Costs budgeting has been a success and should be retained, but also reformed in recognition that “one size does not necessarily fit all”, a major report has recommended today.
The Civil Justice Council (CJC) costs review also called for the guideline hourly rates (GHR) to be uprated by inflation annually ahead of a detailed review in five years’ time.
Other key recommendations included ending the distinction between contentious and non-contentious costs – a major issue raised by last year’s Court of Appeal ruling in Belsner – and reviewing more broadly the costs provisions of the Solicitors Act 1974.
The review, chaired by Lord Justice Birss, deputy head of civil justice, said that “overwhelmingly, and somewhat surprisingly”, responses to its consultation last year supported costs management.
The “clear outcome” of the consultation was that “there is now evidence of real and sustained progress in the discipline and understanding around costs and this has consequently improved case management and the proportionality of costs”.
Yet the responses came with calls for changes and the working group’s “fundamental recommendation” was that budgeting should be retained alongside “acceptance of the hypothesis that ‘one size does not necessarily fit all’”.
It continued: “We suggest that it should be possible to permit a more tailored approach to costs management, to suit different work types and/or venues where the litigation is conducted.”
This would require further input and some piloting to flesh out, and the working party “tentatively” identified three areas where costs management could work differently from the norm and each other: personal injury and clinical negligence work (covered by qualified one-way costs shifting (QOCS)), claims progressing in the Business and Property Courts, and “other specialist work”.
It said that, where QOCS applied, particularly in clinical negligence cases involving the NHS, defendants should only have to provide the Precedent H front sheet and not full budgets, subject to the court requiring one.
The group also recommended piloting a “costs budget light” regime for part 7 cases in the multi-track valued up to £1m – these cases were “at greatest risk” of incurring disproportionate cost but are not so high in value that they needed full-scale budgeting – and a “lighter touch” approach for Business and Property Courts cases worth more than £1m.
The majority of the review group backed allowing judges to deal with costs management separately from case management if appropriate.
The consultation showed “no real appetite” to abolish the GHRs, suggesting “the current system is fit for purpose”.
The group recommended retaining them and uprating them on 1 January every year by the services producer prices inflation (SPPI) index – but not the legal services-specific SPPI that is available as this could encourage lawyers to increase fees. The increase should be backdated for 2023.
The GHR should also be tweaked to recognise that the top band is “too low and unrepresentative of the fees charged for top-flight commercial work”, to bring counsel’s fees into the regime, and to set out the test for departing from the GHRs.
There should then be a “detailed review” after five years to consider the impact of index linking and of remote working by lawyers.
The working party looked at what digital justice could mean for costs and said an appropriate body – such as the CJC or the Law Commission – “should be invited to report on the need to revise the Solicitors Act 1974 given the intended digitisation of dispute resolution”.
It also recommended that “for new portals in which the emphasis is on drawing a distinction between pre-action dispute resolution and court proceedings, there should be very limited costs recovery pre-action, if any”.
For existing pre-action protocols which provide for recovery of costs that settle pre-action, a rule change could deem certain types of dispute as issued at the point that the protocol was commenced.
This would be a significant change and could be piloted with housing condition claims, the report suggested.
The CJC also supported the proposal for a £500,000 costs cap in patent cases in the shorter trial scheme.
CJC chair Sir Geoffrey Vos, the Master of the Rolls, welcomed the recommendations. “It is now 10 years since costs budgeting was first introduced in England & Wales. That period has seen significant changes to both the operation of the civil courts and our society as a whole,” he said.
“Our litigation and judicial processes require reconsideration in the light of the major technological advances that have occurred. Careful consideration of the costs implications of all kinds of dispute, whether resolved in the analogue or the digital world, is essential.
“I am delighted that this report has moved away from the model of the single ‘big name’ reports of past times. Such reports are never sufficiently up-to-date, when litigation methods are changing so rapidly to serve increasingly well-informed citizens and small businesses.
“There is likely to be further work required on these topics. I will ask the CJC to consider the next steps in the very near future.”
It is the job of the Master of the Rolls to set the GHR and he said an annual adjustment “will ensure that they are not left to stagnate as they have in the past”.