Stewarts responded to the CJC Working Group’s Consultation on Costs on 14 October 2022. The group was set up with the objective of taking a “strategic and holistic look at costs”. Virginia Jones, Grace Horvath-Franco and Julian Chamberlayne briefly summarise our proposals and the reasoning behind them.
The CJC’s consultation considers:
- Costs budgeting
- Guideline Hourly Rates (GHRs)
- Costs under pre-action protocols/portals and the digital justice system
- The extension of Fixed Recoverable Costs (FRC)
Our response focused on the types of complex and high-value commercial and injury litigation in which we exclusively specialise.
Costs budgeting and consequences of extending the fixed recoverable costs regime
Proposal: shift to ‘default off’ for cost management but retain the requirement to file cost budgets and with discretion for judges to ‘flip the switch’.
Grounds in support of this proposal included:
- multi-track litigation with claim values above the incoming £100,000 threshold for FRC tends to involve complexity and variation that it would be difficult or impossible to fairly constrain within any further increase to that FRC threshold. Cost budgeting is a much better and fairer method of managing costs between litigants in such high-value claims
- the requirement to file budgets has improved transparency between the parties concerning costs, thereby promoting earlier resolution of claims
- but cost management by the courts has proved an unwieldy process that causes significant delay and unnecessary ‘costs of costs’, thereby impeding access to justice
- the approach of different judges to costs management orders (CMOs) is too variable, resulting in rough justice to the parties. This is, in part, a result of the court having insufficient time to hear full arguments or give full consideration to the difficult issue of trying to predict the likely costs in each phase of complex litigation
- it is a far better use of resources for judges to exercise their discretion to hold a cost management hearing only in the cases where that is really required and once the budgeting assumptions based on the court’s directions are known.
Guideline hourly rates (GHR)
- annual uprating by Services Producer Price Index Legal (SPPI Legal) to begin immediately and be backdated to account for the three years of significant inflation since the data on which GHR 2021 was based
- a full review every 10 years with that full review to consider not just what costs judges allow but also what rates were actually claimed
- HM Courts and Tribunals Service (HMCTS) to gather data both on rates claimed and assessed, based on budget filed and bills to be assessed
- criteria for summary assessments be amended to exclude claims for costs in excess of £100,000, which should, instead, be assessed by a specialist cost judge either sitting alone or as an assessor alongside the assigned judge
- amend guidance in paragraph 29 in the Guide to the Summary Assessment of Costs to clarify that in exceptionally complex and/or high-value cases, an enhancement could be up to 100% and could encompass Grade D.
Grounds in support of those proposals included:
- GHR control what successful litigants can recover from their opponents; they do not define what the clients pay their own solicitors and are not intended to be a form of restraint on what solicitors charge
- although GHR are intended to be broad approximations of actual rates in the market (ie to reflect the average price actually paid by litigants), we have concerns that the methodology that fixed the 2021 rate by reference to the average of rates assessed involved circularity, as those rates were influenced by arguments based on the outdated GHR 2010
- if GHR are set below market rate, clients have their compensation reduced to meet the resultant costs shortfall, thus eroding the full compensation principle
- a switch to a methodology based on ‘rates claimed’ data would not be unfair to paying parties as they would still be able to raise GHR arguments against anyone who instructed the 50% of solicitors who charge above the average market rate
- it would also enable a much larger data set to be gathered from any case budgeted or with a costs claim rather than the much smaller cohort of cases with costs assessed by the court.
Costs under pre-action protocols/portals and the digital justice system
- a tougher approach by the courts post-issue to non-compliance with the pre-action protocols
- digital reforms to have an inclusive and user-focused approach
- a separate consultation considering the issues for a root and branch replacement of the Solicitors Act 1974 to bring it into the modern age, including making it understandable by members of the public.
Grounds in support of those proposals included:
- our only concern relating to the pre-action protocols is that there is very rarely any sanction imposed for non-compliance once the case is issued
- cases settling pre-action almost always do so on either a global basis (notably for commercial disputes) or with costs agreed without any cost assessment by the courts (for our complex injury claims), so there is no significant problem to be fixed
- as such, we would be wary that any attempt to introduce additional pre-action rules might cause more problems than they resolve, notably detracting from the freedom to pursue alternative dispute resolution (ADR) on an unfettered basis
- there are considerable advantages to digitisation, but implementation is complex and historically has not been a great success. The significant hidden cost of reform for solicitors implementing these systems also needs to be considered
- the distinction between contentious and non-contentious business serves no proper purpose and is confusing to the public. Any change would require primary legislation, which the government does not have on its legislative agenda. When there is intent to address these issues, there should be a consultation.
Our full response can be read here.
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Find out more about Stewarts Litigate here.
This communication has been authorised by Arthur J Gallagher Insurance Brokers Limited for the purpose of s21 of the Financial Services and Markets Act 2000
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