Approval has recently been given to the new J-Codes. These are integral to future case management software that will be used for drafting of costs budgets, costs schedules and bills of costs. As the Jackson Final Report stated, the purpose of the new software included the ability to "automatically generate schedules for summary assessment or bills for detailed assessment as and when required".

The new bill of costs format (the development of the J-Codes being a necessary part of the process) has yet to be finalised and most commentators expect this to be at least 12-18 months before it will be rolled out.

The new bill of costs format will mirror the various phases that appear within costs budgets. It will therefore be possible to see at a glance (in theory) whether there has been an overspend in any phase.

Unfortunately, we have a further 12-18 months where this is not possible. The process of trying to determine from a bill drafted in the current format whether costs are above or below an approved budget is painful and time-consuming at best and impossible at worst.

Lord Justice Jackson always envisaged that his proposals were a complete package to be implemented in full. Sadly, the problems caused by the piecemeal introduction of costs budgeting and the new bill of costs format is a prime example of what was always likely to happen if this was not followed through.

I was recently instructed to prepare points of dispute and advise in relation to a bill running to a little over £220,000. Instructing solicitors had obtained various estimates from in-house and external draftsman. The other estimates varied from:

• 10-15 hours at £120 per hour
• 15-20 hours at £175 per hour
• 5 hours at £120 per hour

To be fair, these estimates appear to have all been given without the benefit of seeing the actual papers.

Nevertheless, 5 hours appears incredibly optimistic and it is difficult to see how it would be possible to properly read the papers in addition to drafting points of dispute in that time for a bill of this size. As to £175 per hour, nice work if you can get it but I would suggest this is not realistic for defendant insurance personal injury work.

To be fair, trying to estimate at the outset what it will cost to undertake this task is a virtually impossible task. How long is a piece of string? It would be like, I don’t know, trying to estimate at an early stage in the proceedings what the legal costs would be of conducting a complex claim through to trial. A fool’s errand.

(I estimated 10-14 hours at £118 per hour. Time actually spent: 8.7 hours. A margin of error of 13%-40% on my estimate.)

A Costs Lawyer was quoted in a recent edition of Costs Lawyer magazine as saying Costs Lawyers should:

“get as much experience and knowledge of costs budgeting as they can, as this will prove to be the main source of work for [them] in the future”

Presumably the logic of this is that we will get to a stage where receiving parties will know they cannot recover more than an approved budget and paying parties will know they cannot reduce costs below the approved budget. This will remove the need for bill drafting, points of dispute, costs negotiations and detailed assessment hearings.

The profession is in trouble if this is true. Costs budgeting can never replace the traditional income streams generated by costs work. If costs budgeting makes up the majority of the work that is left, then that is going to be a small pie to divide up between those still working in costs.

Discussing the new Costs Lawyer training scheme, in Costs Lawyer magazine, the ACL Council member for education, Claire Green, said:

“The new Costs Lawyer qualification teaches student that the court timetable is now sacrosanct”.

This was written pre-Denton and highlights the problem of trying to develop a training programme in an area of law that is in constant flux. Any training material based on Mitchell will already be out of date.

Fixed success fees have been in place for “disease” claims since 1 October 2005. It is therefore surprising that it was not until 2012 that any serious consideration was given as to which claims fell within the scope of the fixed success fee regime (see Fountain v Volker Rail Limited, Bird v Meggit Aerospace Limited and Patterson v Ministry of Defence [2012] EWHC 2767 (QB)).

The leading case of Patterson concerned an unusual non-freezing cold injury. The area of real importance is whether Noise Induced Hearing Loss (NIHL) claims are disease claims for the purposes of the rules. Traditionally such claims have been viewed as “disease” claims. The problem arises because the rules themselves do not define “disease”.

There are currently a growing number of decisions at first instance where the courts have concluded that NIHL is not a “disease”, including Mansfield County, Sheffield County Court and Harrogate County Court. Although a binding decision is still awaited, there is an increasing wiliness by the judiciary to adopt a narrow interpretation to the word.

Despite the disappointment that no new Guideline Hourly Rates have been published, the recent review has finally killed off the argument that Guideline Hourly Rates are of no relevance to detailed assessment and are designed purely for summary assessments on the fast track.

The Costs Committee stated of the GHRs they are:

“primarily a guideline rate for summary assessments and a starting point for calculating rates in detailed assessments”

and:

“The GHR are themselves guidelines and a benchmark for summary assessments. As such, they may provide a helpful starting point in the detailed assessment process, but no more than that.”

