Possible further changes to costs budgeting rules

At the Third Annual Harbour Lecture yesterday evening, 13 May, Lord Dyson MR and Lord Justice Jackson spoke on the topic of "Confronting Costs Management". Lord Justice Jackson explained that the Civil Procedure Rule Committee has set up a sub-committee to review the operation of the costs management rules. He presented a paper which sets out his views on how the rules are working and makes a number of suggestions as to how the rules might be developed. It will be for the sub-committee, chaired by Mr Justice Coulson, to consider what changes, if any, should be made to the rules.

Lord Justice Jackson's view is that, when done properly, costs management works well and brings substantial benefits to courts users. These include enabling both sides to know where they stand financially, focusing attention on costs from the outset, and encouraging early settlement.

He recognises, however, that a number of problems have emerged with the operation of costs budgeting, and makes suggestions to put these right.

Perhaps his most important suggestion is to repeal the recent amendments which have provided the courts with a particularly strong steer in favour of making a costs management order, namely:

• CPR 3.15 which states that the court will make such an order "unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made"; and
• PD 3E which states "Where costs budgets are filed and exchanged, the court will generally make a costs management order under rule 3.15."

The practical consequence of this, he says, is that the courts are making costs management orders in virtually every case where such an order is available. In some courts this is causing delays due to a backlog of cases awaiting costs management hearings (which is a particular problem in clinical negligence cases, he explains).

Lord Justice Jackson suggests that the provisions quoted above might be replaced by criteria to guide courts in deciding whether or not to make a costs management order. The formulation of those criteria would be a matter for the Mr Justice Coulson's sub-committee, but he suggests that it may be appropriate to include a provision that the court should not manage costs in any case if it lacks the resources to do so without causing significant delay and disruption to that or other cases. This would assist with the backlog issue.

He also highlights difficulties caused by inconsistent approaches between courts as to when costs budgets should be filed, with some courts requiring early filing (eg at the same time as directions questionnaires - which tends to mean the budgets are overtaken by events and have to be redone before the CMC) and others only 7 days before the CMC (which leaves little time for discussion and agreement of budgets). To address this problem, he recommends that the rules should be amended to specify that budgets should be lodged 14 days before the hearing, subject to the court's discretion to specify a different period if required in the circumstances of a particular case.

Other suggestions put forward by Lord Justice Jackson include:

• Better judicial training, to achieve a more consistent approach in the application of the rules. Lord Justice Jackson notes that a full day training module on costs management is available on judicial refresher courses. He recommends that this course should be compulsory for all civil judges.
• A standard form of costs management order, with discretion for the court to depart from the standard form if the circumstances of the case require it.
• New court powers to deal with costs incurred before the budget period, including summarily assessing the incurred costs, or setting a global figure for any phase to include both incurred and future costs.
• Improvements to Precedent H, including potentially the provisions in respect of assumptions and contingencies, expert costs, and the treatment of ADR and settlement discussions.
• Introduction of pre-action costs management in cases where incurred costs tend to be high, eg clinical negligence.

In his subsequent remarks, Lord Dyson expressed his strong support for costs management and agreed with Lord Justice Jackson's view that it is here to stay. He said that Lord Justice Jackson's suggestions for improvement would be given careful consideration by Mr Justice Coulson's sub-committee. However, he expressed concern at Lord Justice Jackson's suggestion that the court should not manage costs if it cannot do so without causing significant delay and disruption; this, he feared, might lead to a danger of costs management becoming the exception rather than the rule.