The cost of costs

Kris Kilsby considers changes to costs budgeting

As the group of lawyers with the most direct experience of the issues raised by the Civil Justice Council’s working party, the Association of Costs Lawyers (ACL) responded in detail to its consultation following extensive member consultation towards the end of last year. We told the consultation that costs management has achieved what it was created to deliver: to provide judicial oversight on the cost for claims and provide a cap on what could be considered reasonable and proportionate. Nearly three-quarters of costs lawyers say it assists at the detailed assessment, with several reporting that it is reducing the overall number of assessments required. The alternatives are either “a return to dealing with unmanaged costs solely at the end of the claim”, or further expansion of the fixed costs regime. The ACL considers that neither of these options are suitable and will have a negative impact on access to justice.

Reform proposals

The costs management process has been improved over the years but there is still scope for additional reform. Those proposed by the ACL include:

• De-coupling case and costs management so that the court can set out the clear directions that the claim will take, and the budget prepared accordingly, know the number of witnesses, type of disclosure, number and specialism of experts, etc.
• Updating Precedent R to reflect the approach adopted within points of dispute and reply, namely that both parties can include their comments and rebuttals within one document, which is then served and filed with the court ahead of any costs management conference.
• Issuing guidance that sets out clearly where costs are to be considered incurred or budgeted, reducing arguments at the detailed assessment.
• Clarifying the test for varying the cost budget – the current rules say it should happen when there have been “significant developments” in the case, but at detailed assessment the budget can be departed from where there is “good reason to depart”. The two tests appear to have different levels and it has been interpreted that the bar is lower to establish a good reason to depart than to significant developments. Therefore, in some circumstances, it may be currently better for a solicitor to decide to not update a costs budget during the case. This is against the spirit of the rules.

Guideline hourly rates

Our response also argues that complexity of work, rather than where it is done, should be a key factor in setting the guideline hourly rates (GHR). Members also call for the GHR to be reviewed no less than every two years. Further, costs lawyers should be recognised within the GHR, as was recommended by the 2014 Foskett review. This said they should be eligible for payment at grades C or B, depending on the complexity of the work. The ACL believes this recommendation should be included explicitly within the GHR’s ‘fee-earner’ category.

Costs lawyers are regulated professionals and are qualified to conduct reserved legal activities pursuant to the Legal Services Act 2007. In his independent review of legal services regulation in 2020, Professor Stephen Mayson said costs activities should be restricted to costs lawyers to ensure that “harmful dabbling” is avoided and greater consumer protection when dealing with the issues of costs. One way of assisting this would be to ensure that costs lawyers are enshrined within the GHR to reflect their specialism and underscore their value to the process. The ACL considers that such an inclusion should not be limited by the recommendations made in 2014 but should be extended to reflect that there are complex costs issues (with key costs cases regularly being heard by the Court of Appeal) that warrant grade A rates.

Without the GHR, a form of chaos would ensue, with less certainty, more satellite litigation and a lengthy evidence-based assessment necessary in almost every case. There may well be alternatives but the existing methodology (ie average overheads with profit element applied) has proved reliable thus far and for many years. The costs process is not perfect, but it is much better than it was in 2013. We urge the working group not to throw the baby out with the bathwater, and instead look to reform, rather than remove costs management.

Kris Kilsby is a council member of the Association of Costs Lawyers (ACL) and a costs lawyer at Paramount Legal Costs: associationofcostslawyers.co.uk; paramountlegalcosts.co.uk