Legal Cost Specialists

Dividing bills of costs by phase

I’ve commented before on the fact that whatever the merits of the Jackson costs reforms, the implementation process has been truly botched. Nowhere is this more apparent than the introduction of costs budgeting.

There are obviously myriad problems with costs budgeting as it currently stands but one of the most serious issues, that is only now becoming truly apparent, is the introduction of costs budgeting without amending the bill of costs format.

Although work progresses with a new bill of costs format, to mirror the phases of costs budgeting, we are still many months away from anything being formally introduced.

This is not simply a dry theoretical issue, but a problem that is beginning to cause serious problems as part of the detailed assessment process.

CPR 3.18 states:

“In any case where a costs management order has been made, when assessing costs on the standard basis, the court will –

(a) have regard to the receiving party’s last approved or agreed budget for each phase of the proceedings; and

(b) not depart from such approved or agreed budget unless satisfied that there is good reason to do so.”

The first problem stems from the fact that it is “each phase” of the proceedings the court must consider and not depart from the same. This means it is not sufficient for a budget to be approved at £100,000 and for the costs to come in at £99,000. The court must consider whether costs have come in on budget for each phase (Precedent H containing 10 main phases plus contingencies).

For a judge on assessment to fulfil their duties under CPR 3.18 they therefore need to know what costs have actually been incurred for each phase. The “good reason” to depart from the budget must, in this context, clearly refer to each phase. For example, if a case was budgeted based on a one-day trial but the case runs into two days, that may be a good reason to depart from the Trial phase of the budget. It would be no reason to depart from the budget in relation to the Witness Statements phase, Disclosure phase, etc.

The second problem comes from PD 3E para.7.4:

“As part of the costs management process the court may not approve costs incurred before the date of any budget.”

This provision is easily overlooked. What is often referred to as an approved budget, is often a budget consisting of two elements. The first being the “incurred” costs that the court has not (and cannot) “approve”. Those costs are subject to detailed assessment in the ordinary way. The second part of the budget is the future estimated costs that are the part the court has approved and which are subject to CPR 3.18(b).

This means that a judge on assessment needs to know not only what costs have been incurred by phase, but also how this is split between pre and post-costs management order. It might be arguable that there is no need to split the pre-costs management order work between phases, as this is all open to assessment in the normal way, but this is unlikely. Where a budget has been served showing incurred costs by phase, it would be doubtful a court would allow a party more costs that those shown in the budget for that phase and period. It does not mean the figures would be allowed as reasonable between the parties simply because they mirror the costs shown in an estimate for incurred costs, but it is likely they would act as a cap (the purpose of the “incurred” section of the budget being to allow the other party to know what their potential liability is for the work done to date).

The problem with the implementation process is that there has been no formal amendment to the standard bill of costs format and the current rules contain no requirement to draft a bill by phases or identify pre and post-costs management order work. A bill that enables the court to undertake its job properly would potentially need to be divided into 20 parts (10 phases each divided between pre and post-costs management work) plus further phases for any contingencies.

Anecdotal evidence suggests some courts are already striking out/ordering to be redrawn bills that are not properly divided where there has been a costs management order made. Other anecdotal evidence is that some courts are striking out bills that are clearly divided by phase on the basis that such bills do not correspond with the current rules (this is nuts as PD 47 para.5.8 is drafted widely enough to give a discretion to divide bills into two or more parts where this is necessary or convenient to do so).

I’ve previously commented on Lord Justice Jackson’s recent recommendations concerning costs budgeting that:

“Until the new form bill of costs is developed, in those cases where detailed assessment proceedings are commenced, the receiving party should lodge a summary of its bill in a format which matches Precedent H”

That appears to be the absolute minimum as to what should be expected but why are we now over two years down the road since costs budgeting was introduced (more if you count the pilots schemes) with still no proper rules to deal with this? Common sense dictated that the existing bill of costs format would no longer be fit for purpose when the costs budgeting rules were introduced in April 2013.

15 thoughts on “Dividing bills of costs by phase”

  1. According to Alexander Hutton QC speaking last week at Hailsham chambers conference – mandatory pilot scheme for new bill format for all SCCO matters is expected April 2016.

  2. Its truly stunning to contemplate, that those “developing” the new bill format, are taking this long, when all one has to do is divide the work in exactly the same way, as you cost a file for a budget, and present the bill accordingly
    As with many things to do with costs, there appears more time and cost wasted on having committees and jolly old internal debates (ACL anyone?) than applying common sense

  3. north west calling

    It is not rocket sicence to split bills into pre & post budget being prepared) and into phases, although responses from Defendants to bills split in such a way varies significantly.

