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Whilst concerns over the Jackson reforms appear to have centred on funding arrangements (CFAs and DBAs) and the new proportionality rule, Lord Justice Dyson, in his inaugural speech as Master of the Rolls, said that, “costs management is the key to the Jackson reforms”.
Unless firms understand the costs management process, and take practical steps to prepare for it, they are going to be in for a rather unpleasant surprise. In the case of Henry v Mirror Group Newspapers EWCH 90218 (Costs), the Claimant failed to comply with the requirements of the defamation costs management pilot. The senior costs judge, Master Hurst, decided that there was therefore no good reason to depart from the approved/budgeted sums despite the fact that the Claimant’s additional costs had been incurred as a result of the Defendant’s actions. The sum at stake was £300,000! Whilst the judgment is subject to appeal (due to be heard next month) the message is clear – failure to engage in and comply with the costs management process could cost you and your client dearly.
So what can firms do to prepare? Firstly, a change of mind-set is needed; each case should be considered as a project that needs to be managed. Imagine you were having an extension built to your house: after the architect has finished designing your extension you would get quotes from builders who would (or should!) set out the work and cost involved at each stage of the project before giving an overall cost and likely completion date. He would build in contingencies (bad weather, finding a well or old gas main etc) and additional expenses (skip hire etc).
Whilst builders have had years of experience and can (fairly) accurately predict how long such a project will take, how much it will cost and how to build in a realistic profit margin, many solicitors have no such experience when it comes to litigation. Firms need to start preparing now. Some suggested first steps include:
1. Analyse your old/completed cases to identify average costs per phase across each type of litigation your firm undertakes.
2. Ensure that your time recording system is able to record ongoing/future work by reference to the phases of litigation set out in the draft Rules and Practise Direction (CPR 3 and PD3E).
3. Prepare draft budgets for existing cases. As well as being a useful discipline, it needs to be remembered that the courts already have the power to manage costs and are more likely to do so on existing matters once this becomes the norm for post April 2013 cases.
4. Involve your costs specialists, whether in-house or external, in both the analysis of old cases and the budgeting of new ones. They are going to become an integral and essential part of your litigation team.
Work put in now will not only reap benefits come next April but should also help give firms a much clearer understanding of their core cost-to- revenue ratio.
Sue Nash, founder of Litigation Costs Services and Omnia Legal Software