Ellis Grant

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At he beginning of February this year the Court of Appeal handed down judgment in two costs appeals that had been heard consecutively in December 2009 and which shared common issues. 

The first of these, O’Beirne v Hudson [2010] EWCA Civ 52, involved facts that will be very familiar to all practitioners running high volume low value personal injury cases.  The claimant was the driver of a car and  the victim of a rear-end shunt at a roundabout.  Proceedings were issued claiming general damages exceeding £1,000.

Before the case had been allocated to any track, the parties negotiated settlement at £400 general damages plus hire charges of £719.06 together with “the claimant’s reasonable costs and disbursements on the standard basis, to be subject to detailed assessment if not agreed.”

In the second case, Drew v Whitbread [2010] EWCA Civ 53, the claimant fell from a ladder in the course of his employment and suffered lower spinal injuries with on-going symptoms.  Proceedings were issued claiming damages exceeding £1,000.  The matter was allocated by consent to the multi-track, albeit the defendant had suggested the value of the claim was fast track.  The claim for special damage climbed to over  £30,000 and the claimant also sought a Smith v Manchester award.

Unlike in O’Beirne, the parties in Drew were unable to settle the case and the matter went to trial over two days.  The claimant succeeded on liability but with 25% responsibility for his own injuries.  Total damages were £9,291.56 which included an award under Smith v Manchester but, on the basis of the joint experts’ reports, no award was made for future losses for care.

The defendant had made a Part 36 payment into court of £6,000 which fell short of the sum awarded but made conduct points within  costs submissions under CPR 44.3, alleging failure to negotiate on the part of the claimant,  exaggeration of the claim, and unreasonable conduct over agreement of the joint experts’ reports.  The Recorder refused to make a special costs order on grounds that  it had been open to the defendant to protect its position on liability by making a Part 36 offer and found that alleged exaggeration was no more than “just the cut and thrust of litigation”.  In the otherwise normal order for the claimant’s costs of the action  to be assessed on the standard basis if not agreed, the Recorder gave express permission to the defendant “to raise on detailed assessment all issues relating to the costs incurred in relation to quantum including in particular all costs relating to correspondence with and of the medical experts since the 4 August 2006″.

On detailed assessment and the subsequent appeals the principal issue in O’Beirne was whether the costs could be assessed by reference to the small claims track regime (ie effectively fixed costs) notwithstanding the agreement of the parties that the claimant should be paid reasonable costs on the standard basis.  In Drew, the two related issues under appeal were whether and to what extent the costs judge had the power to revisit conduct issues on the detailed assessment, and assuming she could, whether trial costs could be assessed as if the matter had  been pursued  as a fast track trial (the defendant’s point being that but for the claimant’s unreasonable conduct, the trial would  have concluded in one day and not two).

The Court of Appeal’s decision in O’Beirne was that it was not open to the court to rule that the costs would be assessed on the small claims basis, because the consent order provided that they be assessed on the standard basis.  The sting in the tail of that decision is then found in paragraphs 16 and 17 of the judgment of Waller LJ where he says “… in making an assessment  the Costs Judge is entitled to take account of all the circumstances (see CPR 44.5(1)), including the fact that the case would have almost certainly have been allocated to a small claims track if it had been allocated.  In doing so he would have regard to what could or could not be recovered if the case had been so allocated.”.

Later in paragraph 19 the judgment in O’Beirne continues “There is a real distinction between directing at the outset [of a detailed assessment]  that nothing but small claims costs will be awarded and giving items on a bill very anxious scrutiny to see whether costs were necessarily or reasonably incurred, and thus whether it was reasonable for the paying party to pay more than would have been recoverable in a case that should have been allocated to the small claims track.”

Hence it is now possible to allow costs no greater than a small claims track award in cases where the parties have agreed that costs be assessed on the standard basis, provided that the allowance is made following an assessment of what costs were  reasonably incurred.  One may assume that one of the considerations on assessment will be to determine whether  the case would inevitably have been allocated to the small claims track.

The test in determining that issue  should, I venture to suggest, be the same as was applied in the pre-CPR cluster of 22 costs appeals arising  from accidents in the workplace and gathered under the title Afzal and others v Ford Motor Co Ltd and other appeals [1994] 4 All ER 720.

