Call for pre-assessment protocol for costs

Ellis: Making the labour-intensive part of the process more efficient

A pre-assessment protocol for costs – which would require the receiving party to serve a costs summary – could help reduce the costs of the process, a new report has suggested.

There was also a call for greater use of early neutral evaluation as a way to head off expensive costs disputes.

The report, Beyond the electronic bill, was published by well-known costs firm Practico and was inspired by a discussion among current and former members of the Hutton committee – which developed the bill – on how the costs assessment procedure should be developed and improved to help harness the advantages of electronic presentation and filling in the gaps between the bill and the assessment itself.

It said the electronic bill was only meant to be a means to an end, not an end in itself. Practico managing director Andy Ellis said: “We may end up with a more fundamental change to how detailed assessments are conducted, especially in the larger cases.

“Once bills are over £1m and sometimes less, the benefits of resolving micro-points by attrition are quickly overtaken by the ‘costs of the costs’. Something has to give and it usually does.”

Simons Muirhead & Burton senior associate Erica Henshilwood told the report that serving a costs summary would enable the paying party to decide whether or not to make an early offer and potentially give itself “some level of costs protection and allow it to avoid being liable to pay for an unnecessary bill of costs”.

Such a costs summary would need to be served promptly after a costs order was made and certainly well within the current three-month time limit for bills.

The eponymous Alex Hutton QC supported the idea: “Hopefully, if you’ve recorded everything electronically as you go along, then the process of producing a summary should be a relatively easy one.”

Fellow costs counsel Nick Bacon QC said he liked the idea of having a compulsory period of dispute resolution based on schedules for large cases and only after that has failed requiring the receiving party to prepare bills of costs.

Watson Farley & Williams litigation partner Andrew Hutcheon suggested that a preliminary stage could be built into the procedure, whereby a costs judge carried out a preliminary non-binding adjudication on a summary bill. “That would come in quickly and already be an early indication of what the expectations are,” he said.

The Senior Costs Judge, Master Gordon-Saker, backed this, saying: “I think that we should give further thought to a system of early neutral evaluation. One can see an obvious analogy with financial dispute resolution hearings in the family court.”

There were practical difficulties with this, however, he acknowledged, such as the judge at the preliminary hearing not being able to conduct the detailed assessment – given that there are not that many costs judges – the preparation time needed in costs disputes and whether the issues could actually be identified without a detailed bill and points of dispute.

Derek Boyd, senior costs lawyer at Ince, highlighted another incentive for refreshing the process: “So far untouched by reform is the principle that a losing party should automatically pick up the costs of assessment, when surely there should now be scope for a formal protocol to ensure that a receiving party does not have free reign to run up significant assessment costs when prospects of an early compromise, particularly where budgeting has taken place, should be explored.”

Mr Bacon added that the ‘open offer’ system was not working. “It is basically respected in form and not substance… Is there a case for imposing a costs sanction, or placing risk on a paying party having its open offer beaten by a particular margin beyond the standard award of standard costs of assessment?

“If there was a costs sanction on a paying party in cases where an open offer was beaten by a certain percentage – perhaps an increase of over 150% – then it would help remove the obviously tactical games that are being played.”

The report also floated the idea of streamlining detailed assessment by looking at the detail in selected areas rather than every item.

Mr Bacon said: “Once there has been attempts to settle under a protocol, the parties are then in a good position to work with the court to identify the real issues. The days of objecting to line-by-line time spent on every task in a case (in large cases) must surely require scrutiny going forward — it is often disproportionate and wasteful in costs.”

Mr Ellis predicted that the electronic bill could in time be developed so that best practice would include “graphical and modern data visualisation” alongside the numbers.

The report said that Practico and the other costs lawyers interviewed were not concerned that the electronic bill was going to take their roles away; indeed, there was support for the electronic bill becoming standard across a much wider range of cases.

Mr Ellis said: “It’s making the labour-intensive part of the process more efficient. It’s not making what we do redundant, it’s just improving the quality of what we do.”

He predicted that those who exploited the potential of the bill should reap the dividends. “We’ve got an opportunity to debate and establish best practice here. It’s a really positive challenge: stay relevant, be better.”

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