Jackson launches costs management trial in Birmingham

Lord Justice Jackson went to Birmingham on Tuesday to encourage its litigation solicitors to take part in a costs management trial in the specialist courts. The details are interesting, but less so than the policy considerations which underlay Sir Rupert’s approach to the business sector – the Small and Medium Enterprises or SMEs – which is one of his (many) particular concerns. I went to hear him – my interest in the rules and the technology of e-disclosure is infinite, but it is servant to a wider interest in making litigation accessible. “Accessible” means that it is affordable to the clients and still profitable to the lawyers.

I gave up marking the key passages as Sir Rupert outlined the scope of this part of his investigation – it was all important. For those with short attention-spans, I will leap to the end and report that the upshot was that the majority of the assembled company were willing to support a voluntary trial during which judges in the Mercantile Court and the Technology & Construction Court would supplement their case management role by managing costs in tandem with (or, strictly, as part of) their close attention to the other aspects of bringing a case to trial. Not everyone supported the idea, but no-one opposed it. Sir Rupert’s gentle lucidity barely concealed the implication that if this approach did not work then something more drastic will be needed. If it does not work in Birmingham, it would not work anywhere.

I have already posted a short introductory note about this (Hard to keep up with Lord Justice Jackson ) which has links to his Preliminary Report on Litigation Costs and to the Guidelines and Costs Estimate template which resulted from the evening.

Those of you who think they have more important things to do can push off whilst I summarise the context which led to this conclusion. Sir Rupert began by saying that whilst his mandate and terms of reference came from the Master of the Rolls, the review was supported by the government and funded by the Ministry of Justice. He was cautiously optimistic that if sensible recommendations emerged from his review, they would be implemented.

Small business disputes were a particular concern, whether they were between SMEs, between an SME and a larger company or were smaller disputes between two big companies. They raised very different policy issues compared with, say, personal injury cases. One size of approach did not fit all circumstances. His conclusion after hearing many views was that businesses with claims in the range £25,000 to £500,000 craved certainty as to the costs which they must pay if they lose, or which they will receive if they win, their case.  If costs are uncertain, or may dwarf the sum in issue, they will not feel able to bring proceedings or run a valid defence. When costs have that consequence, Sir Rupert said, massive injustice ensues.

There are, he said, three broad options. One is to go on as we are (but we know from his preliminary report that he likes to list all the options, however remote – I challenged him on one of his disclosure options the other day, and he said that a number of people had suggested it, it had respectable arguments behind it, and was not to be ignored – no-one will say of this report that it did not consider every option).

The other options were scale costs and costs management. In Germany and New Zealand, there is a scale of the costs which will be paid by the loser to the winner in a civil litigation case. In Germany, you simply read the sum off a scale. In New Zealand there is a slightly more flexible system. Either approach gives the certainty which businesses want, and there is much greater use of the civil courts in Germany that in England & Wales. Scale costs have to be considered as an option for this kind of litigation. That will not be the option which the lawyers will want.

The alternative is costs management as an adjunct to case management. (Anyone who has heard an argument skilfully developed in court will recognise this technique incidentally – if you present three ideas, the first impossible and the second unacceptable, then you can usually persuade people to the third).

Sir Rupert said that Lord Woolf had explored these options in his Reports and had backed off in the face of strong opposition from solicitors. Whatever the benefits of the Woolf reforms (and there were a few, such as faster progress towards trial, fewer strike-outs for want of prosecution, and Part 36 offers) they had manifestly failed to keep costs down, so the ideas abandoned a decade ago should be revisited. There were, he said, more solicitor-judges now and the profession as a whole was more focused on costs.

Notwithstanding this, costs often exceeded the sum awarded as damages. There had grown up a good body of principle on the assessment of damages, but that had not been matched by any advances in assessing costs. The costs questions either went to a Costs Judge who could not know very much about the issues or were dealt with on summary assessments which were often too rapidly done on insufficient material. He had explored the question of costs management in Chapter 48 of his Preliminary Report (Part 8 at page 483). What was envisaged was a dialogue between the judge and the lawyers as the case went on as to a budget which would allow everyone to see the relationships between costs and maximum recovery (or the objective – not all cases involve money). The judge may, for example, see a good reason not to allow an expert or might restrict the evidence to be adduced at trial. At the end, when the matter went to a costs judge, parties would be able to explain any deviation from the budget (which could and should be reviewed anyway as the case progressed).