The costs regime at that time  in the county court was, as many will recall, to refer claims under £1,000 automatically to arbitration for summary resolution.  No costs could be recovered in such cases.  Hence, unsurprisingly, many claimant lawyers would employ the tactic of valuing even small claims at over £1,000 in order to avoid the automatic reference.  In some of these cases defendants would pay sums into court below £1,000 and then, when offers were accepted, argue on taxation (as it then was) that despite the deemed costs order (notice of acceptance) , no costs were reasonably payable.

In the Afzal cases the Court of Appeal found that if the plaintiff could not reasonably expect to be awarded more than £1,000, it was a misuse of process to claim damages limited to £3,000.  This meant that in cases where a low payment in had been accepted (even in  Green v British Gas where the figure was £875) it was permissible to deem that the case did not “involve” more than £1,000 and deem it automatically refereed to arbitration  - with no costs recoverable.

In future detailed assessments for personal injury cases that settle before any allocation and  below £1,000 general damages  I anticipate that defendants will advocate through points of dispute that the costs officer should review expert evidence and reach a finding that the claimant could not reasonably have expected to be awarded more than £1,000, that the only sustainable allocation would have been small claims track, and that in all the circumstances it would not be reasonable for the claimant to recover more than a sum equivalent to fixed costs. 

Back to Drew.  The Court of Appeal took the opportunity to clarify  and confirm the wide powers of the court on detailed assessment.   The defendant argued on detailed assessment and through the appeals  that costs should be assessed by reference to the fast track.  The claimant maintained that by virtue of Aaron v Shelton, not only should the defendant be precluded from arguing a point on assessment that had not been raised when the costs order was being made, but also that the failure to obtain a special order for costs prevented the defendant from having a second bite at those conduct arguments before the costs judge.

The Court of Appeal recognised that there may be rulings made by the trial judge that bind the costs judge but (at paragraph 26) Waller LJ went on to state  “more often than not the costs judge has material which the trial judge did not have, and thus will not be bound .”  At paragraph 31 the judgment continues “In my view it would not be consistent with the express provisions of 44.3 and 44.5 and with the court’s duty to see that costs are proportionate and reasonable to preclude a party raising a point highly material to that question because it had not been raised before a judge under 44.3.”

The fact that exaggeration was raised in Drew before the trial judge did not, it was decided,  prevent  the costs judge from considering conduct assessing whether particular items should be allowed , including (at paragraph 39) “the question whether the case in reality was a fast track case.”

Aligning Drew with the decision in O’Beirne, Waller LJ determined that it was not permissible simply to rule that the costs should be on the fast track basis.  However, had the costs judge  given separate consideration whether the trial would always have been likely to run into a second day, it would have been open to her to conclude that but for the claimant’s conduct the trial would have finished in one day.  Had that been the decision-making process then the equivalent of the O’Beirne approach may have produced a recovery no greater than fast track trial costs.

The implications for future assessments are that they are likely to be harder fought on conduct issues.  The decisions open to costs judges to limit costs in dramatic fashion (provided they do so at the end of an assessment and not at the outset) could go some way to achieving Lord Justice Jackson’s proposed tougher line on proportionality without a rule change.

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Resistance was futile. Once I had played with a demo iPad for 2 minutes and it was clear that the Apple Store at Bluewater was well stocked, there was only one possible outcome. 24 hours later and I’ve hardly had it out of my hands. 1- I’m finding the typing far more accurate than on my iPhone, as you would expect. It’s the size of the keys that makes the difference, not the fact that it’s a soft keyboard. 2- The resolution of images on the screen is very high. The built-in use as a digital photo frame is highly effective and watching Andrew Marr on BBC this morning (streamed on TVCatchup not iPlayer) in the kitchen was remarkably sharp. 3- Any app optimised for the iPad is very nice indeed. if it’s an iPhone app the zoom just makes it fuzzy. 4- The iWork apps are first class, especially Pages. This gives you an option to open either a downloaded Word file from Dropbox or a Word email attachment in a proper word processor not just a viewer. It doesn’t cope though with tracked changes. Instead it accepts any changes in the document and just gives a nice display. Same with Excel and Numbers (although it didn’t have enough memory to cope with a 25MB Excel file I downloaded from Dropbox) and I haven’t got to the normally excellent Keynote ye 5- Battery life is holding up very well at around 10 hours. I bought the £30 case and it is pretty good at propping it up or acting as a stand. Very clever alternatives will no dot emerge from the aftermarket. 6- I haven’t tried to read a novel yet but will load a couple before my next holiday. The indexing, dictionary and search functions are pretty slick. The iBook store is not comprehensively stocked yet but its march will no doubt be inexorable as iTunes has proved. The page-flicking is dead easy and very forgiving to minimum effort. I have not read anything for long enough yet to suffer any star in from reading a back-lit display. 7- I’m not a gamer but have had a go at Scrabble and may look at Chess and Bridge Baron. 8- Signing up to a 3G service was a royal pain in the arse so I’ve parked that until after the holiday weekend. 9- I’ve even played around with our prototype web app on it. Exceptionally interesting potential there. 10- For surfing in front of the tv it’s pretty perfect.

