Practical Law

My last blog on cost management was, I now appreciate, rather boldly titled “Cost management by the courts is here to stay”. I was writing in the context of the TCC but my thoughts were soon endorsed when the judiciary announced that the cost management regime would be applied to all multi-track cases in all courts save for the Commercial Court.

Cost Management here to stay in the TCC

I had therefore thought that it was not open for debate whether active cost management was appropriate for all TCC litigation. After all, it was Jackson LJ, a former Judge in Charge of the TCC, who had put forward the idea in the first place. It seems clear from his final report and subsequent public announcements that cost management underpins the whole of the civil litigation cost reforms; it goes to the very heart of them. The only surprise was the continued decision to exempt the Commercial Court from the regime (more on that later!).

The TCC’s support continued when Ramsey J, also a former Judge in Charge of the TCC took the baton from Jackson LJ and himself began lecturing on the benefits of cost management. Together with Brown J (known for championing the earlier Birmingham pilot), he has continued to promote it over the last year.

It was then a huge surprise when, on 18 February, only a few weeks before the new rules are due to come into force it was announced that, in addition to the Commercial Court exemption, automatic cost management would not apply to cases worth more than £2m in the Chancery Division, TCC and Mercantile Court.

Forum Shopping

It now transpires that, despite a lack of substantive published data to suggest that the pilot was not working, there was a body of dissenters who, it seems, were persuasive at the eleventh hour.

The basis for such dissent was the feeling that the other specialist courts, including the TCC, should have parity with the Commercial Court. There has been understandable concern that the Commercial Court’s exemption from cost management may lead to forum shopping by parties not wishing to be subject to the judicial scrutiny that comes with budgeting: they would opt for the Commercial Court for this reason.

My view has always been that it is the Commercial Court that should step into line with the TCC and Chancery. I do not accept that the nature of the cases in, and the parties using, the Commercial Court are sufficiently different to justify its exemption.

As for high value litigation, surely cost management is even more vital in these cases, not less. TCC judges are regularly faced with high value complex cases but there has been no suggestion from the two main proponents, Ramsey J and Jackson LJ that it wouldn’t work for such cases, so why exempt the TCC now?

What does it mean for us and our clients?

There may be a feeling of relief among some practitioners who think that the majority of their caseload won’t be subject to the provisions of Section II of CPR 3 and PD 3E. Viewed objectively however, we must realise that this is a hugely backward step for the management of high value complex civil litigation in this country. Rumours suggest a concern that a system of rigorous court-managed budgeting will put our courts at a significant disadvantage to forums in other jurisdictions. I am not sure that I agree, particularly from a construction perspective. Our clients manage high value complex construction and engineering projects and do so by reference to a budget. They expect the same of us.

Cost management, as Jackson LJ has always said, is a tool to promote effective case management at proportionate cost. Isn’t this just what our clients ask of us? The benefits of knowing what the other party’s expenditure is likely to be far outweigh the inconvenience of budgeting. We are already preparing estimates for our clients: exchanging this information means we can be more effective in advising our clients on strategy.

Confusion and anomalies

So where does this leave us? Quite apart from the frustration that comes from having relentlessly highlighted to our lawyers that completion of Form H will soon be a mandatory part of their case management, we are now left with confusion and uncertainty:

• Will the TCC judges apply cost management anyway, notwithstanding that it will not apply automatically? If so to what extent?
• Will CMOs still be granted for large value cases and if so, in what circumstances?
• Will parties overstate the value of their claim in order to fall outside the automatic cost management regime?

In addition, as part of the transitional arrangements from April 2013, cases that are already subject to the pilot will continue to apply the regime, leading to yet more inconsistencies.

The Future

The recent “revisions” to the rules on cost management are touted as “interim measures” that will be “revisited”. It is anyone’s guess when this will be, and what will be the outcome? In the short term it means more waiting and a continued lack of clarity for us and our clients.

I for one have given up trying to anticipate what will happen in the future. Having been a true supporter of cost management I feel that all the efforts and resources that have been committed by so many, have been undermined by what I see as an incredibly short sighted and reactive last minute decision by the judiciary.