Senior judge questions effectiveness of costs sanctions

Birss: Costs cap aids access to justice

The deputy head of civil justice has questioned the use of costs sanctions as a way to control litigation behaviour and hinted he would like to see the costs rules simplified.

Meanwhile, the Senior Costs Judge (SCJ) has suggested it may be time to review the criteria for costs management and look again at requiring it for cases worth more than £10m.

Speaking at the recent Costs Law Reports conference, Lord Justice Birss – who took over as deputy head of civil justice at the start of this year – acknowledged that while costs were “a problem”, it was not easy to see what the solution was.

The “most significant problem” with costs was simply that “everybody hates them”, which he put down to a facility with words and numbers being “a prerequisite for working in the law”, but not a facility with numbers.

Sir Colin, who previously chaired the Civil Procedure Rule Committee’s costs sub-committee, went on to question the role of costs provisions – such as part 36, indemnity costs and interim costs payments – as behavioural incentives.

“We use costs consequences to drive behaviours all the time in civil justice,” he observed. “The question is, do they work? Does anybody know?

“Looking at part 36, many cases settle anyway. Have the costs consequences set out in part 36 led to an increase in settlements? If not, what are they for?… It’s not obvious to me that there are more settlements than they used to be.”

Indemnity costs has not prevented “lots of out-of-the-norm behaviour” continuing to happen, and “indemnity costs assessment is not that far away from standard assessment quite a lot of the time”.

Interim costs payments, meanwhile, could lead to “real tangles”, especially with litigants in person and the judge suggested they ended up being “security for costs by another name”.

“Nobody is looking into this. These are discussions we should have,” he said.

“We should also be making orders about costs that do justice. But maybe to do justice, all you really need is two things: first, proper proof that the costs have incurred… and second a set of rules which distinguish certain circumstances and then allowing the courts a wide discretion to make an order.”

A lot of rules could be swept away as a result. “The fact we’re having a conference all about costs… tells you something about the complexity of the current costs regime. I wonder if that’s really the right way of going.”

Birss LJ also spoke with approval about the regime in the Intellectual Property Enterprise Court – where he used to sit – which has a £50,000 cap on recoverable costs.

This has been “very successful in solving the problem of the costs of that litigation as a barrier to access to justice”, he said.

“It chips away at the idea that very often litigants feel they are litigating at their opponent’s expense. That’s the wrong idea which is possibly at the root of some of the troubles we have.”

It also highlighted the “intrinsic value” of certainty. “The cap works to promote rational access to justice for mid-scale commercial disputes. It also protects defendants.”

He added that he did not know why the bid to extend the idea to general commercial cases – through the capped costs pilot – failed.

In his address to the conference, the SCJ, Andrew Gordon-Saker, noted the recent comments of Master Davison that many judges did not think costs management controlled costs better than detailed assessment.

The SCJ said: “It may be that the time has come to review the criteria for costs management. The government has recently decided to extend costs budgeting to ‘heavy’ judicial review cases, so it’s not going away, but is it needed in every multi-track case up to £10m? And why not cases over £10m?”

At the time was in the middle of a detailed assessment of a £53m bill and spent 12 days on £24m which were the fees of accountancy experts. The SCJ said to the parties in his decision that, in a case where the expert evidence was going to be so substantial, it would have been better to seek a costs management order.

Master Gordon-Saker also reiterated his call for part 3 of the Solicitors Act 1974 to be revised, with the Senior Courts Costs Office seeing more solicitor and own client disputes and more going on appeal too.

“Too many solicitor and client assessments are preceded by an expensive hearing about whether the bill is a final bill, or an interim statute bill, or one of a series of bills that makes a final bill, or a request for payment on account.

“So this is great for lawyers who specialise in costs but personally I think it’s a bit embarrassing, particularly for the legal profession, that there’s so much dispute about what the bill is before you get to actually deal with what the client’s grievance is.”

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