Civil Justice Council publishes its final report on costs

Last year, the Civil Justice Council (CJC) Costs Working Group was charged with taking a "strategic and holistic look at costs, particularly given the ongoing transformation of civil justice into a digital justice system".

As part of the review exercise, the group launched a consultation seeking views on four key areas:

1. Costs budgeting.
2. Guideline hourly rates (GHRs).
3. Pre-action protocols and the digital justice system.
4. Wider consequences of extending fixed recoverable costs (FRC).

On 10 May 2023, the Working Group published its final report and recommendations, offering an insight into the likely direction of travel for costs in civil claims. In this article, we provide an overview of the responses to the consultation and the Working Group’s recommendations put forward.

Costs budgeting

Overall, responses to the consultation questions relating to costs budgeting were positive, with the majority of respondents noting that costs budgeting has proved to be beneficial and therefore, should be retained.

Moving forwards, the CJC Working Group recommends a “one size does not fit all” approach, with initial piloting of any changes before a wider rollout. The following groups have been identified as those which may require bespoke costs management regimes:

1. Personal Injury and clinical negligence work (covered by QOCS).
2. Claims progressing in the Business and Property Courts.
3. Other specialist work such as mesothelioma cases.

A majority of the Working Group agree that in cases where QOCS applies, full budgets should be dispensed with for defendants, with just the front sheet of the Precedent H to be completed. The option to stage costs and case management tasks and the introduction of “costs budgeting lite” are also supported.

Other recommendations include:

• Amending timescales for exchanging budget discussion reports.
• The budget variation process to be simplified.
• Considering whether to introduce penalties for those who default on aspect of the budget timetable.
• The approach and process around rates and incurred costs regarding budgeting.

Guideline hourly rates

The majority of respondents agreed that GHR should be retained but adjusted for inflation using SPPI, and undergo a regular review.

The report notes that before the first detailed review takes place, the Working Group recommend a number of changes to the existing structure of GHRs, namely:

1. The creation of a new band for complex, high value commercial work.
2. A retrospective uplift to be applied to the current figures having regard to the SPPI.
3. Counsel’s fees to be capable of being assessed by reference to a guideline hourly rate.
4. A test to be applied when considering departing from the GHR.

Pre-action and digitisation

Respondents generally agreed that the digital justice system will result in costs savings and facilitate early communication between the parties, or at least narrow down the issues in dispute prior to court proceedings being issued. Respondents also identified the need to ensure better compliance with pre-action protocols.

The Working Group suggest that claims where a pre-action protocol allows for recovery of costs where there is settlement at the pre-action stage could be considered “issued” at the point where the relevant pre-action protocol commences.

Consequences of the extension of FRC

The responses in relation to this section fell into three groups, namely:

1. Those opposing FRC.
2. Those supporting the principle behind FRC.
3. Those supporting the proposal on capped costs (of £500k) for the patents Shorter Trials Scheme.

Regardless of which camp the respondents fell into, there was an overarching agreement that not only should FRC be set at the right level, but the levels should also be subject to regular review and uprating in line with inflation.

Comment

In our view, although costs budgeting creates certainty for insurers, the process needs strengthening to both improve the effectiveness and focus of the system, whilst also reducing the costs burden for paying parties. In a bid to improve the budgeting process, we recommended to the CJC Working Group in 2022 that costs budgets should only be set after the court has issued directions on how the case is to proceed.

In terms of GHR, given the vast majority of cases worth under £100,000 are shortly to be subject to fixed recoverable costs, we believe GHR should be calculated on the basis that they will largely only apply to ‘mid’ value cases between £100,000 and £250,000, thus avoiding the current system of requiring ‘bespoke’ uplifting to account for value/complexity.

As we have previously highlighted to the CJC, the pre-action protocols ‘lack teeth’ as they are rarely enforced with sanctions for non-compliance. More robust and rigorously enforced pre-action protocols would encourage an exchange of information and cooperation at an earlier stage. Ultimately, this would lead to more cases settling at the pre-action stage.

Related items:

• Holistic costs review launched by the Civil Justice Council
• Wait until directions are issued to set the budget, says Kennedys