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Costs management is felt by many to be the one key Jackson proposal that will be implemented swiftly.  Even under existing case management powers, courts are increasingly embracing costs budgeting, especially in larger cases.

A very recent example is in the group action brought by 70 Columbian farmers against a subsidiary of BP for damage to crops and farmland allegedly caused by the laying of the OCENSA pipeline.  Senior Master Whittaker has in that case ordered both sides’ solicitors (Leigh Day and Freshfields) to prepare costs budgets and to update them on a monthly basis.

Costs estimates have of course been an increasing feature of litigation for some time.  However, they have yet to become authoritative or reliable.  There are many reasons for this, including to some degree the inherent unpredictability of litigation.

The central problems though are of both form and (lack of) common methodology.  Too often over the last two years I have found myself in costs-capping applications trying to compare apples with oranges.  The rather amorphous nature of estimates and bills of costs as currently submitted also creates difficulty in comparing estimates with actual costs incurred on a like-for-like basis.  This is particularly felt in the majority of cases that do not reach trial when there is no easy way to disassemble an estimate to trial to show how it properly compares to the costs incurred up to settlement or other early disposal.

Thus despite the current Costs Practice Direction (“CPD”) requiring solicitors to provide an explanation on assessment if an estimate have been exceeded by more than 20%, unless the case concludes at trial the court cannot tell easily the extent to which an estimate has been exceeded.

As ever, the devil is in the detail, and the major obstacle to costs management is the absence of a consistent system of identifying cost categories from estimate to time recording through to assessment.

Solicitors tend now (and in part are required under the CPD) to set out estimates and prepare costs claims grouping items by activity (eg drafting, attending, telephoning) rather than by the tasks to which those activities were directed (eg , preparing a witness statement, compiling client’s disclosure documents).  Unfortunately this leads to most estimates and bills of costs being opaque and uninformative.

Having looked closely at the Uniform Tasked Based Management System (“UTBMS”), which was developed in the mid-1990s and is used widely in North America, it became clear during the Jackson review that a more logical form of grouping is based on task first and activity second.  It is also useful to further group tasks into a smaller number of “phases” or “aspects”.  If each set of related tasks is attached to an aspect (e.g. the aspect disclosure might be formed of the tasks including client’s disclosure, opponent’s disclosure, inspection etc) there is immediately a higher level available for measurement, comparison and analysis, allowing a view of the wood rather than the trees.

 A standardised set of tasks would enable an estimate to be prepared, time and other costs to be recorded, and a claim for costs to be prepared and then assessed by reference to such tasks.

In his final report, Lord Justice Jackson endorsed the three-tiered Aspect/Task/Activity approach (see Ch. 45, para 5.6) so that “costs information can be extracted at different levels of generality”.

Developing an agreed standardised set of tasks is thus key to this process and will need to cater for all parties to the litigation, whether they be claimant, defendant, respondent, interested party or others; and all types of litigation, to include for example normal Part 7 claims, Part 8 Claims, and appeals.

Most solicitors now record time spent on fee earning matters on sophisticated practice management systems (“PMSs”), but they invariably employ a very unsophisticated set of activity descriptions.  In order to facilitate the approach that the senior judges want, a means must be found to record for each time entry the task in respect of which the work in question was undertaken.  This is a challenge that should not be beyond legal technology but before that, an agreement over what generic task descriptions should be is the next logical step on the road to implementation.

