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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