, and ever increasing, cost of litigation. All those who addressed expert evidence within their submissions were fairly critical, and many appeared to think that expert evidence is more of a costs burden than witness statements. However, the majority of submissions were silent on expert reports. The criticisms made in the submissions were:

A failure to identify the correct issues (presumably, this means on the part of the lawyers)
The perceived difficulty for a judge to rule that a claimant cannot rely upon evidence obtained prior to the first CMC
An overwhelming failure to impose the use of a single joint expert (but surely this has come about by the application of the pre-action protocol in allowing the claimant to obtain the report pre-issue?)
Delay caused by unrealistically short deadlines in the timetable
An inability to contact the opposing expert
Prevaricating tactics in relation to the experts' meeting
An inability for the parties to agree expediently an agenda for the experts' meeting;
The expense of obtaining the attendance of an expert at trial (this will be looked at in chapter 44)

More work will be carried out in respect of the issues relating to experts in phase 2

(Page 412 section 10.5)

One issue, upon which comment and debate is welcomed during Phase 2, concerns the timing of instructing experts. In particular, could the cost rules be recast in a manner which would (a) encourage parties to cooperate in relation to appointing experts and (b) encourage the appointment of experts at an appropriate time?

The working paper concludes that it is clear, both from experience and from submissions received, that expert evidence makes a major contribution to the costs of civil litigation. ....... The ultimate objective, which is easier to state than to achieve by rule change, is to obtain at proportionate cost expert evidence truly focused upon what (in the absence of settlement) the judge must decide (Page 415 -14.3 )

8.3 Case management- The majority view seems to be that pro-active management is the key to proportionate costs i.e. prevent the costs from being incurred in the first place.

Suggestions as to how this can be achieved include:

More effective use of sanctions and greater use of interim payments of costs
Greater examination of prospective costs. Potentially by more frequent reference to costs estimates (and possibly, a requirement for more detailed costs estimates)
Increased use of specialist judges who, due to their expertise in dealing with a specific type of case, are more likely to intervene robustly to control costs.
Those who deal with specialist judges note a marked difference in case management
Simplification of the rules and processes
Greater control of the use of experts (See Ch 42)
Where a party fails to control its costs that party could be prevented from recovering those additional costs from the other side (page 417)

Delay = Cost - Possibility of getting tough on defaulting parties- (Page 432)

Another possibility would be a declared change of judicial policy that as from a stated date, say 1st January 2010, non-compliance with deadlines or due dateswould no longer be tolerated, save in exceptional circumstances.

There would thenbe a series of “hard cases” in January 2010 where parties found themselves struck outor unable to rely upon late evidence etc., and thus thrown back upon their remediesagainst their own lawyers.

This may rapidly lead to a tightening up of practice on thepart of all litigators, for the benefit of civil litigation generally. This is not a reform which is positively advocated, because of the hardship which it would cause toindividual litigants and lawyers. However, it is one possible way of dealingwith the concerns expressed in the Phase 1 submissions.

8.4 Resourcing of Courts - Although the organisation of the Court Service lies outside the terms of reference, better resourcing of the civil courts is one direct way to reduce litigation costs. (Page 436)

8.5 ADR - In the context of business disputes the parties and their advisors are well aware what ADR has to offer. If they want to mediate they will do so. If, on the other hand, they desire the decision of the court, then that is what they are entitled to receive, without being forced to incur fruitless mediation costs.

Away from business litigation, however, parties are less well informed about the benefits of ADR and there is a need for better information and education about its benefits. Even there, however, if reluctant parties are forced to mediate, the outcome may be wastage of costs rather than settlement.(Page 444)

8.6 Trials - In respect of fast track trials, it is essential that the fixed costs regime be maintained. If all fast track fixed costs are reviewed every year (see ch 22) this should meet most of the concerns which have been expressed.

8.7 Cost capping- Costs capping cannot be used in isolation to control costs, tempting though this may seem to those who throw up their hands in horror at the present levels of costs. Costscapping may be used as an adjunct to a wider exercise of costs management in thosecases where it is appropriate for the court to undertake costs management.

Otherwise, however, costs capping should be reserved for exceptional circumstances, as currently prescribed in CPR rule 44.18 and section 23A of the Costs Practice Direction. Costs capping must not be used as a shortcut or as treated as a sword to cut through the Gordian knot of civil costs. (Page 466)

8.8 Success fees and ATE premiums - what may work if they are abolished?

If success fees and ATE premiums cease to be recoverable, then the question arises as to how the interests of individual claimants (most of whom could not sensibly afford the costs of litigation) might be protected. In the field of personal injury litigation, possible measures might include:

(i) Introducing one way cost shifting.