 

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It’s a part-heard detailed assessment and parts of the hearing were held in private but Buxton v MGN (Master Haworth, SCCO, 18 March 2010) provided more clear support to the notion that media defendants are having greater success this year in challenging claimant costs.

Firstly the decision on rates was, in the context of libel cases, indicative of downward pressure and a more robust approach to proportionality

Grade A £350, Grade B £220, Grade C £175 and Grade D £125 – all for work in 2009 on a case that settled for £30,000 damages.

Secondly, although the costs judge was reluctant to make a global Lownds decision at the outset (not being overly shocked by base costs of £62,692 – even for a case that settled inside 10 weeks of publication), by the time the detail was examined Master Haworth was persuaded that several items of the costs claimed were “grossly disproportionate”.

Earlier that week the same solicitors, Atkins Thomson, had settled another costs claim against MGN (arising from a privacy action) for virtually half the costs first claimed.

 

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It’s important to us at Feesability to establish a simple price-banding structure that will be proportionate to usage levels while maintaining a liberal approach to the number of users who can log in under a single account.

Here are some of our thoughts –  we would be very pleased to receive comment from potential users and other interested parties.

In the context of our costs-budgeting application we focus initially on the person who will have primary day-to-day conduct of a case. And by a case we mean a civil dispute (non-family) that would be allocated to the multi-track if reached that procedural stage.  Hence a case would include anything from a serious personal injury to a £ multi-million commercial dispute.

The person with day-to-day conduct might or might not be the client partner but is the one who would be primarily responsible for compiling a costs estimate (and for whom we hope Feesability will become indispensable)

We would like to compile data on the number of cases that person could have active at any one time.  The better informed we are on this issue over the next two months the more transparent our pricing model can be when we launch.

So please let us know what your numbers are, individually or within your department or firm.  Likewise we would be interested in reviewing any independent data that may be out there on caseload.

Feel free to comment on this blog, on twitter @Feesability or by email to info@feesabilityhq.com

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An Integrated Approach to Costs Management

Introduction

1.1           This paper sets out a proposal for an integrated approach to costs management in civil litigation from estimating, through time recording to budgeting review and assessment.  It is believed that if such an approach can be achieved, this will bring great benefits in terms of:

(a)            increased accuracy and clarity of costs estimates to litigants which can inform them in the decisions they make in respect of any piece of litigation;

(b)            providing meaningful costs estimates, schedules and bills of costs to the court so that cases can be managed efficiently and proportionately; and

(c)             where the actual costs vary from the estimate, allowing litigants, their lawyers and the courts to see clearly where the variations have  occurred .

2.              Problems

2.1           Estimates have been an increasing feature of litigation for some time.  However, they have yet to become authoritative or reliable.  There are many reasons for this, including to some degree the inherent unpredictability of litigation.

2.2           The central problems though are of both form and (lack of) common methodology.  The rather amorphous nature of estimates and bills of costs as currently submitted creates difficulty in  comparing estimates with actual costs incurred on a like-for-like basis.  This is particularly felt in the majority of cases that do not reach trial when there is no easy way to disassemble an estimate to trial to show how it properly compares to the costs incurred up to settlement or other early disposal.

2.3           A major obstacle is the absence of a consistent system of identifying cost categories from estimate to time recording through to assessment.  This proposal seeks to address that problem.

2.4           Solicitors tend now (and in part are required under the CPD) to set out estimates and prepare costs claims grouping items by  activity (eg drafting, attending, telephoning) rather than by the tasks to which those activities were directed (eg , preparing a witness statement, compiling client’s disclosure documents).  Unfortunately this leads to most estimates and bills of costs being  opaque and uninformative.

2.5           A more logical form of grouping  is based on task first and activity second.  It is also useful to further group tasks into “phases” or “aspects”.  If each set  of related tasks are attached to an aspect (eg the aspect disclosure might be formed of the tasks including client’s disclosure, opponent’s disclosure, inspection etc) there is immediately a higher level available for measurement, comparison and analysis, allowing a view of the wood rather than the trees

3.              A standardised set of tasks

3.1           Central to the approach proposed in this paper is to identify a standardised  set of tasks (ideally specified under the CPR) for each piece of litigation so that:

(a)            the estimate can be prepared;

(b)            time and other costs can be recorded; and

(c)             the claim  for costs can be prepared and then assessed;

by reference to such tasks.