    The new bill format may not be linked solely to this issue but also the ‘j-codes’ issue as well which also may be part of the pilot?

  4. Me and my Cat

    We do not need a new bill or even a new budget. It’s a simple rule adjustment from “by Phase” to “total amount”. Tadaaar.

    The whole capped by phase, regard to constituent elements blah blah is tosh.

    You have a budget split by phase and a phase split by content. This is to help the court reach a TOTAL. Come in under that total, and Jackson wins.

    What’s so hard about that? You’re welcome.

  5. @ north west calling
    Defendant negotiators in the main have little understanding of budgets or bills, hence the patchwork response you receive; the point is, it is parties duties to the Court that comes first, so producing a bill which isn’t properly split to accommodate the budget phases, sees you fail your first duty

    As to these J-codes, what a debacle they will be! Claimant fee earners hardly know how to time record without a case management system doing it for them, asking them to enter the right code as they work I have no doubt will kill of the budget regime entirely

  6. How on earth can the SCCO set any timetable for lodging Bills in a new style format when 90% of lawyers aren’t even phase recording let alone applying J-Codes to the work on their Billing guides – It is the Solicitors that need advising not ACL members we only work with what we are given – Imagine trying to draft a new format Bill where you have to apply J-Codes but time is simply block recorded in a vague manner on a billing guide with generic entries for work types – whole thing is an utter farce.
    When I talk to clients 95% of them of which are London based they have no idea about any of these requirements… Its a joke the system is set up purely for magic circle firms who have the IT systems and inclination to adopt the process

  7. @Anonymous on July 3, 2015 at 4:50 pm

    Clearly you didn’t read ‘me and my cat’s’ comment. They said make a rule adjustment – they didn’t say that is what the rule is.

    I love it when people are stupidly rude to someone and then they end up looking like a fool themselves for being too lazy to read the actual comment!

  8. @ Richard

    I indeed read fully what Mr Cat-lover said, which is not a simple rule ‘adjustment’, but a fundamental misunderstanding of the whole point and purpose of the Rules on budgeting (which are part of Case Management, as you hadn’t noticed)

    I am however so pleased at where you derive your amusement, and on that score, clearly you are well a head, Richard

  9. @ “Me and my Cat”

    I don’t know who the “other” anonymous poster is, but it strikes me, he does have a point. Budgeting is only 1 part of Case management. CPR 3.17 makes it clear, budgets are to assist the Court in making case management decisions “in each procedural step”. Your suggestion of ignoring phase costs in preference to just the “total”, does rather miss the point

  10. Me and my Cat

    @ Helpful anon

    Gotcha, and a valid point.

    My only retort, such as it is, would be to say that I did think this was a discussion about splitting bills. These are normally at the case end and thus irrelevant to the case management. When approving a budget and/or using the budget as a yardstick by which to assess a Bill; it would be easier if we just looked at the total instead of fixing the court into Phases.

    No new bill format needed. We all know the new format will be, pardon the expression, cack.

    I was not saying bin phases entirely.

    At the end of the day there is often so much overlap between phases, or work done could sit in one of several phases, that isolating costs within a phase at budget or bill stage is all a bit of a sham anyway.

    Of course, I have now learned that if one dares to post an off the cuff (and perhaps too flippant) remark on a blog whilst munching on a tuna sarni, then one does so at one owns peril unless one first carefully consults the white book, checks with colleagues and google’s for his very life. 🙂

    I am right though.

    So there, with knobs on, @ unnecessarily rude anon @ 4.50pm last week.

  11. Northern Costs Muppet

    A court in the north west has requested a preliminary hearing to discuss the issue regarding the fact that a bill does not mirror the budget and hence makes it impossible to tell whether parts have been exceeded etc.

  12. We have designed our own bill, which works very well and cannot cause any complaint by either the Court or paying parties. I can’t believe how many bills I am receiving which are not split at the point of budgeting. Instead, the whole bill is split into parts by budget phase with no differentiation between pre- and post-budget costs. I have also received a number of bills where the different proportionality tests apply and yet they are not split at 1 April 2013.

    Regardless of the bill format, if the client hasn’t recorded their time by budget phase after the point of budgeting then the process of drafting a detailed bill verges on farcical. Teasing out how much time should go into various phases for each chunk of work done, e.g. drafting a 3 page letter, is a time consuming and challenging task and highly subjective.

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