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Costs management and budgeting - a lack of real traction - opting in again!

Costs management and budgeting – a lack of real traction – opting in again!

As some of you know the final report on the costs budgeting pilot published by King’s College London, which TeCSA joint sponsored was published last month, (we have it on our website), makes for an thought-provoking insight into a battle TeCSA has learnt is going on within the judiciary. We can understand why as most punters we know, and let’s face it we are closest to the construction industry, that’s right the clients out there, are mightily concerned cost management is going to disadvantage recovery of costs and do nothing good for TCC practice, which so far as cost management is concerned was not perceived to be in trouble or need for regulation by the Judiciary and is seen my many as at the cart end of the horse!

Many of us were dismayed at the start of the year to see that the overriding objective was to be amended (as it now has in smaller cases) to include dealing with cases justly “and at proportionate cost.”  Therefore even if costs are incurred reasonably and are necessary, they may be disallowed if the court considers that they are disproportionate.

In all multi track cases commenced on or after 1 April 2013 we now know in a County Court or in the Queens Bench or Chancery Divisions of the High Court (except the Admiralty, TCC and Commercial Courts) all parties (except litigants in person) must file and exchange costs budgets (in the form of precedent H) by the deadline set by the Court in a notice of allocation or 7 days before a case management conference. If a party fails to do so, it will only be able to recover its court fees from its opponent. If the costs budgets are agreed in advance, the Court (in the real world) is likely we think nine times out of ten to simply record this in a costs management order. If the parties cannot agree in advance, the Court will look at the budgets and either approve or amend each party’s budget. Once the budgets have been filed at Court, a party will need to agree any changes with the other side or apply to the Court to amend its costs budget.

As is general public knowledge, the Commercial Court somehow managed to win itself an release from costs budgeting a while back by convincing Lord Justice Jackson that, in the high-value commercial cases dealt with in the Commercial Court, such measures were unnecessary. Jackson duly accepted this in his 2009 reform proposals. Then at the Bar Council’s annual conference last year, the Commercial Court’s Mrs Justice Gloster (as she then was) labelled this in terms of having ‘won the battle’ on costs budgeting.

Fast forward to February this year, shortly before costs budgeting came in across the board on 1 April, and another carve-out was granted, which many members of TeCSA and TECBAR learnt of when Mr Justice Ramsey gave his lecture on 20 March 2013. We learnt that for TCC and Admiralty dealing with similar high-value claims, to the Commercial Court, they rightly feared ‘forum shopping’ problems if they were subject to costs budgeting while the Commercial Court was not! We learnt that come about July the TCC might review its opt out. By all events cases worth more than £2m in the, Technology and Construction, Chancery Division and the Mercantile Courts were also excused.

This exemption will be reviewed next month - yes in July, however, and according to a TCC User Meeting the writer attended in April it is by no means certain to stay in place. Mr Justice Ramsay – our own TCC judge in charge of implementing the Jackson reforms has said that his own view was that such exemptions should not exist.

Well we can see in the final report on a costs management pilot which has been running in the TCC and Mercantile Court since October 2011, co-authored by a group of three monitoring lawyers (Nicholas Gould, Christina Lockwood and Claire King), casts some light on what other judges think of the exemptions from costs budgeting; and it seems the to TeCSA the judiciary are none too impressed.

Interviews undertaken with judges conducted for the report showed that ‘many judges shared the feeling that there is no principle for the exemption of the Commercial Court, and they find this very unsatisfactory’.

One reads that a specialist mercantile judge interviewed said he firmly believed that costs management should be ‘across the board’, adding that ‘no rationale’ had been given for the Commercial Court’s exemption, and describing the additional exemptions announced in February as frankly ‘illogical’. The report carried on: ‘The cynical view is that there are so many foreign litigants in the Commercial Court (Berezovsky v Abramovich etc.), that the decision had been made to allow [litigators] to continue earning very high fees in the Commercial Court. Consequently big firms might choose to start proceedings in the Commercial Court for a “free for all”, instead of using courts of choice such as the Mercantile Courts in Bristol or Birmingham…‘Why should a mercantile judge be forced to tell Barclays Bank and HSBC that they cannot spend more than X on their expensive City firm of solicitors, when the Commercial Court is free from this obligation? Judges clearly resent that no guidance whatsoever was given on this.’ Well so do we!