3.2           Only with such a standardised set of task descriptions can an effective comparison be made and any proper analysis be taken between:

(a)            the comparative costs (whether estimated or actual) of each party; and

(b)            the estimated and actual costs of a single party (for example to assess the reasonableness of costs claimed and to improve the estimating process for the future).

Developing an agreed standardised set of tasks is thus key to this process.

3.3           Such a standardised set of tasks will have to cater for:

(a)            all parties to the litigation, whether they be claimant, defendant, respondent, interested party or others; and

(b)            all types of litigation, to include for example normal Part 7 claims, Part 8 Claims, judicial review and appeals.

3.4           For convenience (for example to facilitate time recording by reference to the standardised set of tasks), each task will be ascribed a standard code.

3.5           There is some tension between a set of tasks optimised for estimating and a set optimised for time recording and assessment of actual cost.  In respect of the former, it is necessary (or at least useful) to identify specific and discrete tasks in respect of which the fee earner can anticipate the likely amount of work involved.  The more generic the task descriptions, the harder it is to calculate a reliable estimate.

3.6           By contrast, with time recording, where the task has to be identified with each item or work undertaken, overly specific task descriptions become burdensome and it can be difficult to determine properly into which task a piece of work can be properly placed.

3.7           Accordingly, a unified and standardised set of tasks to cater for estimating, time recording and assessment of costs must represent a balance between these competing requirements.

3.8        

4.              The proposed approach

4.1           It is proposed that costs management in litigation proceed through the following steps.

(a)            Preparation at the outset of the case a plan and estimate on the basis of standard (or at least common) assumptions and standardised task codes

(b)            Disclosure of estimates and assumptions to the other side and the court

(c)             Consequent case management by the court

(d)            Fee earners on the case (solicitors and counsel) record time by reference to standard task codes

(e)            Periodic review throughout the case of actual cumulative costs incurred to date and if necessary a reformulation of estimates

(f)              On any costs awards, a review of the costs sought against the estimate

(g)             A review at end of the case of estimates against actual costs with a view to informing and thereby improving the reliability of estimating in future.

Preparation of a case plan and estimate

4.2           Estimating the likely costs in litigation remains at present somewhat haphazard and can be unsophisticated.

4.3           For the reasons outlined above, it is suggested that the following steps be adopted by a party to a piece of litigation in respect of an estimate.

(a)            The party identifies the assumptions in respect of which the estimate in prepared.  In time these assumptions, as developed in practice,  may too become standard

(b)            The party prepares a case plan and costs estimate.  The estimate will set out the anticipated amount of time expected for each fee earner on the case and other costs to be incurred for each relevant standardised task in the case.  For larger cases It is advisable to use appropriate case planning software for this.  Ideally, reports should be produced which not only set out the likely costs for each task in the case, but also an estimated monthly cost of the case going forward.  This provides a useful and early check for the client as to whether actual costs are exceeding the estimate.

(c)             The assumptions and the estimate are submitted to the court and other side, in the first instance at the initial case management conference.

4.4           A number of steps can be undertaken to improve the accuracy of an estimate.  Setting out at an early stage the assumptions on which the estimate is based is useful in this regard.  However, other guidance can be given (which may in time be  built into the case planning software), based on experience, to improve the accuracy of the estimate.

Time and cost recording

4.5           Most solicitors now record time spent on fee earning matters on sophisticated practice management systems (“PMSs”).  In order the facilitate the approach suggested in this paper, a means must be found to record for each time entry the task in respect of which the work in question was undertaken.  This is a challenge which should not be beyond legal technology.  Many PMSs have available spare fields for data entry.  Alternatively, PMSs invariably allow for a text narrative field for each time entry.  This can simply be used to enter the code for the task immediately before the usual time recording narrative.  For example:

“4.2 Attending with Graham Smith in preparation of his witness statement.”

4.6           Counsel also record time with some form of narrative.  Again, this could be recorded by reference to the standardised task codes. 

