Litigation costs: Getting more for less

The costs of litigation remain a major issue almost 12 years after the release of the Right Honourable Lord Justice Jackson’s review. Various reforms have sought to address costs, such as the introduction of costs management and the extension of fixed recoverable costs.

Specific aspects of the litigation process have been targeted due to costs concerns, such as the disclosure pilot, shorter trial scheme and rules on trial witness statements in the Business and Property Courts. 

These show a desire to progress reform of the justice system. However, these all start from the premise litigation should be avoided, due to implications for the rule of law. Although there are good policy reasons for wanting to avoid a litigious culture, parties should feel comfortable they have an effective means of having their legal position determined. Dispute resolution has a value as an end in its own right, but needs to match the available resources to make it viable.

Litigation as last resort

Parties want to avoid disputes because they can be expensive, inconvenient, stressful and time-consuming. It is therefore understandable for the Practice Direction – Pre-Action Conduct and Protocols to view litigation as a last resort.

The litigation process therefore takes a facilitative approach towards dispute resolution. Parties are expected to resolve their dispute themselves, either directly, through mediation or other forms of alternative dispute resolution. The court then provides the backstop of imposing a resolution which binds the parties where they fail to achieve a settlement.

One of the driving factors pushing the parties towards achieving settlement is the unattractiveness of reaching the showpiece event of litigation, namely the trial. In most cases, there are good reasons to want to avoid the all-or-nothing outcome of litigation. Instead, parties may prefer the certainty of an outcome falling within the range of their realistic best and worst-case scenarios, rather than risk the latter.

In most cases however, a major impetus for settlement is the parties’ fear and uncertainty in relation to costs. This often means meritorious cases are not pursued either at all, or as far as they might be.

That litigation is often seen as prohibitively expensive, and potentially ruinous, is a major failing for the justice system. This has a pervasive effect through society. Individuals and organisations have to manage their risk on the basis it will often be uneconomic for them to fully enforce their legal rights.

Price pressure

There is a general downward pressure on costs. If successful, this will reduce the fees each case will generate to trial, but may lead to parties being more inclined to pursue disputes further because it is more viable for them to do so.

Efficiency improvements can allow solicitors to reduce their per-trial costs. One legacy of the pandemic is the use of technology which helps achieve this aim, such as video conferencing for remote and hybrid meetings or hearings.

There are, however, limits on the savings participants in the litigation process can generate by themselves. Ultimately, the reduction of litigation costs requires solicitors and barristers to undertake less work on each case.

This requires a shift in mind-set. Rather than trying to have the available costs fit the existing process, the process needs to fit the available costs. This requires prioritising the different elements of the litigation process and recognising the trade-offs required to achieve costs savings.

Process, purpose and priorities

Costs may be incurred by parties undertaking tasks leading to the production of one or more of:

·       judgment-centred work to produce material for the court to review at trial, the value of which can be measured by the extent to which its output (whether in the form of the documents located or the evidence created) impacted on the decision-making of the judge

·       opponent-centred work to progress settlement, both by presenting the merits of their case and progressing negotiations through offers, dialogue and formal processes like mediation

·       process-centred work to progress the litigation, which should be in accordance with the overriding objective of having the case dealt with justly and at proportionate cost.

The danger is that every step in litigation:  

·       lengthens the process, increasing the time for the parties to incur and generate costs

·       adds procedural complexity, which may trigger disputes

·       leads to work being repeated or efforts duplicated across different stages.

Each step in litigation must therefore focus on clear objectives, including allowing parties to understand the case they have to meet or allow a party to obtain evidence to support their claims.

Seeking streamlining

The standard multitrack process under part 7 of the Civil Procedure Rules is a thorough process producing quality decisions. However, it contains potential inefficiencies and luxuries which could be removed to reduce costs.

The litigation process involves parties building their cases over several months. This means they have to repeatedly set out their case in whole or in part and collate and review the same documents.

In the pre-action processes the parties set out the legal and factual basis of their claim, together with the key documents. However, the progress of the case takes a backwards step after proceedings are issued because pleadings should contain facts and not evidence or legal argument. The parties must therefore rebuild the evidence on which they will rely through disclosure, witness statements and expert evidence, and then set out their legal arguments in submissions.

The courts have repeatedly (for example, in UK Learning Academy Limited v Secretary of State for Education [2020] EWCA Civ 370) stressed how statements of case play a critical role in civil litigation. However, the general dislike towards parties taking ‘technical’ or ‘pleadings’ points undermine the judgment-centred role of pleadings because their importance diminishes as the case progresses. Similarly, the opponent-centred value of pleadings is reduced by the restrictions on the material they should contain.

This means pleadings have a largely process-centred role in setting boundaries for the litigation. However, this raises an issue about whether pleadings in their current form provide value for money for the parties, particularly when separate chronologies, lists of issues, case summaries and submissions need to be prepared.

Alternative approaches

Unlike the case-building approach of litigation, construction adjudications provide a form of dispute resolution where the parties’ work is heavily judgment-centred. This reflects the constraints within which adjudication operates, where adjudicators must make a decision within a strict timetable (of 28 days, subject to extension). Rather than build up their case in stages, in adjudication the parties present their case through the exchange of submissions and supporting documents and evidence.

The speed at which adjudication decisions are made inevitably impacts on their reliability. Adjudications are also generally costs neutral and so the parties incur significant, irrecoverable costs obtaining a decision which might be reversed in subsequent litigation or arbitration. Nonetheless, the value and success of adjudication is widely recognised, including by the Supreme Court in Bresco Electrical Services Ltd (In Liquidation) v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25. Parties recognise the value of obtaining a relatively quick and cheap decision attempting to arrive at a fair resolution of the competing positions.

Front-loading and follow-through

Just as the professionals within the justice system are expected to find efficiencies, the system must do likewise. All legal systems involve balancing competing interests and objectives. This applies when looking for savings from the litigation process, as this will require trade-offs where the most valuable elements of the process must be prioritised.

There is a balance about the extent to which parties should frontload efforts and costs, in litigation. Too much and costs can become an obstacle to settlement. Too little and cases will progress in a piecemeal way, increasing costs.

The success of adjudication as case-presentation form of dispute resolution provides a helpful way of critiquing litigation. Although the value of case-building cannot be ignored, the ways in which litigation holds the parties back from progressing their disputes may no longer be affordable.

Mark Fletcher is a partner at Russell-Cooke russell-cooke.co.uk