The route to effective cost budgeting is fraught with dangers

One concern of the new Jackson costs reforms is the extent to which they will unintentionally produce unnecessary frontloading of costs. My previous Solicitors Journal article considered the extent
to which the costs budgeting requirements may generate an extra layer of costs with no corresponding cost benefit.

In addition, there are two other areas of potential concern.

First, there is the danger that introducing costs budgeting will encourage parties to frontload the work they undertake.

The rules relating to costs management are clear: “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.

There is potentially a large incentive for parties concerned that their costs expenditure may otherwise be limited by
the courts to frontload the
work, and ensure as much
work as possible is undertaken before the matter comes
before the court for any cost management hearing.

Defendants may obviously have limited scope to take advantage of this loophole in the rules if they are not notified of a potential claim until shortly before issue. For claimants, however, this opportunity clearly exists and we may increasingly see claims where the majority of the work is undertaken pre-proceedings.

Naturally, a party proceeding in this manner may face the danger that the costs they have incurred are significantly knocked down on detailed assessment and through the new proportionality test.

Balancing exercise

There would clearly be a balancing exercise to undertake as to whether to have the certainty of likely recovery of potentially limited legal costs, or the uncertainty of potentially being able to recover more costs on detailed assessment and outside any cost management order.

The second issue relates to the post-Mitchell approach to applications for relief from sanctions. If the approach of the courts in future is to be close to zero tolerance for failing to court imposed deadlines, this represents a second significant incentive to undertake as
much work as possible
pre-proceedings.

If expert reports, witness statements, etc have all been prepared pre-proceedings,
the danger of missing court deadlines is significantly reduced.

The clear downside to frontloading work is that many cases can, and do, settle by negotiation without it being necessary for cases to be fully prepared for trial.

The more work that is frontloaded, the greater the likelihood is that some of
this work will have been unnecessarily incurred. This was one of the acknowledged flaws in the Woolf reforms. SJ

Simon Gibbs is a costs lawyer at Gibbs Wyatt Stone