The Master of the Rolls wrote:

“It is also important to emphasise the the guidelines were originally intended to be broad approximations of actual rates in the market.”

This is key, the GHRs are intended to reflect the rates that solicitors actually charge in different localities. They were never intended to reflect only what solicitors charge for fast-track litigation (£409 per hour anyone?). Much less was it ever suggested that solicitors charged their clients different hourly rates, for example, for interim hearings where the court dealt with the costs by way of summary assessment as opposed to deferring the matter to detailed assessment.

David Greene, a member of the CJC Costs Committee, writing in the New Law Journal stated:

“GHRs apply largely to fast track and multi track litigation outside the fixed costs regimes. … Further while GHRS were originally introduced to assist judges with summary assessment they had become the cornerstone for all assessment.”

The Master of the Rolls concluded:

“GHRs are needed to guide summary and detailed assessment of costs.”

They are a starting point for both. Nothing more, nothing less.

A further interesting issue arises as to Costs Lawyers being potentially classified as Grade B fee earners (from October 2014). This is as a result of the wording used by Lord Dyson and in the original report recommendation.

To achieve Grade B status as a solicitor or Fellow of CILEX requires a combination of qualification (solicitor or Fellow of CILEX) and experience (over 4 years PQE).

Although we wait to see whether any further guidance will be published, the Costs Committee Report contained the following recommendation:

“The ACL provided evidence giving details on the qualification route, continuing professional development and regulatory framework for Costs Lawyers. The Committee agreed, and determined that the following approach should be adopted for those Costs Lawyers who are suitably qualified and subject to regulation under the Legal Services Act 2007 to undertake reserved legal activities:

(i) For budgeting and bill drafting, save in exceptional circumstances, Costs Lawyers should sit within the grades for Grade C and D fee earners;
(ii) For practising litigation and advocacy, save in exceptional circumstances, costs lawyers should sit within the grades for Grades C or B.”

Lord Dyson accepted the recommendation with these words:

“Costs Lawyers who are suitably qualified and subject to regulation be eligible for payment at GHR Grades C or B, depending on the complexity of the work”

Neither the Report nor Lord Dyson’s words make any comment on experience. Taken together it seems to suggest that a newly qualified Costs Lawyer could attract Grade B status for advocacy if the case was sufficiently complex.

It is, of course, important to recognise that there is a distinction between formal status and the rates that would be justified on assessment. A solicitor of 20 years PQE would clearly fall within Grade A status but would struggle to justify Grade A rates for dealing with a low value RTA. Equally, a non-qualified paralegal might fall firmly within Grade D status but be able to justify rates similar to a Grade A if they were punching considerably above their weight dealing skilfully with a complex clinical negligence claim.

The Report itself recognised this issue:

“The current situation is rather ambiguous; many Costs Lawyers will be bracketed for most work in Grade D, but the criteria for the grades is sufficiently flexible for Costs Lawyers to submit for fees at Grade C and occasionally Grade B where the complexity of the work and the experience/expertise to undertake the work warrants it.”

The strange result of the Report and Lord Dyson’s acceptance of this recommendation is that it appears to have blurred the lines between status (as a matter of definition) and what rates can be justified. It should be a matter of definition as to whether a Costs Lawyer is a Grade B, C or D. It should be a matter of argument as to what rates are reasonable. What we have to date appears to make status an entirely subjective test.

Congratulations to Master Gordon-Saker who has been appointed as Senior Costs Judge with effect from the beginning of October.

He has timed this perfectly as the next couple of years should be a relatively calm period in the costs world and this will allow him to ease himself gently into the new role.

The recent decision of Lord Dyson to allow Costs Lawyers to potentially qualify as Grade C or Grade B fee earners raises an interesting issue.

What level of qualification and training is required for a Costs Lawyer to now potentially be classified as a Grade C fee earner?

A typical solicitor will have stayed at school until age 18, then undertaken a 3 year law degree, followed by a 1 year LPC full time course and then undertaken a two year training contract. At that stage they will be entitled to call themselves a Grade C fee earner. This is, post-age 16, a combination of 8 years full time education and training. During the 6 years of education they will have lost potential earnings. During the 4 years of a law degree and LPC will have incurred significant tuition fees. (For those undertaking a non-law degree there will be the further delay and cost of the CPE.) It is unlikely that Grade C status would be reached before the age of 24.