(ii)Capping the proportion of damages which the claimant’s lawyers might take in respect of success fees.

(iii)Providing that no element of damages referable to future care costs could be subject to any deduction.

(iv)Raising the level of damages. This might be perfectly feasible if some of the huge transaction costs could be reduced. (See Ch 26)

(v)Introducing a CLAF or a SLAS for personal injury claims (See ch 18 and 19)

In areas away from personal injury litigation similar measures might need to be considered to promote access to justice, if ATE premiums and success fees become irrecoverable. At the moment CFAs are seldom used in Commercial or Mercantile litigation. Therefore, special measures would probably not be necessary in that area, in the event that success fees and ATE premiums become irrecoverable.

Professor Paul Fenn points out that if success fees and ATE premiums become irrecoverable (as they were before April 2000), then market forces would once more come into play. Claimants would have incentives to shop around for low success fees and low ATE premiums. “While there might be costs then faced by claimants to come out of their damages, it is possible that the increased efficiency of the system could lead to reductions in these costs as well as knock-on reductions in liability insurance premiums.”

8.9 Review- During Phase 2 of the costs inquiry, Lord Justice Jackson invites further evidence, data and comment upon:

(i) The appropriateness of the levels of success fees currently set in different types of litigation.

(ii)The appropriateness of the levels of ATE premiums currently charged in different types of litigation.

(iii)Whether success fees and ATE premiums should continue to be recoverable under costs orders.

(iv)If not, (a) what steps should be taken to provide for the funding of personal injuries litigation; (b) what other steps should be taken to preserve access to justice for those who currently depend upon success fees and ATE insurance.

9. Costs management

9.1 A foreign concept? - Currently a foreign concept in CPR - active costs case management is clearly and squarely on the agenda to control and contain costs being incurred throughout the life of a case.

The introduction of the new concept of “Costsmanagement orders" envisages the Judiciary using their hitherto dormant case management powers at key interlocutory stages. Using these tools to require proper and meaningful costs estimates be served ,to cap where appropriate and to demand practitioners budget to comply with professional obligations (Rule 2-02)and to provide clients with greater certainty . By setting price tags for stages of cases all parties, including the Court, focus on the need to control cost throughout a case.

If successful that approach could be the death knell to detailed assessment after the event. It could usher in an era of costs budgeting policed by opponents and enforced by courts.

There is no mention made in CPR rule 1.4 ofcosts management. Indeed, unlike case management, costs management is not a concept that is expressly recognised by the CPR. Costs management is concerned with ensuring that the incidence of costs is actively controlled by the court as the case moves from inception to its conclusion.

Successful costs management might however, also have a part to play in avoiding detailed assessment hearings in all but the most exceptional cases. Specific approval

or sanction of the incidence of costs at stated or approved levels throughout the life of the case ought to have the effect of removing or reducing the need for an ex post factoexamination of whether the costs incurred should have been incurred or werereasonably incurred.

9.2 Breakdown of costs estimate. The costs estimates provided by each party must in practice be based upon a detailed budgetprepared by the solicitors.

9.3 What does costs management entail?

An analysis of the above rules and practice directions reveals that currently the court may make the following costs management orders:

(i)Require a party to file and serve an estimate of costs in the Form H at any stage of the proceedings. (CPD section 6/CPR rule 3.1(3) (ll). (It is not clear whether this includes pre-litigation cases – it would be desirable to have some mechanism for exchange of costs estimates prior to litigation ensuing so that budgeting can commence from day 1 of a claim and not be left until the court becomes involved, which can be over 3 years later)

(ii)Take the amount of an estimate into account when making case management orders. (CPR rule 1.2).

(iii)Make case management decisions with conditions attached including conditions as to costs. (CPR rules 3.1(2)(m) and 3.1(3)(a)).

(iv)Require costs estimates served in the proceedings to be provided to the client. (CPD section 6.4(b)).

(v)Limit prospectively the amount of recoverable costs for a given step in the proceedings. (costs capping).243

(vi)Retrospectively limit a receiving party to an estimate of costs that he has previously provided if the costs exceed the estimate by 20% or more, where the paying party has relied on the estimate or where no satisfactory explanation is given. This is certainly the case in the vast majority of all case management hearings.

At least they should be based upon a detailed budget.The Senior Costs Judge advised the assessors that on occasions this appears not to have been done. (See chapter 45)

Costs Budgeting– (See Page 391) What is costs budgeting? Costs budgeting is not a term found in the CPR. It is a term that has been derived from consultation papers and reviews that have taken place over the past decade.

