Costs system is 'least successful part' of civil procedure reforms, claims judge

CIVIL JUSTICE: consensus that the current costs system is a quagmire and should be replaced

A costs quagmire has evolved from the new civil procedure rules (CPR) leading to calls for the current costs system to be scrapped altogether, a solicitor judge said last week.

Michael Cook, a circuit judge, said that while costs were the lynchpin of the CPR reforms, they have been 'the least successful part'.

He said the cost of interim hearings had doubled or trebled, and that surveys showed summary costs assessments 'are universally regarded as unsatisfactory'.

Said Judge Cook: 'Step by logical step we have have walked into a quagmire, where in many cases more time and money is spent on costs estimates, quantification and liability than on the subject matter of the litigation.'

He said there was increasing momentum to replace the system with one similar to that in Germany, where fixed costs are recoverable, or in the US, where no costs are recoverable but contingency fee agreements are allowed.

Predicting the end of the indemnity costs system, he said: 'The need to ensure that each individual item of costs claimed from the paying party does not exceed the amount of the receiving party's liability for that item to his solicitor is the modern equivalent of medieval monks estimating how many angels can dance on a pinhead.'

The Law Society backed the attack on the indemnity principle.

A spokesman said: 'We're very pleased that Judge Cook agrees with the Law Society's position.'

Costs expert Tony Girling, a former Law Society President, said the CPR regime has increased settlements.

However, he agreed that from a costs perspective the new regime 'is not working'.

He said the German fixed-fee system gave no incentive for quality legal service, while the US system - in which parties bear their own costs - is not suitable in England and Wales because the levels of damages here are too low.

A Lord Chancellor's Department spokesman said concerns with the indemnity principle were recognised, and that the issue is under 'active consideration'.

It has a working party looking at costs as part of a general CPR evaluation.

Judge Cook was speaking at the launch of his new book, Cook on Costs, published by Tolley.

Jeremy Fleming