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Jackson's unanswered questions

Jackson's unanswered questions


Francis Kendall considers whether a reduction in the hourly rates for incurred costs on detailed assessment should also be applied to budgeted costs

Lord Justice Jackson cited the positive development of costs budgeting as the key reason for pulling back from the more radical end of possible recommendations on extending fixed recoverable costs.

But, more than four years in, there remain plenty of unanswered questions, with the complications added by incurred costs at the heart of many of them. Indeed, Jackson LJ recognised this in his report, saying the issue had been highlighted by both claimant and defendant lawyers, but that now was not the time to implement the solution.

He recorded that a review of 191 claimant and 183 defendant budgets showed that, on average, incurred costs represented 35 per cent of the former, and 18 per cent of the latter.He cited the Personal Injuries Bar Association’s “constructive” proposal that the judge at the CCMC should “positively [...] take into account the amount of costs already incurred when setting the budget for the future conduct of the case”.

Jackson LJ said he also saw “considerable merit” in Master Cook’s proposal that it might be appropriate to fix pre-issue and pre-budget costs. “Clearly any grid of fixed pre-issue and pre-budget costs would not suit every case. Therefore, Master Cook suggested that there could be a rule saying ‘don’t exceed £x without permission’.”

However, for various reasons, he said it was premature to take action on incurred costs at the moment. In the meantime, an issue that has raised its head has been whether a reduction in the hourly rates for incurred costs on detailed assessment should also be applied to budgeted costs.

Ruling in RNB v London Borough of Newham [2017] EWHC B15 (Costs), Deputy Master Campbell said this was a “good reason” to depart from the budget. To do otherwise would mean that the claimant would recover an hourly rate as set out in Precedent H for the budgeted stage “at a level that significantly exceeds the figure I consider to be reasonable and proportionate for the pre-budget stage”.

He explained: “If (as it is the case) the hourly rate is a mandatory component in Precedent H which is not and cannot be subjected to the rigours of detailed assessment at the CCMC (case and costs management conference), it makes no sense if it is automatically left untouched when the rates for the incurred work are scrutinised at the ‘conventional’ assessment.

“Such an approach would offend against the guidance given in Harrison at paragraph 44. Indeed, as [counsel for the defendant] points out, it is only on that occasion that a paying party has an opportunity to challenge the rate.”

This situation would be different if the court at the CCMC approved hourly rates “in terms”, he added. However, costs lawyer Michael Fletcher of Glaisyers Solicitors in Manchester has written about a detailed assessment he conducted in mid-August in which District Judge Lumb in Birmingham, sitting as a regional costs judge, expressly disagreed with the decision in RNB.

Fletcher said: “Judge Lumb held that to reduce hourly charging rates for budgeted costs to the same levels as those allowed for the incurred costs, thereby causing a potential departure from the budgeted phase totals, would be to second guess the thought process of the costs managing judge and would impute a risk of double jeopardy into the detailed assessment.

“The costs managing judge was not fixing hourly rates, but may have had regard to them when setting a reasonable and proportionate allowance for each phase of the budget. Absent cogent evidence to the contrary, the costs judge simply couldn’t know. The clear philosophy and guidance from the senior courts in Merrix and Harrison was to simplify and reduce the scope of detailed assessments. The ‘good reason’ bar was a high one.”

I have had similar decisions to Judge Lumb’s in the SCCO before the ruling in RNB, and it was an approach that seemed eminently reasonable. If you have a budget for a phase and end up within that budget, surely levels of resourcing (and therefore hourly rates) are irrelevant.

It is a truism that the hourly rates of the more senior fee earners are the main target of attacks on detailed assessment. Yet these are the lawyers who are able to complete a task in a quicker and more efficient manner – why should parties be punished for using them if they are within budget? Why should the paying party receive a windfall?Of course, it was Judge Lumb’s original, now-overturned ruling in Merrix which set that particular hare running, and it seems inevitable that this too will end up in the higher courts so watch this space.

Francis Kendall is vice chairman of the Association of Costs Lawyers and a costs lawyer at Masters Legal Costs Services