Costs Budgeting Works!

Following a mini consultation with the judiciary and selected practitioner groups, Lord Justice Jackson has concluded that costs budgeting works.

When experienced judiciary costs manage litigation with the assistance of competent practitioners on both sides, the costs of the litigation are controlled from an early stage.

He outlines what he sees as the numerous benefits of costs budgeting:

• Knowledge of the financial position - Both sides know where they stand financially; they have clarity as to what they will recover if they win and what they will pay if they lose.
• It provokes early settlement - Once all parties can see the total costs of the litigation and the extent of their own exposure there is an OMG moment and common sense prevails.
• Costs control – Costs are controlled from an early stage and excessive budgets will receive criticism from both opposing parties and the court. Ultimately, it reduces the costs payable by the losing party.
• It focuses attention on costs at the outset of the case – It focuses the potential successful parties on incurring only reasonable and proportionate costs and saves potential paying parties from paying costs that far exceed the value of the claim.
• It makes CMCs more productive – Managing the issues in the case at the same time as managing the costs brings serious debate as to what is really needed to resolve the issues in the case.
• It provides elementary fairness- A potential paying party knows in advance what costs risk is coming down the track and the incentive to avoid it.
• It protects real people – Individual litigants can see the amount of costs involved and their exposure from the outset and make an informed decision as to whether the litigation is worth it.

Having set out the benefits, Lord Justice Jackson set out each of the objections that had been raised and gave detailed reasons as to why they were not valid. This approach will be very familiar to those who remember his strident response to the critics of his original report.

In doing so, he recognised that there were a number of flaws that needed to be addressed ranging from inconsistency of approach by courts and the judiciary, to exchange of budgets, to delay in costs management.

In terms of delay, the waiting time for a first case management conference in clinical negligence cases in London is now running at about nine months. He said that, “delays of that order are unacceptable and defeat the object of the 2013 civil justice reforms,” and recommended that all cases listed between October 2015 and January 2016 should be released from costs management.

The Master of the Rolls, Lord Dyson, expressed misgivings over the recommendation and we agree this step could set a dangerous precedent for unravelling costs management at a local level for lack of resources.

In Keoghs’ view the issue of incurred costs and the front loading of claims to avoid costs management is the most important issue to address. Sir Rupert offered to prepare a paper on pre-issue costs management if requested by the MoJ and CPRC and if the time was right to move to the next stage.

Pre-action costs control is an issue that Keoghs have been campaigning to be dealt with for a number of years. It was a glaring omission in the reforms that were implemented and can easily be implemented through the introduction of scale budgets within pre-action protocols. We discuss this issue in more detail in our recent paper following the second anniversary of the introduction of costs budgeting (click here to view our costs budgeting review).

This pre-set scale budget will allow a party to determine whether the case has merit before submission of a letter of claim.

It would also need amendment of CPR 25 to provide the court with the power to make case and cost management orders before proceedings have been issued should a party have good reason to exceed the scale budget.