Civil Justice Council publish their final report (May 2023) following a “strategic and holistic” review of costs
By Mark Brighton, Manchester office Technical Manager and Head of Advocacy
The Civil Justice Council published their Final Report in May 2023 following a “strategic and holistic” review of costs. Questions were set, a consultation was held and views from the very diverse areas of the civil justice system were considered. The Report makes several recommendations, with all major recommendations being unanimous but with some decisions being by majority. The areas covered and the recommendations (with our thoughts upon them) are set out below.
Costs Budgeting
Responses to the consultation were overwhelmingly in favour of retaining costs budgeting, at the minimum as a method of exchanging costs information and allowing effective case management. There was support for changes to be made as to when budgeting should or should not be undertaken, depending on the nature of the case.
One recommendation was to pilot dispensing with full budgets for Defendants in clinical negligence cases where QOCS applies, so that only the Precedent H front sheet would be required. The Court would retain the power to order a Defendant to produce a full budget.
Our opinion is that full budgets should be retained. Costs visibility should be a two-way street and having both solicitors “show their workings” assists negotiations upon the budgets and allows the Court to see the reasons behind any major differences.
A further pilot was recommended for Part 7 cases valued between £100,000 and £1m, where a “costs budget light” might save Court time and the parties money. This is an interesting suggestion, though without sufficient detail to see whether a “light” budget would materially affect the preparation required.
An extension of the approach of Sheffield County Court was recommended by the majority of the CJC, whereby case and costs management hearings are staged to ensure that budgets are prepared in accordance with a known set of Directions. A pilot Practice Direction was recommended to enable this change.
Our experience of this approach is that it does assist with budget negotiations. Additional time is permitted to negotiate and the advocates can meet to discuss proposals. This does result in fewer costs management hearings being required. We support this recommendation.
Guideline Hourly Rates (GHRs)
GHRs were last updated in October 2021. The consultation highlighted broad agreement that further updates should be made, though with some disagreement over the frequency and the basis for any change. Annual SPPI index-linked updates (with some minor tweaks) were recommended for each January 1st for the next 5 years with a detailed review to be undertaken at the end of that time (and every 5 years thereafter) by a new Working Group. It was recommended that where a case spans multiple sets of GHRs, costs are assessed by the date upon which they were incurred.
It remains to be seen what challenges this approach might bring to assessments where costs are not often separated by the date upon which they were incurred, such as in summary assessments or for routine correspondence. It is not clear whether the Court would be prepared to allow multiple hourly rates by year (4 grades per year for a case lasting, say, 7 years where complexity may have waxed and waned would mean 28 decisions) or whether combined figures would be favoured. Attention should also be drawn to costs budgeting where hourly rates are intended to increase automatically in the future by an SPPI figure that is not yet known. Our opinion is that annual index-linked increases overcomplicate the setting of hourly rates, which has always been within the capabilities of the Court at assessment. Reviews every 5 years are welcomed.
A new band for “complex, high value, commercial work, whether in London or elsewhere” is proposed, though a full definition and an applicable hourly rate is yet to be identified. This would be helpful for that type of work; however, this might render the London 1 band all but redundant.
Further recommendations include bringing Counsel fees within the scope of the GHRs and defining a test for solicitors’ hourly rates to depart from the GHRs. Both are interesting concepts but lack sufficient detail to comment upon.
Costs under pre-action protocols/portals and the digital justice system
Pre-action processes do help to settle claims and narrow issues. It was broadly agreed in the consultation that greater interaction between solicitors’ in-house systems, digital portals and the Court should lead to a saving in costs.
A recommendation was made to facilitate costs recovery pre-action and therefore encourage compliance with the pre-action protocols, by allowing parties to bring disputes as to pre-action costs to the Court (this already exists for some protocols). To discourage parties from disengaging with protocols due to a perceived costs risk, the design of future portals should make the process as simple as possible.
This appears to be a step in the right direction, though it will rely upon the design of any portal and the extent to which human decision-making (and human error) plays a part.
It is widely agreed that parts of the Solicitors Act 1974 are out of step with present-day litigation practice. The differing definitions of contentious and non-contentious business were highlighted in Belsner[1], and it was agreed that no such difference needs to exist.
New pre-action portals were recommended with very limited or no costs recovery pre-action, providing the matter settles pre-action. Changes to existing pre-action protocols were recommended such that cases are considered “issued” at the point at which the protocol is commenced. An amendment to CPR 46.14 is also recommended to enable the Court to deal with disputes over the liability to pay costs, rather than merely the quantification of costs after an agreement between the parties had already been reached.
We would welcome this change. If costs were reasonably incurred through the fault of another, there should be a formal mechanism to claim those costs and have them determined by the Court if agreement cannot be reached. In most cases, agreement should be reached both due to efficient pre-action work and the threat of litigation should disagreements remain.
Further recommendations were made to review and report upon changes to the Solicitors Act 1974, particularly in respect of Section 56 and “non-contentious” costs. This is much needed.
Consequences of the extension of FRC
There is widespread opposition to the implementation of the extension of FRCs; however, that implementation is happening and so the CJC placed their focus upon discussing the impact of the extension rather than arguments surrounding the principle of the extension. They identified “legitimate questions” about the possibility of parties having to pay costs that exceed their own damages and/or recovered costs and that FRC will most likely increase this prospect.
It should be noted that there is support for the extension of FRCs insofar as that it will enable potential Court users to assess the financial risks before steps are taken. It was agreed that where recoverable costs are limited, there must be greater clarity between solicitor and client as to what is recovered both from damages and from an opponent.
A costs cap of £500,000 for patent cases in the Shorter Trials Scheme was discussed, with near unanimous support.
Recommendations as to pre-action costs and the Solicitors Act 1974 were repeated, and a pilot scheme to cap costs at £500,000 for patent cases in the Shorter Trials Scheme was recommended.
[1] Belsner v CAM Legal Services Ltd [2022] EWCA Civ 1387