Sir Rupert anticipated the argument that judges do not know about costs. He did not seek to claim that this view was wrong, but stood on his primary point – the status quo keeps SMEs out of the courts and access to justice is denied. Something must be tried. Birmingham, he said, was the right place to start. It had specialist courts with a tradition of innovation and was a centre of excellence in this respect. There was a relatively small core of solicitors and barristers in those courts. If a scheme for managing costs was going to work anywhere it would work in Birmingham. The unexpressed corollary was that if the ideas failed in Birmingham they would fail anywhere else.

He asked the lawyers if they would commend this approach to their clients. Section 2.03 of the solicitors Code of Conduct required solicitors anyway to explain to their clients what the costs were likely to be. He would not, he said, impose it on them if the clients did not want to take part. If the trial takes place and is seen to work, he might include it as an option. Otherwise, he saw no alternative but scale costs.

Time was not on his side, Sir Rupert said, but although formal consultation was due to end of 31 July, he could continue to receive feedback after that date. I come to you, he concluded, with a modesty as effective as it was unwarranted in the light of his Preliminary Report, as a “mere judge and ex-barrister”.

It was a masterly piece of advocacy, as much for the manner of delivery as for the clever unfolding of the arguments. Persuasion has become a devalued art in the last decade as both politics and marketing have plumbed new depths of spin and trickery in parallel. Government ministers exaggerate and lie by default, so that everything they say is discounted and devalued, not least because it is heavily scripted. Advertising and marketing is largely ignored for the same reason. Jackson’s art lay in its artlessness – he spoke without notes and in a manner which was neither pleading nor bullying nor faux-deferential, just realistic. The “I need your help” message touched on the personal interest of the audience as well as wider notions of public duty, without over-egging either of them. He squared up to the obvious downside – that judges have no experience in this area – without denigrating his brethren.  The downside of not following his suggestion came across as something inevitable for obvious external reasons rather than his own mailed fist in a velvet glove.

It was interesting (speaking as one who is already convinced that costs management is both obvious and right as the way to go) to sit at the back and take the temperature. My guess as to the outcome proved correct – that a little over half the audience signified agreement with the proposal for a trial and none overtly opposed it. The strongest views expressed in the Q&A which followed were from those who said that estimating costs in this way was a duty as between solicitor and client and not just because Rule 2.03 said so – how can a client make a commercial decision to proceed with or to abandon or settle litigation without costs estimates alongside other areas of risk? The doubters (and I take all those who did not put up their hands in support of the initiative to be doubters rather than opponents) will have been concerned about three things – the tactical implications of showing their hand on costs, the time they expect to have to spend on formulating the costs, and their ability to do so regardless of the time taken. Sir Rupert suggested that time taken in the calculations and debates about costs ought itself to be itself a proper head of inter partes costs.

The most interesting thing to come up arose during the Q&As.  A point was made about the importance to clients of irrecoverable costs. Lord Justice Jackson said that the reaction which he had had during his information-gathering stage had convinced him that lawyers and judges had a greater attachment to the established principles of costs-recovery than did the clients. There was a powerful and traditional school of thought which felt that a party who was vindicated should emerge no poorer as the result of the litigation than he began it. This was the conventional view of the lawyers, but he had detected a mismatch between lawyers and court users. The latter preferred a fixed and certain costs regime. Any case which has got as far as trial must have an element of uncertainty in it – you do not know how the witnesses will stand up or what construction the judge will put upon a document, and there are other variables. Parties preferred to recover some costs should they win rather than face an indeterminate liability if they lose.

