Costs budgeting needs to be reformed, not abolished, says CILEX

Costs budgeting should be retained but reformed, such as by ending the requirement that defendants produce a budget in cases where qualified one-way costs shifting (QOCS) applies, CILEX argued in its response to the Civil Justice Council costs working group’s consultation on possible reforms to the regime.

CILEX also called for the guideline hourly rates (GHR) to be updated every two years.

Engaging with members working in civil litigation, CILEX found nearly seven out of 10 respondents backed retaining budgeting, with most saying it should operate on a ‘default on’ basis.

Members said budgeting should take place once directions have been set by the court rather than at the same time, as now – meaning the parties would then know better what they were budgeting for.

There should be a single order setting out the date for the initial case management conference, the date for filing budgets and the date of the costs management conference. Sheffield County Court currently splits the case and costs management hearing into two 45-minute sessions on different dates and CILEX recommended extending this practice across the country.

In QOCS cases, the defendant will not recover their costs even if they win, except in rare situations. Members said such defendants should not have to serve budgets, saving time and costs for both sides.

Other recommendations were for budgeting to be revisited more often throughout proceedings, for particularly specialist sections of a budget to be sent to a specialist judge for assessment, and further judicial training more generally, as some judges remain reluctant to engage with the process.

There was strong support for retaining the GHR and a slim majority in favour of them having a wider role in costs assessments. Members highlighted the need to review the rates regularly but said every year would not be long enough to judge the effect of the last rise.

The response also urged an end to the confusion between contentious and non-contentious work for costs purposes – saying pre-action work should be treated as contentious activity – and expressed concern about the impact of more fixed recoverable costs and/or costs capping.

CILEX President Matthew Huggett said: “The Civil Justice Council’s costs working group has said it is looking at the need for reform with an open mind. We have heard calls for the abolition of costs budgeting but the process has helped clients understand their potential liability in litigation and introduced some control of costs.

“The system needs to be refined rather than removed, especially as the alternative method of controlling costs may be more fixed costs, which would harm access to, and the quality of, justice by making it uneconomic for many law firms to act.”