Rule committee approves three costs pilots and reverses controversial Carver ruling

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By Legal Futures

23 August 2011

Costs under pressure: solicitors will have to stick to their budgets

There will be three different costs pilots running from this autumn as the impact of the Jackson report spreads, the Civil Procedure Rule Committee has decided.

It has also accepted the report’s recommendation to reverse the Court of Appeal’s highly controversial Carver ruling, which threw a major spanner in the workings of part 36 offers.

In addition to the year-long national costs management pilot in mercantile and technology and construction courts, which starts on 1 October after being trialled in Birmingham, the committee has extended both the defamation costs management pilot and the county court provisional assessment pilot for a further year from the same date.

The rules of the new pilot have been published and are similar to those for the defamation pilot, requiring the parties to provide the court and each other with a detailed budget of the estimated costs for the entire case prior to the first case management conference.

The court has the power to monitor expenditure against the budget throughout the case, while any party can apply to the court to revise their budget or if they believe another party “is behaving oppressively in seeking to cause that party to spend money disproportionately on costs”. The costs awarded at the end of the case will usually be those in the approved budget.

The defamation pilot, taking place in London and Manchester, has been amended to clarify that only future costs are being approved and that the approved budget is not a detailed assessment made in advance.

Speaking earlier this year at an event hosted by the Association of Costs Lawyers, Master Hurst admitted that the defamation pilot “is throwing up certain problems”, although he said that was the point of having pilots.

“On the one hand, both sides may put in high estimates of costs, but neither side takes any point on the size of the other’s budget,” he said. “This may result in budgets being approved which are in fact unreasonable and disproportionate.”

The provisional assessment pilot taking place in Leeds, York and Scarborough has been extended to allow for collection of further data and refinement of procedures ahead of what is likely to be a national roll-out.

It allows for the provisional assessment of bills of costs of £25,000 or less. The district judge makes an assessment on the papers, but a party can request an oral hearing if unhappy with the decision – albeit at risk of a penalty if they fail to beat the provisional assessment by at least 20%. The district judge overseeing the pilot, Robert Hill, has said it is working smoothly.

Before 2008, so long as a claimant beat the defendant’s part 36 offer by any amount, or equalled their own offer, he avoided costs sanctions. But in Carver v BAA [2008] EWCA Civ 412 – where the claimant beat the part 36 offer by £51 – the Court of Appeal said judges should take a broader view of whether the final outcome showed the case was worth the fight.

In his final report, Lord Justice Jackson said Carver had introduced “an unwelcome degree of uncertainty into the part 36 regime” and also “tends to depress the level of settlements” because claimants are wary of taking the risk of going to trial.

The rule committee has approved a clarification to part 36 that says “‘more advantageous’ means better in money terms by any amount, however small, and ‘at least as advantageous’ shall be construed accordingly”. It too will take effect from 1 October, when the 57th update to the Civil Procedure Rules comes into force.

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