Another important point arose from a point made by HHJ Simon Brown QC who, as a Designated Mercantile Judge in the Birmingham Civil Justice Centre will be very much involved in this trial. Judges, he said, were end-users of the case preparation as well. One of the biggest burdens they face is the fact that 95% of the documents placed before them are redundant. Someone in the audience made the point that solicitors dared not run the risk of a bollocking because something vital (or seen as vital by the judge) is missing. They need more certainty as to what the judge wants. Sir Rupert Jackson said that this was one of the advantages of being in the TCC or the Mercantile Court because the judge managed his or her own cases and should (delightful phrase) be “estopped from complaining about the documentation”.

This point is utterly central to the problem, and not just in the context of the documents actually in court. I have made the point elsewhere that the inability to predict what line a judge will take as to the scope of disclosure (amongst other things) is the cause of much of the protracted correspondence which takes place before CMCs and disclosure applications. Lawrence West QC, in an article which I wrote about recently  referred politely to “the variable quality of the office-holder [when] combined with wide areas of discretion that appeal courts will not review”. The effect, in case management terms, of this “variable quality” is that parties have little idea of the likely parameters around decisions, and therefore no framework for their discussions. District Judges and others making case management decisions for others will inevitably err on the side of caution in restricting what will appear before the court at trial. The debate about judicial discretion is one of the big CPR issues, with Lord Woolf himself reported as wondering if the rules got the balance right.

I well remember being up late at nights making sure that I would have in court absolutely everything which the judge might possibly ask for, and throwing most of it away untouched. What is needed here is a clear direction to judges to distinguish between sloppy preparation and a genuine, though in the event misguided, decision to omit something.

I am only half-way through the notes I took in what was a densely-packed discussion. Pre-issue costs protocols came up (“I have got to grapple with it and how we can get the benefits of protocols without great expense and without abuse of protocols; I am not brushing them under the carpet, they are just not what this trial is about”, Jackson said). Concern was raised about one party running another out of costs, and the subject of after-the-event insurance came up. I will spare myself, and you, the rest of the detail and leave you with one quotation from the many which I recorded from Lord Justice Jackson or from the audience. Sir Rupert said this:

“Firm case management should limit the scope for the costs to get out of hand. The lawyers should go to the court and be able to say “this is how we intend to manage it”. The judge cannot dream up a figure, and may come to a view different from that of either party. The parties are supposed to have tried to agree beforehand.”

That is also, of course, a good statement of the position with regards to the management of electronic disclosure. Attempts to discuss and to try and agree are mandatory as well as sensible. The judge cannot form any view without input from the parties, but is not bound to follow their views. Disclosure, like the costs generally, must not get out of hand.

Sir Rupert said of one of the points which came up “I am not going to pull a rabbit out of the hat and devise a solution for every case”. That might serve as a motto for the whole exercise – it is, after all, only ten years since Woolf went over all this ground, and every other similar jurisdiction is grappling  with the same issues. What is certain is that, as Lawrence West put it in the article already referred to,  litigation “plummeted as if pushed off a cliff” in the year after 1999 and has stayed that way. Nobody wins – clients and their rights to bring or defend claims, lawyers whose business depends on the work, judges and those who have a devotion to access to justice are equally losers. The tactical benefit of playing your cards close to your chest is meaningless if you do not get to sit at the card-table. The ability to predict, within reason, what your costs are going to be seems a pretty elementary qualification for the practice of any profession. The suggestion that costs be managed as part of case management has to be tried.

An ambition to pull rabbits from hats is not what we are after anyway – we get enough such empty promises from  Westminster and do not seek them from the Strand. What we need is a realistic approach to real problems, a close analysis of the issues, an informed survey of the possibilities, the sounding of informed interested parties, and a sensitive but firm appraisal of the realities. On the strength of his meeting last week, that is what we are getting from Lord Justice Jackson.


About Chris Dale

I have been an English solicitor since 1980. I run the e-Disclosure Information Project which collects and comments on information about electronic disclosure / eDiscovery and related subjects in the UK, the US, AsiaPac and elsewhere
This entry was posted in Access to Justice, Case Management, Civil justice, Court Rules, Courts, CPR, Litigation, Litigation costs, Lord Justice Jackson, Mercantile Courts. Bookmark the permalink.

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