4.7           The alternative to recording this information pro tem, is for there to be a retrospective allocation of work done to the different tasks on the case.  This is likely not only to be less accurate but also more time consuming – adding an unwelcome layer of expense to the process

Periodical comparative review of cumulative actual costs to date with the estimate

4.8           At periodic intervals, as determined by the court, it will be necessary to compare the cumulative actual costs to date with the estimate.  If the approach set out above has been adhered to, this becomes a largely automated process and meaningful analyses can be quickly and efficiently produced.  At Appendix [], there is a sample comparison of estimate vs actual.

4.9           It is outside the scope of this paper to consider

(a)            the appropriate frequency of this periodic comparative review (whether on a solicitor/client basis or between the parties and before the court); and

(b)            the consequences of any material discrepancy between estimated and actual costs

Assessment of costs

4.10        Where there is an assessment of costs after an award of costs, one factor which should be taken into account is the comparison, on the basis of the standardised tasks, between the estimate and the actual costs incurred.  This will plainly be of the greatest application in respect of full detailed assessment at the end of the matter.  Whether this approach would also be at all applicable in respect of a summary assessment of costs or a detailed assessment in respect of part of a matter (for example, where detailed assessment is ordered in respect of an interlocutory application) is perhaps something which can be kept under review

4.11     

4.12        The developing use of information technology ought over time to enable many of these more sophisticated documents to be generated as reports from either bespoke software, reconfigured PMSs or popular office productivity applications. 

 

 

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“Well Andy, the empire strikes back!”

This is how the the Legal Director of a major media group greeted me recently and this was what he was referring to.

Critics say the timing is an attempt by the Labour government to soften the newspaper publishers’ attitude to them during this pre-election period.  Naive though it might be to ignore short-term political motives, this clampdown has been coming for a while and to those of us at the sharp end of costs in publication cases it signals the end of an extended term of one-way traffic.  Ten years of the unfettered recovery of success fees and ATE premiums and finally a hint of access to justice for defendants.

Carter-Ruck (for they are the most prominent CFA claimant factory in publication cases) should be wary of blaming the media lobby for this overdue clipping of their wings.  I am reminded of the old adage; whenever you point your finger, three point back at you.  The hat trick of own goals I believe they have scored are;

1. Frequently overstating risk in their CFAs
2. Uplifting fees that are already based on lavish base rates and eye-watering claims for time spent.
3. Using the encouragement given by the courts to stepped success fees to ramp up to 100% too early in proceedings.

The next unpleasant dose of reality to arrive at St Andrew Street is likely to be costs management as it evolves through the pilot scheme and presents an important opportunity to keep a grip on the stable door of base costs before that shire horse has bolted completely. 

 

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Congratulations to Nick Bacon of 4 New Square.

I had wondered whether it was time for a second costs specialist silk so today’s announcement came as no surprise.

Who’s next I wonder?  Alex Hutton or Ben Williams would be my guess.

 

 

 

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Our first notable costs result of 2010 fell short of a contested hearing.

Brief facts:

Libel claimant recovered nominal damages of £12,500 plus an apology.

Bill came in (including success fees and ATE premium) at a whopping £296,000.

Settllement in the week before a two-day detailed assessment  ……. £165,000.

Given the settlement included interest and the costs of the costs fight (a good eight months worth) this represented a major climbdown by the claimant.

No wonder media defendants are getting ready to test the water on a range of costs cases in the wake of the Jackson report. 

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It is fairly rare these days for us to take an assessment of costs between client and solicitors all the way to a contested hearing.

But the assessment hearing my colleague Justin Edwards appeared on yesterday was exceptional in every respect.

The bill (for administration of an estate) came down from £145,000 to £25,000.  Justin had advised our client to offer £30,000 so it became very expensive for our opponents in costs as well (to the tune of a further £18,000).

Their own costs would easily have exceeded the remaining £7,000 so it proved a salutary lesson in keeping one’s client informed as to costs.

A bill of £145,000 more than wiped out – plus a disciplinary referral to the Law Society.

 

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The costs profession has so far proved resilient in the face of rule changes.  The costs bar has flourished since 2000 and firms of low-grade costs negotiators have expanded.  But there is no doubt the Jackson Report presents the sternest challenge imaginable to all costs specialists.

Threats leap out from the confluence of a fixed costs regime in the fast track, the desire to demystify costs, litigation budgets progressively set to replace detailed assessment and the use of technology largely to automate the production of estimates and bills.

We cannot be certain of the pace of change but it would be foolish not to prepare for the inevitability of wide-ranging reform.

