Show your working

The government now seems intent on implementing Lord Justice Jackson's proposals to shake up the civil justice system. Other than the headline grabbing proposal to end the recoverability of success fees is the consultation for increasing and extending the RTA claims process into EL, PL and lower value clinical negligence disputes, together with a system of fixed costs for all fast-track personal injury matters.

The impact of this will not just be felt by claimant personal injury lawyers, who will see major changes in the way these claims are handled and a potentially significant impact on profitability. The extension of fixed fees across the board will remove 90 to 95 per cent of the work in this area for costs lawyers and law costs draftsmen.

Some observers have predicted that another Jackson proposal will come to the rescue. This is the proposal for costs budgeting. Costs budgeting and costs management has already been trialled and is likely to be rolled out across the country in due course.

Specialist costs counsel Nicholas Bacon QC observed at the Association of Costs Lawyers' national conference that costs reforms are 'not doomsday' for costs lawyers and they 'should work on the basis that [they] will be doing costs management hearings'.

The theory is that those who specialise in costs will be the best placed to help calculate realistic budgets and persuade the courts that the budgets submitted are appropriate. The theory is that this new area of work will compensate for the loss to fixed fees of the volume costs work.

It is worth exploring this further, both from the perspective of those who work in this field and from the perspective of solicitors who will shortly need to consider who to instruct to deal with costs budgeting tasks. Costs budgeting requires not only accurate estimating of the time it will take to complete future tasks in the litigation but also a detailed understanding of the tasks that will be required. Although costs draftsmen may be skilled at calculating the value of the work that has been undertaken on a case and analysing the reasonableness of the time claimed for the work done, most are not litigators.

They may not be best placed to plan the steps that will be necessary in a case. This is a task that solicitors may need to undertake themselves. Once the relevant steps in a case have been identified, solicitors may feel it is only a short step to completing the budgeting exercise.

Even if costs draftsmen do possess the skills to set budgets, will solicitors routinely instruct them to undertake this task? If the experience of costs estimates is anything to go by, this is doubtful. The courts have been incredibly reluctant to hold solicitors to inaccurate estimates (see Mastercigars Direct Ltd v Withers LLP). Are the courts going to be any more interested in inaccurate costs budgets? If not, solicitors are unlikely to take the task of preparing these any more seriously than most do for costs estimates. They are likely to undertake the task themselves, adopting the back-of-an-envelope approach.

Costs budgeting is unlikely to be widely implemented by the courts. Even Jackson's recommendation is no more than: 'Rules drawn up which set out a standard costs management procedure, which judges would have a discretion to adopt if the use of costs management would appear to be beneficial in any particular case.'

The reality is that only some judges will utilise these powers in some higher value claims. Costs budgeting may never be more than a minority sport. Even where costs budgeting is being imposed by the courts, will costs draftsmen be instructed to undertake the hearings? The courts are likely to be reluctant to allow costs budgeting to become the expensive satellite litigation monster that costs capping applications became before the rules committee limited such applications to exceptional cases.

Any costs budgeting hearing will be expected to be a relatively short and straightforward affair. These are likely to be tacked onto directions hearings. If counsel has been instructed to deal with the substance of a directions hearing, how likely is it that a costs draftsman will also be instructed to deal with the costs aspect? Outside of very heavy litigation, this seems unlikely.

If costs budgeting does work as intended, what is this likely to mean? An accurate budget is set at the outset of the case and at the conclusion of the case the successful party checks their time records and sees that the costs have come in roughly on budget.

Will there be a need for a detailed bill of costs to be drafted or will the successful party simply advise the other side accordingly? Where a court has approved a budget, and the unsuccessful party is faced with a claim for costs in line with the budget, will the unsuccessful party instruct a costs draftsman to scrutinise the claim, knowing a court is unlikely to significantly interfere with a claim for costs at the same level as the court approved budget? How many cases will proceed to a full detailed assessment hearing?

Specialist costs counsel Jeremy Morgan QC was recently quoted as saying that with costs management: 'It is hard to see any room for arguments on proportionality, hourly rates or the reasonableness of the work done'. The irony is that far from compensating costs draftsmen and costs lawyers for the loss of work elsewhere, costs budgeting may erode further into work volumes.

Copyright & permissions