Last month the author of the 2013 costs reforms, Lord Justice Jackson (Sir Rupert) retired from the Court of Appeal. In his final speech, Sir Rupert suggested that the ‘blunt and inescapable fact is that the Jackson reforms have achieved significant reductions in the costs of litigation… most of the reforms have worked well, but a few have not. Those reforms which work well have also promoted access to justice’. The reforms aimed to make the costs of litigation more ‘proportionate’ and more predictable. The reforms to substantive law (for example, the abolition of recoverable success fees and after-the-event (ATE) premiums) delivered immediate reductions in costs payable by a losing party in personal injury and clinical negligence cases. They have not, however, as far as I can see, reduced the actual costs of the underlying litigation itself. Far from it.
Sir Rupert’s controversial costs budgeting reform was, in my view, his greatest failure. Indeed, it could be argued that costs have actually increased—lawyers must now do more work to ensure costs are incurred rather than budgeted by the time of the costs and case management conference (CCMC). By all accounts the expectations of Sir Rupert and the senior judiciary were that most costs budgets would be agreed. This simply has not happened. Problems of judicial inconsistency persist with widely differing approaches and attitudes to costs management. All of this seems to have been overlooked. Moreover, what about the amount of judicial time that has been spent on costs budgeting which has inevitably led to significant delays in the court system? It is now not uncommon to wait for up to a year (and sometimes beyond) from service of a defence before a first CCMC takes place. Prior to the reforms it was often possible to agree case management directions without the need for a formal hearing. Perhaps one of the most significant events of the past five years was the 2015 suspension of costs budgeting in clinical negligence cases issued in London as a result of the significant delay being added to these cases. Sir Rupert’s solution was to remove the requirement for costs budgeting in those cases which had already been issued—hardly a ringing endorsement for its supposed success!
It is also unclear how this so-called ‘success’ has been measured? First, even before the reforms were implemented in April 2013, claimant’s costs were already reduced by agreement or on assessment. Claimants were not recovering 100% of the costs incurred on their behalf. Second, as far as I am aware there is no suggestion that incurred costs have reduced in any way. In other words, pre-CCMC the majority of multi-track cases are being conducted in exactly the same way as they were before. To reduce costs to below their April 2013 level, budgets would need to be significantly reduced in order to produce even a relatively minor saving. For example, take the case of a pre-April 2013 personal injury claim that settled following expert joint statements (ie before any work was carried out relevant to trial preparation or trial). The profit costs claimed were £100,000 and the parties later agreed costs in the sum of £75,000 (a 25% reduction in costs not being uncommon). Now let’s run exactly the same case under the current costs regime. At the CCMC, a £200,000 budget is submitted and the judge approves a £150,000 budget, allowing £50,000 for the trial preparation and trial phases. Incurred costs are £60,000 and £40,000 is allowed for phases other than trial preparation and trial. The budgeted costs are exceeded by £5,000 but as there is no other good reason to depart from the budget the budgeted sum of £40,000 is recoverable from the paying party. The parties agree to reduce the incurred costs by 25%, and the paying party pays £85,000 (£45,000 incurred plus £40,000 budgeted). The paying party’s costs are actually £10,000 more than they would have been under the previous costs regime! Without reference to any guidelines how can judges know what to allow in the budgeting process? Further, without a point of reference how can anyone say that the reforms have delivered ‘significant reductions in the costs of litigation’?
What the reforms have delivered is a significant amount of satellite litigation, and this seems likely to continue. Numerous unresolved questions arise from the introduction of Qualified OneWay Costs Shifting while the concept of ‘proportionality’ remains as undefined as ever, making it almost impossible to advise clients with any degree of certainty. It is also difficult to see how any of the reforms have promoted access to justice. For example, would a claimant who finds himself in the situation of Queen guitarist Brian May bring a claim at all if they knew they would incur costs of £208,000 in return for a mere £60,000 in recovered costs and damages? Would any claimant pursue a claim if they knew they were going to be substantially out of pocket even if they won their case? The reality is that some clients with a strong claim may have to be advised that it would not be in their best interests to pursue it. While discouraging claims from being brought in the first place is certainly a novel way of easing the burden on the creaking court system, it is difficult to reconcile this with any suggestion that access to justice is being promoted. I think the blunt and inescapable fact is that the reforms have been anything but a success.
Published in The New Law Journal