Link costs budgeting with case management

At the recent Civil Justice Council conference, Lord Justice Jackson highlighted the problem
of judges severing costs management from case management, often having the two hearings some time apart.

The problem is threefold, as a recent case highlights. At the first hearing, the court ordered the parties to file and exchange costs budgets one month later. The matter was listed for a further hearing four months thereafter where, if the budgets could not be agreed, the court would consider making a
costs management order.

Further directions were
given including disclosure, inspection, the exchange of witness statements and the exchange of expert evidence,
all to be done before the
next hearing.

The first problem relates
to the accuracy of the budgets by the time of the next hearing.

Precedent H contains two columns for each phase of
the budget. One column is for ‘incurred’ costs, which are those that have been incurred by the time of preparation of the budget. The second column is for ‘estimated’ costs, those that are yet to be incurred.

The first problem with the order made by the court is that by the time of the next hearing much of the work that would have been placed in the ‘estimated’ column will have become ‘incurred’ costs as the work will have been completed, such as work in the phases for disclosure, witness statements and expert reports.

Precedent Hs prepared, by the time of the next hearing, will no longer be accurate as the figures for the ‘incurred’ costs will have become too low and for the ‘estimated’ costs too high.

It is not simply an issue of categorisation, which is where the second problem arises.

The rules relating to costs management state: “As part of the costs management process the court may not approve costs incurred before the date of
any budget.”

Cost management orders
are concerned with costs ‘to
be incurred’. They do not retrospectively govern costs
that have already been incurred.

In this example, by the time the matter next comes before the court, much of the work
on the claim will have been undertaken and will have become ‘incurred’ costs, over which the court has no control in terms of costs management.

Simpler task

Any costs management order will be limited to costs not yet incurred. In this case, it will be little more than the trial costs
in respect of which the court
can make a costs management order. Costs budgeting would no doubt be a simpler task if it was limited to trial costs alone, but that is not its purpose.

The third problem stems from a failure to appreciate the proper relationship between case management and costs management. Lord Justice Jackson’s preface and guide to the civil justice reforms in the White Book 2014 states: “when making case management decisions the court will have regard to any available budgets and will take into account the costs involved in each procedural step.

“When a judge directs parties to undertake tasks, it is obvious good practice that the judge should appreciate the costs consequences of what he/she
is ordering.

“The court should not generally compel parties to incur disproportionate costs in the furtherance of their litigation.”

Where a budget appears disproportionate to the value
of the claim, the courts are not meant to just arbitrarily slash down the amounts sought.
They are meant to consider
how the directions can be altered to reduce the work required by each party, such
as by limiting the number of experts or restricting the
nature of disclosure.

By issuing directions in advance of considering the budgets, this becomes impossible. By the next hearing, it will be too late to limit the scope of the expert evidence, witness statements or form of disclosure. The work will already have been undertaken and the associated costs incurred.

The importance of linking costs budgeting with case management was emphasised
in the limited judicial training given in advance of the
Jackson reforms.

Unfortunately, it does not appear the message has been fully taken on board. SJ

Simon Gibbs is a costs lawyer at Gibbs Wyatt Stone

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