REUTERS | Toby Melville

It’s time to have your say about costs management

A little over four months ago, the costs management pilot that had been running in Birmingham was extended to all TCC and mercantile courts until 30 September 2012. The team monitoring the pilot has now published an interim report.

Some may consider it odd that an interim report has been published so early into the pilot, but perhaps given the initial lack of enthusiasm for the pilot, particularly in London, this is a way for its authors to gather support and encourage more TCC users and its judges to participate.

Failure to participate

One of the striking features of the interim report is the small number of survey questionnaires that the team had received. The interim report describes this rate of return as “slow”.

As of 30 January 2011, the team had received:

  • 11 solicitors’ questionnaires (seven from the Birmingham mercantile court). Nine of these solicitors then discussed their answers with the team.
  • 32 judges’ questionnaires (16 from the Birmingham mercantile court and six from the Birmingham TCC). Of the remaining 10 judges’ questionnaires, only one came from the TCC in London.

It is clear that those familiar with the Birmingham pilot are more willing to take part in this extended pilot. For example, HHJ Simon Brown QC is an advocate of costs management and has spoken widely on the subject (you can also listen to him, in two PLC podcasts on costs management). The report notes that other judges need to be contacted to see if the rate of return for questionnaires can be improved.

As for solicitors, the interim report notes that it is disappointing that no solicitors’ questionnaires have been returned from the TCC in London, where the highest value claims are dealt with. One wonders whether this is due, in part, to the number of case management conferences (CMCs) that may have been listed over the last four months, or whether it demonstrates a greater degree of apathy towards the pilot.

Advantages and disadvantages of costs management

Much has been written about the pilot and the anticipated problems (whether real or perceived) with judges carrying out costs management as part of case management. The interim report looks at these issues, which it considers as benefits or disadvantages, and also notes a number of issues that might improve the pilot.

With so few responses, it is premature to draw any firm conclusions, but the following are of note:

  • On average, it takes two-four hours to complete precedent form HB. Some considered it time consuming and an unnecessary increase in costs. Others were using a costs draftsman to complete the form, which was increasing the costs of preparation even further.
  • Too often preparation of form HB (and costs budgets generally) is delegated to junior members of the team, instead of an experienced litigator.
  • Many had experienced technological issues with form HB. Interestingly, this reflects feedback received by PLC. Some requested that the form should be available as a download in Excel, which would give more flexibility, and prevent the current practice of some firms simply retyping the form into Excel to achieve this.
  • There was no consensus among solicitors on how form HB could be improved.

Despite these concerns, there are some positives:

  • Preparing form HB focuses the parties’ minds on the costs of litigation. Knowing what the other side thinks the litigation will cost creates greater transparency and ensures clients are more informed about their potential liability. This might assist settlement.
  • The judges did not think the current cost management procedures need to be improved. It is more a question of educating the parties that they must file cost estimates. The judges did wonder whether cost estimates should be verified by clients, like a statement of truth, but more along the lines of “My costs budget has been explained to me and I understand that I will be liable to pay £X. I accept that this is a reasonable budget.”.
  • Costs management works where there is continuity of the judge from the start to finish of a case. The judges questioned whether it would work without such continuity.
  • The judges think the pilot encourages proportionality of costs relative to the value of the claim.

Shape of things to come

Most commentators believe that costs management is here to stay and will eventually be rolled out to other courts. If that is the case, unless those currently affected by the pilot take part and contribute their views, they will be unable to influence the future of costs management.

The interim report concludes with the hope that more solicitors will participate. Now is your chance to have your say. Don’t lose it.

2 thoughts on “It’s time to have your say about costs management

  1. West African Gas Pipeline Co Ltd (WAGPCL) and Willbros Global Holdings Inc (WGHI) are in dispute, with WAGPCL claiming some US$273 million under a guarantee. The dispute relates to a on-shore gas pipeline in West Africa and is being heard by Ramsey J in the TCC.

    A number of issues have been before the court, with the latest dealing with alleged inadequacies in WAGPCL’s disclosure. WGHI claims it has wasted some £1.8 million in legal fees and other costs (including experts) as a consequence.

    The reason we have mentioned this here is not because of the disclosure issues, but because this is the first reported judgment since the start of the extended costs pilot to refer to a CMC (it took place on 1 December 2011). In addition to dealing with disclosure, the judgment refers to the future conduct of the proceedings, including pleadings and expert evidence. There is no mention of costs management.

    This leads us to wonder about a number of things:
    • Assuming the parties did complete form HB, as required by the pilot, was there was any discussion about costs management at the CMC?
    • How did the parties complete the contingency part of form HB to deal with the alleged inadequacies in disclosure (which included a failure to collect documents, to properly redact them and to de-duplicate them).
    • Whether judges are able to cost-manage a claim for US$273 million in light of Ramsey J’s reluctance to assess summarily the wasted costs of the inadequate disclosure exercise (although this was, in part, due to the way the experts’ fees were presented). Surely all estimates will contain “round figure estimates”.

  2. To allow practitioners time to familiarise themselves with the new rules and to prepare for the changes ahead, details about the new costs management regime and proportionality test, due to be introduced in April 2013, were released at a Law Society seminar on 29 May 2012 (see Legal update, A revolution in litigation practice: details of the costs management rules taking effect in April 2013).

    Ramsey J’s speech (annexing the new rules and Precedent H) can be accessed on the Judiciary website.

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