The essence of costs budgeting is that the costs of litigation are planned in advance; the litigation is then managed and conducted in such a way as to keep the costs within the budget. Professor Zuckerman has written extensively about the benefits of controlling costs before they are incurred, rather than simply assessing them afterwards.

The way forward? - Costs management – a form of project management. In a very instructive article entitled “Predictability and Budgeting”, Professor John Peysner sought to introduce the concept of project management into the litigation arena.

He pointed out that project management involved a defined project and the teamwork necessary to achieve the project. He observed that a “project” was a defined task with a beginning and an end, made up of a series of separate activities, each of which absorbs time and money, but which can occur in parallel or subsequently. He concluded that this was akin to litigation and as such litigation was suitable for project management.

Professor Peysner observed that the creation of project management tools for the litigation project did not need to be highly technical. He concluded that the key was to break down the steps in the project, for example taking witness statements, attaching a price or cost to the step by using average hours from a database, multiplied by an appropriate fee earner rate. He pointed out that modern case management systems produce this type of information automatically. These discrete steps could then be aggregated to produce a complete schedule. At the end one would be left with a costed overall project plan.

One possible approach. Through an application of a combination of the court’s powers to require costs estimates to be provided at regular intervals, alongside the exercise of the more exceptional powers bestowed on judges to cap costs, the court retains a very wide armoury of possible orders or approaches that it can take to costs management in any given case.

It would be open for example, even under the existing rubric of the CPR, for the court to require parties to file detailed costs estimates or budgets at regular intervals during the proceedings. They could be provided at the following intervals:

(i)At the outset with the claim form;

(ii)At the first and all subsequent case management conference hearings;

(iii)At all interim hearings;

(iv)At trial.

Indeed, in some cases it may be appropriate for costs estimates/budgets to be filed and served at fixed intervals (e.g. every six months) throughout the life of a case from inception to the final hearing.

Taking costs management one stage further, it would be possible to develop the proposals discussed above by making it the norm for the court to cap the costs of each stage of the litigation process. So when giving directions for disclosure, service of witness statements, service of expert reports etc., the court would attach a price tag to each activity. These price tags could either be agreed by the parties or fixed by the court after argument.

The maximum recoverable cost of each stage of the litigation would be that specified by the court in advance. If this course were adopted, there would need to be radical revision of the present cost capping rules.

9.4 costs management and its application.

Some civil actions will be more obviously suitable for case management. In particular:

(i)Small claims track: Costs management will obviously not feature here where there is no entitlement (other than in rare cases) for the inter partes recovery of costs.

(ii)Fast track cases: If costs are fixed for fast track cases, the need for costs management will evaporate.

(iii)Multi-track cases: Multi-track cases are an obvious candidate for the greater use and application of costs management. Each case will dictate its own timeline, but across the board there ought not to be any good reason why budgets could not be exchanged at every case management hearing. At all case management hearings costs management orders of the kind envisaged above might be considered.

(iv)In the specialist courts, especially where cases are managed by a single judge from beginning to end, the full panoply of costs management may well be appropriate.

In relation to the specialist courts, the needs of the users of each court would have to be considered separately. From all the indications that Lord Justice Jackson has received to date, it seems that costs management would have no place in the general run of cases in the Commercial Court.

(v)Cases involving litigants in person. Separate consideration may be given by the court to a case where one or all of the parties are litigants in person. Where both parties are litigants in person costs management is unlikely to be an issue for the court. Where one party is a litigant in person and the other is represented by solicitors, there would seem to be no good reason why the legal representative should not provide costs estimates/budgets as part of the court’s desire to costs manage the case.

The following issues arise for further consideration and consultation during Phase 2 of the Costs Review:

(i)Should costs management become a feature of or adjunct to case management?

(ii)Should section 6 of the CPD or any equivalent be “elevated” to a rule?

(iii)Should those provisions (whether in the rules or in a practice direction) be strengthened, to give the court greater power to manage and control costs?

(iv)What further amendments are required to the rules to enable the court to carry out effective costs management?

(v)What improvements, if any, should be made to Form H? In particular should a detailed breakdown of costs estimate/budget be required?

(vi)Should the more Draconian form of costs management canvassed be introduced for any categories of litigation, e.g. business disputes.

10. The assessment of costs

10.1 - Summary assessment

The summary assessment of costs is not an easy subject to address given the strongly held and polarised views on the issue.

Option 1: make no change. It is not the function of this review to make change for change’s sake.

Option 2: abolition. Instead of summary assessment, judges could be encouraged to order (where appropriate) the paying party to make an interim payment on account of costs. The outstanding balance of any costs would then be agreed between the parties or assessed by post-trial detailed assessment.

