What Next For Costs?
Recent times have seen numerous upheavals in the world of costs. This trend will continue, with further critical changes on the horizon. In this piece we have a look at what lies in store and how the costs and litigation landscape is set to change.
Fixed Costs
In 2017 Lord Justice Jackson’s Review of Civil Litigation Costs: Supplemental Report Fixed Recoverable Costs recommended the introduction of fixed costs for money claims with a value up to £100,000. Following consultation, those proposals have been endorsed by the government and will be introduced over the coming year.
This will be a profound change with ramifications for all litigators involved in cases of this value, and is the latest development in a long-term shift away from assessment and toward tighter costs control. A very large number of cases, which would previously have required the preparation of Bills of Costs, will now be subject to fixed costs. Excluded from the reforms for cases of £25,000 – £100,000 in value are mesothelioma, clinical negligence, actions against the police, child sexual abuse and intellectual property claims. A bespoke process and fixed costs regime is set to be devised for clinical negligence cases with a value up to £25,000.
Changes to the Budgeting Regime
Another of Jackson LJ’s 2017 recommendations was the extension of costs budgeting to judicial review cases in which the costs of a party exceed £100,000. This is also now due to be implemented, bringing these cases within the reach of costs management for the first time.
A Queen’s Bench Master, Master Davison, has cast doubt on the efficacy of the budgeting regime in a judgment in June 2021 (Smith v W Ford & Sons (Contractors) Ltd [2021} EWHC 1749 (QB)), commenting that ‘QB Masters, Chancery Masters and Costs Judges do not necessarily share this defendant's expressed confidence that costs budgeting controls costs better, or more effectively, than detailed assessment’.
Such words, from a Master with extensive experience of budgeting, have provoked disquiet and disagreement among many, but Master Davison is not alone in raising questions over the regime in its current form. The Senior Costs Judge, Master Gordon-Saker, suggesting at a recent conference that a review of the criteria for costs management may be due, to extend it to cases with a value of over £10m.
The Master of the Rolls, Sir Geoffrey Vos, has said that another look should be taken at costs budgeting, in light of the experience gained in the years since its implementation, expressing concern as to the amount of court time which is dedicated to budgeting in cases whose underlying value may not merit it. Though there are very many cases in which budgeting delivers value and certainty to the parties, keeping recoverable costs within a reasonable and proportionate range, the growing clamour of influential voices may mean that the system of budgeting to which we have become used is subject to significant adjustment in the future.
Compulsory Alternative Dispute Resolution
ADR has been an important feature of litigation for many years, with the attitude of the courts, which was once one of gentle encouragement, having hardened over time. Judges have proved willing to apply costs sanctions to those who unreasonably refuse to engage in ADR, and now the Civil Justice Council has published a report on Compulsory ADR which concludes that ADR can be made compulsory, although ‘more work is necessary in order to determine the types of claim and the situations in which compulsory (A)DR would be appropriate and most effective for all concerned, both in the present system and in relation to online justice’. According to the authors, the concerns expressed in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576 that ‘it seems to us likely that compulsion of ADR would be regarded as an unacceptable constraint on the right of access to the court and, therefore, a violation of article 6 [European Convention on Human Rights]’ (para. 9) are to be viewed as the beginning of the debate rather than the conclusion, though the Report invites fresh consideration of the issue by an appellate court (Compulsory ADR, para. 56).
Vos MR welcomed the report, commenting that ‘ADR should no longer be viewed as “alternative” but as an integral part of the dispute resolution process; that process should focus on “resolution” rather than “dispute”. This report opens the door to a significant shift towards earlier resolution’. There appears to be clear appetite for compulsory ADR, and it may not be long before reforms in this area are introduced, with the government having called for evidence on the issue in line with its ambition to ‘mainstream non adversarial dispute resolution mechanisms’ (Dispute Resolution in England and Wales, Call For Evidence 2021, page 4).
New Costs Procedure for Cases Settled Pre-Action
The Review of Pre-Action Protocols Interim Report published by the Civil Justice Council has raised the possibility of a new ‘summary costs procedure’ applicable to cases which settle before the issue of proceedings. Presently in such cases, when the quantum of costs has not been agreed, it is necessary to issue a costs-only Part 8 claim in which the receiving party can obtain an order for costs, provided there is an agreement as to entitlement. The Part 8 procedure is not intended to determine the incidence of costs, however, and the proposed summary procedure would provide a means by which this question could be resolved, removing the need to litigate the substantive claim to obtain a costs order where there is no genuine ongoing dispute as to the underlying issue.
The Report’s comments fall short of positive recommendations, however, and evidence is being sought on whether there are sufficient such cases to justify the introduction of such a procedure.
Having regard to the various changes which are now in motion, it is clear that litigators and costs professionals must remain adaptable. After a decade of continual development in various aspects of costs, ever-advancing reform is, and will continue to be, the norm.