In contrast, the minimum academic qualifications to start the Costs Lawyer course is 4 GCSEs at grade C or above, English and Maths being compulsory. (Even this can be avoided if an aptitude test is passed.) The minimum age to start the course is 18. The Costs Lawyer course is designed to be undertaken whilst students are in full time employment. Although the course is no doubt demanding, it appears students are only required to attend a single compulsory seminar each year. To achieve Costs Lawyer status at least three years of relevant experience in costs law and practice is required before, during or after study for the Costs Lawyer qualification. The current cost of the course is a very modest £1,400 plus VAT per year. It is therefore possible to become a Grade C fee earner having left school at 16 and worked in a non-legal environment until the age of 18 and then undertaken the Costs Lawyer course over the next 3 years whilst working for a costs firm. It would be possible to attain Grade C status by the age of 21 whilst earning consistently since age 16 and for a fraction of the financial commitment of training to become a solicitor. Many Costs Lawyers earn just as much, and often much more, than a large proportion of the solicitor profession.

Of course, not all Costs Lawyer students will have such a “basic” entry level background. Many will have been law costs draftsmen for many years previously. Many will have undertaken a law degree and the LPC or BVC. Nevertheless, this does offer a surprisingly streamlined, and cheap, route to Grade C status.

The new Guideline Hourly Rates for 2014 have now been announced.

The bad news for those hoping for an increase in the rates is that they remain the same as for 2010.

The good news for those hoping for an increase in the rates is that they remain the same as for 2010. The Report of the Costs Committee had recommended a range of amendments with the average rate going down, not up. The recommendation for Grade C Band One was a reduction from the current £161 per hour to £127. Aren’t you pleased they stayed the same?

Lord Dyson, the Master of the Rolls, rejected the main recommendations in the report on the basis of the “fundamental” shortcomings in the evidence upon which the recommendations were meant to be based. Not enough lawyers had bothered to respond to the survey. As Professor Dominic Regan succinctly summarised the position: “rubbish in, rubbish out. Dodgy data, nothing doing”

Lord Dyson concluded:

• there should not be an additional Grade A star
• that separate GHR bands specific to specialist fields of civil litigation should not be introduced
• that separate rates should not be introduced for detailed assessments of costs, but that there should be greater flexibility in detailed assessments than would ordinarily be shown in summary assessments
• there should be no new Grade E fee grade for paralegals (this would have led to reductions in rates for some Grade D fee earners in Band One from £118 to £75 – a 36% reduction)

The only “changes” Lord Dyson accepted were that:

• the criterion for Grade A fee earners should be amended so that it includes Fellows of CILEX with 8 years’ post-qualification experience
• that Costs Lawyers who are suitably qualified and subject to regulation be eligible for payment at GHR Grades C or B, depending on the complexity of the work

The changes are to come into force on 1 October 2014.

The actual wording of the recommendation in the report for Costs Lawyers was:

“The ACL provided evidence giving details on the qualification route, continuing professional development and regulatory framework for Costs Lawyers. The Committee agreed, and determined that the following approach should be adopted for those Costs Lawyers who are suitably qualified and subject to regulation under the Legal Services Act 2007 to undertake reserved legal activities:

(i) For budgeting and bill drafting, save in exceptional circumstances, Costs Lawyers should sit within the grades for Grade C and D fee earners;
(ii) For practising litigation and advocacy, save in exceptional circumstances, costs lawyers should sit within the grades for Grades C or B."

The amendments for Fellows of CILEX with 8 years’ post-qualification experience and Costs Lawyers are largely changes of style rather than substance. The courts have always had the power to grant experienced Fellows rates equivalent to Grade A rates in appropriate cases and the Senior Courts Costs Office has always accepted that more complex bill drafting may justify Grade C rates and advocacy may justify Grade C or even Grade B rates. The only small extension is to now recognise (costs) litigation in the category now potentially justifying Grade C rates. The only real disputes will be the level of complexity that will be required to justify Grade C or B rates. I anticipate that there will be little real difference to what has gone before.

The Association of Costs Lawyer’s email alert on the news rather misleading stated:

“[Lord Dyson] has however accepted that Costs Lawyers should be recognized by being included in the banding at, predominantly, Grade C and B”.

Lord Dyson appears to have accepted the Report’s recommendation. He has not rejected the reports view that budgeting and bill drafting “should sit within the grades for Grade C and D fee earners”.

As with judgments, never just read the headnote.

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