In January 2010 Lord Justice Jackson published his Review of Civil Litigation Costs Final Report. The core recommendations are an interlocking package, and most were implemented on 1 April 2013 in the Civil Procedure (Amendment Rules) 2013, SI 262. The Jackson funding changes, included in the Legal Aid, Sentencing and Punishment of Offenders Act 2012 and related regulations, came into effect at the same time. Simultaneously, the government made further cuts to legal aid for civil litigation, which was emphatically not a Jackson proposal (his own words).
These are the most significant changes since the start of the Civil Procedure Rules (CPR). Sadly, they have been implemented in too much of a rush. But that was also the case in 1999 and everyone coped, as they will now. All full-time judges have been carefully trained by the Judicial College (not inadequately, as was alleged in a Gazette article on 25 March). There will be more training as the changes bed down.
The reforms aim to complete what Woolf began – to control the costs of litigation and make it more efficient. Judges will be more proactive and robust, both in relation to proportionality of work and costs, and compliance with rules and orders. There is a significant ‘brick missing from the edifice’ (per Jackson): fixed costs for fast-track claims, as proposed by Woolf and by Jackson. Work has at last started on this, but in the meantime only multi-track cases will have costs budgets, leaving fast-track costs to be controlled through the new proportionality test, and the funding and procedure changes.
This is the first of a series of Benchmarks on the reforms: this one concentrates on costs management. Later articles will cover the funding and procedure changes. Costs management by the court is the most fundamental innovation, with a new section in part 3 of the CPR and a new practice direction 3E (PD3E). It was successfully piloted in defamation and technology and construction courts. The new rules apply to all multi-track cases issued on or after 1 April 2013, except in the Admiralty and Commercial courts (as recommended by Jackson), and similar commercial cases in the Chancery, Mercantile and TCC courts, with a value of over £2m (added recently to prevent forum shopping). These exclusions will soon be reconsidered by the Civil Procedure Rule Committee (CPRC). Exceptionally, the court might not require costs budgets in a few other straightforward cases, where the costs are clearly not disproportionate, but the court must give reasons when doing so.
Budgets must be exchanged and filed by all parties, except litigants in person, within 28 days of the date specified in the court notice, or no later than seven days before the case management conference (rule 3.13). Budgets must be in the form of new Precedent H (a self-calculating spreadsheet), with details of costs already incurred, and estimated future costs by stage and type of work, including disbursements and contingencies up to and including trial. They must be verified by a statement of truth. The aim is that the court can see where the money will be spent. But if budgeted costs do not exceed £25,000, the party can just complete page one of the precedent form.
Reasonable and proportionate budgets should be agreed by the parties, then the court can only ‘record the extent of the agreement’, even if the budget seems artificially high. Otherwise the court will approve a budget, after making appropriate revisions, at a case/costs management conference (CCMC) (rule 3.15 and paragraph 2.3 of PD3E), when directions for progressing the case will also be given. CCMCs will usually be held at court (not by telephone) so the budget can be recalculated, by the conducting solicitor, on a laptop.
A party who fails to file a budget will be treated as having filed one comprising only the applicable court fees, unless the court orders otherwise (rule 3.14): a sufficient incentive to comply? The court can only approve costs to be incurred, although costs already incurred must be included in Precedent H, and the court can ask for a breakdown and record comments. The court is not undertaking a detailed assessment in advance, and is not micromanaging the work, but is considering whether the budget is reasonable and proportionate.
If a costs management order is made, the court:(a) thereafter controls the budgets in respect of recoverable costs (rule 3.15(3)). The court can order an amended budget to be filed and served (paragraph 2.7 of PD3E), and set a review timetable. Amended budgets must be submitted where there are significant developments in the litigation (paragraph 2.6 of PD3E). An approved budget can only be varied with court approval.
(b) when assessing costs on a standard basis (rule 3.18), will have regard to the receiving party’s last approved budget, and not depart from it unless there is good reason, for example when the costs of a phase were less than anticipated.Well-organised practitioners, especially in commercial cases, will welcome costs budgeting because they do it now anyway for the benefit of clients. For some others it may be a steep learning curve, but the benefits should be fewer clients angry at facing higher costs than anticipated and fewer detailed assessments.
Proportionality and relief from sanctions
Rule 1.1 (the overriding objective) has been amended specifically to include an objective to deal with cases at a proportionate cost. Costs are proportionate when they bear a reasonable relationship to sums in issue, the value of any non-monetary relief, complexity of the litigation, additional work generated by the paying party, wider factors such as reputation or public importance (rule 44.3(5)). Costs that are disproportionate will not be recoverable even when they are reasonably or necessarily incurred (rule 44.3(2)). This reverses the Lownds test. It could be necessary and reasonable for a well-resourced party to take a particular step, but not proportionate for the other party to bear the cost if they lost. Justice cannot be sought at any price. But to assist practitioners, rules 44.3(2) and (5) do not apply to cases commenced, or work done before, 1 April. Those costs will be assessed in accordance with rule 44.4(2) as it was in force before 1 April.
There is a new, simpler rule 3.9 for relief from sanctions that applies to applications made after 1 April 2013. The court will consider all the circumstances, and deal with the case justly, including the need for litigation to be conducted efficiently at proportionate cost, and to enforce compliance with rules, practice directions and orders. The list of factors to be taken into account in the old rule has been deleted (a welcome change because it was time-consuming to go through). It will be harder to obtain relief, and judges will be more robust when parties fail to comply. This was an aim of the Woolf reforms but the Court of Appeal was lenient then. This time only specified Court of Appeal judges will hear appeals to try to ensure consistency. You have been warned.
See also the 18th Jackson Implementation Lecture on the overriding objective and rule 3.9 by Lord Justice Dyson.
District Judge Burn sits at Bromley County Court. She is a district judge member of the CPRC, and a civil tutor with the Judicial College