CJC Costs Review – budgeting and guideline hourly rates to remain

The Civil Justice Council (CJC) Working Group published its “Final Costs Review Report” this month, having initially been tasked by the CJC in early 2022 to take a  “holistic view of civil justice costs” in the light of the move to a digital justice system”. This work included a consultation which closed in December 2022 and broadly examined four areas: costs budgeting, guideline hourly rates (GHRs), costs under Pre Action Protocols and the consequences of the extension of fixed recoverable costs (FRC) due to take effect in October 2023.

The Working Group’s primary concentration was on the first two areas, costs budgeting and GHRs. We examine both the conclusions reached and the recommendations made by the Working Group.

Costs budgeting

The general consensus of the Group and those who responded to the consultation was that costs budgeting was “useful” as it brought the consideration of costs into the heart of the litigation process.

The final Report recommends that cost budgeting is retained, but suggests the piloting of certain changes upon how budgeting applies in practice – to ensure a sound evidential basis prior to wider implementation. Those changes include:

• For personal injury cases subject to Qualified One Way Cost Shifting (QOCS) the defendant should be excused the obligation to file a full costs budget – instead filing a Precedent H front sheet with the court and serving a copy upon the claimant solicitors.
• Separating out Directions and costs budgeting hearings. At present, most courts (with the exception of Sheffield), list cases for a combined Costs and Case Management Conference (CCMC) with an extended hearing time which it was felt had led to considerable listing delays.

The Group recommends adopting the example set by the courts in Sheffield in ‘decoupling’ – listing the Directions hearing first, followed by a costs budgeting hearing.

Additionally, the Group recommends allowing the parties more time to negotiate with a view to resolving issues before a contested hearing.

• Adopting a “costs budget light” for cases commenced under Part 7 on the Multi Track having a value up to £1 million.

It also recommends that judges conducting specialist lists (for example The Asbestos List) at the Royal Courts of Justice (RCJ) are consulted on costs budgeting proposals.

Guideline hourly rates (GHRs)

The Working Group in its preliminary report recommended changes to guideline hourly rates which broadly speaking increased the rates by between 20% and 25% for a variety of fee earner grades.  The rates were last formally reviewed in 2010.

Whilst noting widely divergent consultation responses, the Group concludes that GHRs are uplifted in line with the original recommendation, save that they are increased further by reference to the SSPI – a measure of inflation for the services sector.

Additionally, the group advocates:

• That a Working Group is established now with a view to agreeing an appropriate methodology which will form the mainstay of a review upon how GHRs are calculated –this to take place in five years time. It is recommended that the geographical differences currently seen in GHRs are examined alongside the increasing use of technology and digitalisation of the judicial system and whether this will/has led to cost savings. 
• That a clearly defined test is applied governing when parties are permitted to diverge from the established GHRs. The Group however fell short in agreeing how the test is defined, noting that responses varied from “circumstances where there is clear and compelling justification” to “circumstances where it is outside the notionally average case”.

Commentary

In the light of the Working Group’s Preliminary Report, its recommendations on retaining the principles of cost budgeting and guideline hourly rates are unsurprising.

The Working Group also makes several sensible recommendations on how budgeting should work more efficiently in the future which will benefit practitioners and in time will reduce court delays.

Disappointingly from a compensator’s perspective is their conclusion to “kick into the long grass” any formal review into the basis for calculating guideline hourly rates by a period of five years.

As we articulated in our response to the consultation, changes in technology, telephone and video conferencing and remote working have been in place even prior to the pandemic enforcing mandatory working from home. For personal injury cases at least, there is little or no justification for cases to be handled by London firms applying uplifted hourly rates. 

Solicitors practices from the start of the pandemic in 2020 have now for the most part followed other organisations in the services sector in reducing their physical footprint in offices – driving down rental costs which (after salary costs) form the largest overhead for any firm. The review into GHR methodology taking into account changed working patterns can and should be undertaken now and we see little or no justification for a delay of five years.