Watching the implementation process of the Jackson reforms has often been like witnessing a slow-motion car crash. It has certainly been in slow-motion, with his original report being published all the way back in May 2009 and his final report being published in December 2009, but with elements still to be introduced and practitioners and the courts still grappling with the basics of those already with us.
The interesting thing about all this has been that much of the undermining of the reforms has come not, as might have been expected, from a reluctant legal profession. Most problems have come from the judiciary.
Costs budgeting is an obvious example, with some sections of the judiciary trying to avoid the process entirely, others, at least initially, wrongly treating the exercise as mini-detailed assessments, others postponing the costs management process to such a late stage in the litigation that it has become irrelevant.
The latest example, I would suggest, is the decision by Regional Costs Judge Lumb in Merrix v Heart of England NHS Foundation Trust (Birmingham, 13/10/16).
The issue was summarised as:
“In summary, the Claimant receiving party submits that if her costs are claimed at or less than the figure approved or agreed for that phase of the budget then they should be assessed as claimed without further consideration. The budget fixes the amount of costs recoverable and the costs can only be reduced if the Defendant paying party satisfies an evidential burden that there is a good reason to depart from the figure in the budget. The Defendant paying party’s position is that the Costs Judge’s powers and discretion are not fettered by the budgeted figure for the phase but that the budget is but one factor to be considered in determining reasonable and proportionate costs on assessment.”
The “problem” that arises stems from the, apparently, clear wording of CPR 3.18:
“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.”
As always, the full judgment is essential reading to understand the decision reached. However, I hope I am not doing a disservice to the carefully reasoned judgment by suggesting in can be summarised as follows: A costs budget provides a cap as to the recoverable costs unless there is a good reason to allow a higher figure. To the extent to which a receiving party has incurred costs within that budget, everything is open to challenge in the normal way.
So how might this work in practice? A successful party has an approved budget of £80,000. They incur costs of £100,000. In the absence of a “good reason”, the costs will be capped at £80,000. However, the paying party is free to challenge the costs claimed in the conventional way. The £100,000 bill is reduced by a typical one-third to around £67,000. So, despite having an approved budget of £80,000, and incurring costs in excess of this amount, the receiving party’s costs are reduced to significantly below that budgeted figure.
It is difficult to see how this approach, if correct, is going to deliver the costs certainty to litigants that costs budgeting was intended to or how this will meaningfully reduce the number of detailed assessments.
And Lord Justice Jackson quietly wept.