The Jackson reforms are in place now, but there’s still little clarity and much debate about how they’ll work in practice.
The key word in the Reforms is ‘proportionate’. That’s what your spending needs to be from now on. And if it’s not, then you might pay the price.
So it isn’t exactly ideal that there’s so much controversy surrounding what ‘proportionate spending’ is.
Here is the definition set out in the reforms:
“Costs incurred are proportionate if they bear a reasonable relationship to:
(a) the sums in issue in the proceedings
(b) the value of any non-monetary relief in issue in the proceedings
(c) the complexity of the litigation
(d) any additional work generated by the conduct of the paying party, and
(e) any wider factors involved in the proceedings, such as reputation or public importance”
But it’s rather difficult to see how judges will apply this in practice, especially where it has been necessary to incur costs.
What is clear is that you’re going to have to be thinking about whether your budget is proportionate very early on in proceedings.
Costs Budgets and Precedent H
To ensure proportionality, the Jackson Reforms introduced costs budgets, which must now be filed for most cases.
Naturally, there are a few exceptions – in the Commercial Courts, for example, or for claims valued at over £2 million in the Chancery Division and in the TCC and Mercantile courts.
But for the most part, costs budgets must be filed prior to the CMC and in the form of Precedent H.
There are a few things to remember about this new process. But it really is worth getting your head around…because a complete failure to file a costs budget has draconian sanctions. In fact, only court fees will be recoverable by that party. And for parties that fail to stay within budget, their costs will not be fully recoverable, even if they win the case.
Here are some key points to keep aware of:
- Practitioners only need fill in the first page if the action is valued at £25,000 or less.
- The Jackson Reforms have put a big emphasis on co-operation. Parties will need to discuss their costs budgets and seek to agree at least part of them prior to filing and exchanging.
- An agreement means that the court has no jurisdiction in relation to the costs budgets, so the court can only approve or refuse to approve the costs budgets (it cannot seek revisions of the budget). A court that refuses to approve a budget makes a comment in the form of a recital on the order which can then be taken into account at a costs assessment.
- A failure to co-operate can result in costs sanctions, whilst a failure to reach an agreement means the court can review the budgets and make revisions.
- In the event that circumstances change there is a requirement to resubmit the budget to the court.
It’s a big change, but things will become clearer in the next few months, as issues are ironed out in court. Our advice would be to keep an eye on what’s going on to minimise uncertainty and stress.
In the meantime, we’ll do our best here to keep you up to date.
How do you think costs budgeting will affect you? Are you feeling already in your day to day working life, or is it a storm in a teacup for you?