Alternatively, the judge could make a provisional assessment of, for example, 70% or 75% of the costs claimed at the hearing.

Thereafter, that assessment becomes final, unless either party requires a detailed assessment. If a detailed assessment is required, whichever party does worse than the provisional assessment bears the costs of the detailed assessment.

Option 3: restructure. Revise the rules governing its use by redrafting them to encourage judges to only consider summary assessment where: (1) they have sufficient expertise (including the relevant training); (2) there is sufficient time available to undertake the assessment properly; and (3) all those involved in the summary assessment have the necessary information and have had sufficient opportunity to consider it.

Possible revision of the Mars guidelines so that consideration be given to modifying the guidance given in Mars (UK) Ltd v Teknowledge Ltd [1999] 2 Costs LR 44. This guidance has been followed in a number of later decisions and has the effect of restricting the amount of an interim payment on account of costs. One possible option would be for the interim payment to be, not a conservative sum which will inevitably be exceeded on detailed assessment, but instead the judge’s best estimate of the likely final figure less a modest discount of, say, 10%. An interim payment on this basis may be more likely to promote settlement, whilst safeguarding the positions of both parties. If the judge has fallen into error and the solicitors cannot agree the correct figure, they can still go to detailed assessment.

10.2 Detailed assessment

It is not working.

For fast track - If a matrix, scale or tariff is in place for fast track cases there is no need for points of dispute or any reply. An escape clause enabling a receiving party [or paying party] who feels that the scale allowance is too low [or too high] to apply to the court for a detailed assessment subject to a costs risk, e.g., if the assessment does not result in an increase [or decrease] of 20% or more the party applying will bear the costs of the detailed assessment.

Limit the length of points of dispute - or at least to limit them to points of principle rather than quantum.

Compulsory offer procedure - There should be a requirement that the paying party should make an offer in respect of the costs at the same time as serving points of dispute. Where the points of dispute assert that no costs should be payable, e.g., because of a breach of the CFA Regulations, a provisional offer should be made on the basis that the preliminary issue is decided in favour of the receiving party.

There appears to no reason why Part 36 should not apply to detailed assessment proceedings

Disclosure - The law relating to disclosure on detailed assessment is settled. Query whether any change is necessary.

Time for appeal - It is suggested that the time for appeal should run from the conclusion of the final hearing (not the issue of the final certificate).

Provisional assessment - (could be reintroduced) For bills of up to say £50,000 it may be possible to have a system of provisional assessment whereby the costs officer considers the bill and supporting papers in the light of the points of dispute. A provisional view can then be taken and parties notified of the provisional decision. If either party is unhappy with the provisional assessment the matter can then be listed for hearing. In respect of bills up to say £10,000 it might be possible to deal with these without a hearing.

Costs of detailed assessment hearing - The decision in Crane v Cannons Leisure Centre [2007] EWCA Civ 1352; [2008] 1 WLR 2549 means that on detailed a success fee is recoverable at the same rate as the substantive action. This could be reviewed. Assessors have advised (and Lord Justice Jackson agrees) that this would probably require primary legislation.

Hourly rates - Somewhat disturbingly these seem up for discussion. Question from a Defendants perspective -This could only be merited if additional liabilities were excluded.

One option would be to revert to the pre-1999 regime whereby hourly rates have to be justified by the receiving party, by reference to the “A” and “B” factors formerly used. This would entail that more attention would be paid to CPR rule 44.5(3) than is currently the case. An alternative option would be for the ACCC to set guideline rates for detailed assessment. These could either be the same as or alternatively more detailed than the guideline rates for summary assessment. Whichever option is adopted would, it is submitted, be preferable to the present situation, whereby guideline rates expressly limited to summary assessment are in practice and by default used for detailed assessment.

Conclusion
This report will, we believe, "quicken the pulse" for all stakeholders in this debate and create an impetus towards an agenda for change. Without getting into the realms of hyperbole, the Review has the potential to initiate a seismic shift in Civil Litigation much the same as Lord Denning suggested with the Treaty of Rome where he referred to it as an “incoming tide. It flows into the estuaries and up the rivers”.

The question arises, do we want to hold it back or guide it to where it is needed? If you wish to discuss any aspect of Lord Justice Jackson’s report or would like guidance as to how the reforms may affect your business, please contact Rob Williams (Partner – Costs) at rob.williams@weightmans.com or on 0151 242 7968, Howard Dean (Partner – Costs) at howard.dean@weightmans.com or on 0151 227 2601 or Ken Slade, Andrea Furmedge and Michelle Campbell in our best practice team on 0151 227 2601.

Rob Williams and Howard Dean, Parnters, Weightmans LLP