Judges should have extra support in litigation costs reforms, says expert

Out-Law Analysis | 17 Dec 2012 | 12:26 pm | 3 min. read

OPINION: A seemingly attractive plan to make judges responsible for predicting the cost of court action is not the best way to encourage the accurate prediction of costs, but it is better than nothing. 

Courts in England and Wales are putting in place plans to make judges work out how much litigation will cost and communicate it to all the parties involved. This is better than nothing, but there is another, more effective  solution to the problem.

It would be preferable  to bring in experienced costs lawyers to assist over worked judges and administer the cost-prediction process, freeing the judge to concentrate on the meat of the case. The planned changes are  better than the current situation, but it risks even further straining already-creaking court resources, where the Ministry of Justice has been told recently to cut its budget by £2.5 billion.

What is certain is that something must be done. If there was more transparency and predictability about the cost of going to court then, bluntly, fewer people would do it. This would ease the burden on the crowded courts system and would make the legal system fairer as fewer speculative cases would be  taken on the basis of ignorance about the real costs of litigation.

Why not leave it to the judges? Simply because putting them in charge of a costs management process to determine estimated reasonable and proportionate costs, potentially 18 months to 2 years in advance, in disputes that could incur costs of in excess of £5m just adds to the many things they must deal with and does not play to theirstrengths.

Judges tend to be ex-barristers, and costs management is done by solicitors, not barristers. The most sophisticated costs management systems are operated by large law firms. Pinsent Masons, the law firm behind Out-Law.com, operates a costs management system – it is  called SmartPlan .

Costs prediction and management is not easy to do, and judges, through no fault of their own, are not specialists in this area and are likely to find it challenging.

Judges are also likely to find it extremely difficult to find the time to do this without having to reduce the number of cases they hear, which cannot be the desired outcome of the reforms.

Currently-proposed reforms are based on pilot schemes run in the Technology and Construction Court, the  Mercantile Court and in defamation proceedings. In these cases judges have been reviewing parties' costs budgets and undertaking costs management with a view to linking case management with costs management. 

It is proposed that wiht the exception of the Admiralty and Commercial Courts, from 1 April 2013 costs management will be applied by judges in all multi-track cases commenced on or after 1 April 2013 unless the court orders otherwise.

After 1 April parties in court proceedings will be required to exchange costs budgets within 28 days of service of any defence. The court will then manage the costs and make a costs management order having regard to the budgets of the parties and taking into account the required procedural steps in the proposed action.

A costs management order will record the extent to which the parties and their solicitors have agreed their respective budgets. If budgets are not agreed the court will review them and, after making any appropriate revisions, record its approval of the budgets. In approving costs budgets the court will seek to control the costs of litigation, in particular the costs recoverable by the successful party by reference to the previously-approved budgets.

The court-approved budgets will be subject to review and revision during the course of the proceedings, and parties will be able to apply for an increase in any approved budget, if reasonable, proportionate and justifiable. Failure of a party to file a costs budget will have a draconian effect, in that it will be deemed that such party only wants their court fees, and no other costs from an opponent.

These reforms are welcome, and the courts system should proceed with them. It is vital that efforts are directed at letting potential litigants know what they are signing up for. Clarity on costs will result in a fairer system as organisations and individuals can make informed decisions about the course to take, rather than gambles based on guesswork.

The result is likely to be less litigation and more mediation and arbitration. This is less expensive, and more reliance on these forms of alternative dispute resolution will help to make business more efficient.

Making judges ultimately responsible for the costs management process is a good idea, but they will need help. Judges should be able to appoint a costs lawyer or experienced practitioner to sit with them as assessors in case management conferences where a case is likely to involve substantial costs.

Keith Levene is a litigation and costs specialist at Pinsent Masons, the law firm behind Out-Law.com