Fixed costs in fast track cases

Whereas lawyers will find a way to readjust to fixed costs in the fast track (and lower success fees recouped from damages), those process-driven costs firms who thrash out the costs of lower value cases will have to scale down markedly or risk extinction.

Costs Management

Lord Justice Jackson has identified and criticised a lack of real engagement by judges and lawyers in cost issues. If he is successful in redirecting judicial training and CPD, costs specialists have a more fundamental challenge if they are to remain relevant.

Even those costs draftsmen and consultants who make efforts to swap the abacus for the crystal ball will need to prove their value to clients who will become more self-sufficient in costs.

The process of establishing the methodology and standards needed to forecast litigation costs more reliably is in its infancy.  The brightest minds on the subject have been working independently, but the next phase of the Jackson reform is likely to bring those minds together.

Costs draftsmen will be mistaken if they believe that they can change horses seamlessly from bills to estimates – or even know where to start.  While there is a Cook On Costs available from all good bookshops, it may be a while before a hypothetically titled Tench on Estimating hits the shelves.

Dan Tench is a litigation partner at Olswang.  He is also a skilled software developer and in the wake of the Woolf reforms wrote a powerful application called Feesability that combines costs estimating and case planning.  With our help he has recently blown the dust off Feesability in order to deliver Lord Justice Jackson’s own costs estimating training – a session Sir Rupert described in his report as “invaluable”.  There is a growing buzz around the future development of Feesability (see Times 21 January 2010, http://bit.ly/7WBpaA)

Bill format

Lord Justice Jackson, encouraged by my firm’s work with Chief Master Hurst and Jeremy Morgan QC during the review, has recommended that estimates and bills of costs be presented in a form that follows tiered phases and tasks rather than activities.

He suggests that as a long-term goal, software be developed to enable estimates and bills of costs to be produced with far less human intervention.

Early critics of this initiative have pointed out that many lawyers are not wholly committed to recording their time now, and would not take easily or at all to classifying their time accurately at point of entry.

Whatever the implementation problems are, I doubt the solutions will involve conventional costs drafting techniques or the electronic assembly applications currently used by many costs draftsmen.

The new landscape

Of course traditional work will not dry up completely. Courts will still make complex costs orders that take some working out. Technology will produce bills of costs more efficiently but some human intervention will still be required. Parties will always argue about costs.  For a while they will argue about budgets and the consequences of exceeding them.

Also on the positive side, in the years “AJ” (after Jackson) commercial clients and their lawyers may be less reluctant than at present to resolve cost disputes through assessment. If the assessment can be confined to aspects of the litigation where budgets have been blown, assessments should be shorter and more focused.

The costs profession is in for a rough ride over the next few years. I hope that some of us are still here afterwards to tell the tale of successful transition. 

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… and I haven’t read anything that changes my predictions from those in my last blog.

I realise they were hardly in the Nostradamus league but the telling points about the costs management and detailed assessment recommendations are that (apart from pre-action costs management) they do not require primary legislation to be put into effect.  Hence I wouldn’t bet against their adoption.

I particularly liked the description of current bills of costs as “turgid” (which has immediately become my word of the week). 

Clearly (as everyone can now see) there is far more to the issue about forms of bills and estimates than mere style.  

Where I would blow Ellis Grant’s own trumpet is in the context of the recommendations for greater economy in presentation of points of dispute and replies.  We hope by our good management rather than than luck, the points of dispute and replies drafted by our firm have long been consistent with the brevity and lack of repetition now urged by Lord Justice Jackson.

As to the rest of the report I couldn’t hope to say anything intelligent or useful about it in the early hours of this Friday morning.  My necessarily superficial impression at this early stage is that this, as my American friends might say, is a game-changer.

My late father (who spent most of his working life at Ford Motor Co) used to tell me of the Damascene conversion in management style and manufacturing process brought about after Ford’s top brass studied the Japanese car industry in the 1970’s.  The acronym “AJ” was coined meaning “After Japan” and was employed widely to signify disruptive but necessary change.  

In litigation costs we now have our own “AJ”.  And as Bob Dylan once wrote “Your old road is rapidly agin’. Please get out of the new one if you can’t lend your hand”.  No prizes for guessing the next line.

 

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