Plainly the senior judiciary now sees itself under pressure from those in the lower ranks to remove the costs budgeting exemptions. But if one believes the ‘cynicals’ view sketched above, that could have a damaging impact on the quality and profitability of the bigger city firms, but it could also mean less TCC business, more forum shopping in the TCC, after all our Judges are now allocated for trial sometimes after the PTR, no docket system etc, and arbitration could well be back in the ascendancy.

In his reform proposals, Jackson said that the large commercial businesses that litigate in the Commercial Court had informed him that they were ‘unconcerned’ about the level of legal costs. But it could be that attitudes on this differ according to whether a company is prosecuting a claim, or forced to fend one off. Whatever way you see it, it seems to TeCSA that, before any final decision is made on the exemptions, there must be a proper investigation into whether the clients in these high-value and complex cases actually want their legal costs to be subject to the rigours of costs budgeting, or not. My guess is they do not, so the TCC should be slow to opt back in.

John Rushton

It is with great sadness we announce the sad and indecently early death of John Rushton, on 22 May 2013, a truly great solicitor and construction dispute specialist.

John was one of those rare individuals one comes across in ones working life as a great fighter for his client, but who also brought sharp intellect, razor-sharp wit and yet always had that bright little "twinkle" in his eye of the enthusiast, be it weighing up a new turn in a case or a point to exploit all the others had missed.  It is a sad day indeed and we will all miss him - he was a true Gentleman.

Until March 2009, John was a Partner of the global firm Mayer Brown International LLP (Row & Maw before that). In July 2009, he became a UK arbitration and dispute resolution consultant for the International Chamber of Commerce, and he was a Past-Master of the Worshipful Company of Arbitrators in 2008-09.

John was also a long serving Member of TeCSA and a panel Adjudicator, he was to most of us who knew him a lovely charming polite man.

Our thoughts are with his wife Jenny and his family to whom we all know he was truly close.

 

King's College/TeCSA/Fenwick Elliott LLP sponsored Costs Management Pilot Scheme Report has now been published

Please see Article attached here

Please see attached Report here

STOP PRESS

Two pieces of hot news:

(i) on TCC costs management reforms, and

(ii) on the new TeCSA –e-disclosure Protocol

The first concerns the news the Technology and Construction Court will be conducting its own review of the £2m plus costs management exemption from the automatic costs management provisions that currently apply to cases below £2m. The plan it seems is that from about July 2013 the TCC will be undertaking a review of the cases that have gone through first Case Management Conference since 1 April 2013.  A decision then being made that may mean the TCC could opt out of the £2m or more exemption for automatic costs management and thereby apply it to all standard cases.

The second is that TeCSA has set up a Working Group's with the objective to provide TeCSA members with guidance, know-how and training on E-Disclosure to raise members’ understanding of what is required in practice to meet their E-Disclosure obligations under the CPR and how best to manage the practical and technical complexities of the process consistent with best practice and the new cost management and other rules implementing the Jackson reforms. 

A key goal in this mission is to radically reduce the disparity in terms of knowledge and experience that currently exists amongst practitioners which continues to affect the efficiency and cost-effectiveness of the litigation process and which is a continuing cause for concern for the TCC judges.

To achieve this objective the Working Group has resolved to:

·  Produce an E-Disclosure Protocol in conjunction with TECBAR and SCL, specially designed to meet the particular needs of TCC business,  for consultation with the TCC Judges this summer with a view to its incorporation into the new TCC Guide in Autumn 2013 as representing a best practice code or set of guidelines with which they will require or at least expect familiarity and compliance;

·  Produce a pro forma Disclosure Report (to be served 14 days before the first CMC) for consultation with the TCC Judges;

·  Establish and maintain a body of E-Disclosure know-how material on the TeCSA website which will be available to TCC users (and presumably TECBAR too); and

·  Establish a training programme to educate TeCSA/TECBAR members in legal, technical and practical E-Disclosure issues.  

In this vein I am delighted to invite your attention to TeCSA’s mission statement. We will soon announce more details on this very important initiative.

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