Mandatory budgeting: on its way out?

For lawyers who hate budgeting - assuming there is any other kind - the surprise early retirement of the master of the rolls Lord Dyson this October could turn out to be cause for celebration.

At the IBC Legal Solicitors’ Costs conference earlier this month, the ever popular Sir Rupert Jackson gave a speech outlining his vision for a contingency legal aid fund. Interestingly, in a paper accompanying his speech, Jackson remarked that, ‘of course, costs management may in the future become a discretionary rather than mandatory procedure’.

The judge pointed out that this is, after all, what he had recommended in his Final Report, and also what he called for last year in his Harbour lecture.

Jackson also drew attention to a paragraph in December’s interim report by Briggs LJ, in which Briggs said: ‘It is worth bearing in mind that Jackson LJ recommended that all costs management should be discretionary.

‘The decision to make it compulsory within the wide bracket identified above represented a significant departure from his preferred scheme. The controversy generated by that departure has not entirely died down.’

At the Harbour lecture referred to, Jackson had recommended that blanket mandatory budgeting be dropped, in favour of guidance for judges on whether or not budgeting was appropriate in a case. The guidance would state that the court should not budget cases where it lacks the resources to do so without causing significant delay and disruption.

Sadly for the profession, no sooner had Jackson sat down at the end of that Harbour lecture, than up popped Dyson to rain on his parade. Dyson could not tolerate giving judges discretion over when to budget, because he feared the ‘lack of resources card’ would be played too often.

And so budgeting has remained compulsory, apart from a short-term carve-out that was granted last year for some clinical negligence cases.

Yet it seems Jackson is not the only one who wants to see budgeting made discretionary and the main obstacle to that - Lord Dyson - is now on his way out.

If budgeting does become discretionary, that will no doubt be the beginning of its speedy demise. While some judges are known for their enthusiastic and pro-active adoption of the budgeting ethos, these are very much in the minority. Budgeting is despised by most judges, and if you give them an escape route to avoid having to do it, they will not waste any time in taking it.

Many would applaud the end of budgeting – but at the same time it would feel like a giant waste, given the time and resources that solicitors have now invested in it. Lawyers have actually adapted well to the process, and judges need to do the same.

Overshadowing all this, of course, is Jackson’s call for the widespread introduction of fixed costs for civil litigation up to £250,000. If that comes in, budgeting will be irrelevant in the majority of litigation anyway.

Claimant lawyers are extremely worried about the fixed costs proposal. It all hangs on the level of the fees, because if these are set too low - and Jackson’s initial draft figures are certainly viewed that way - then lawyers will have to charge the client an extra amount that will not be recoverable, and in many cases will make the claim unviable.

The unexpectedly high threshold for the fixed fee proposals, and the markedly ambitious timetable for their implementation - within a year - has led lawyers to question how realistic they are. Is the quarter-of-a-million figure a shock tactic, with the real target actually much lower?

So far, the Ministry of Justice has said only that it endorses the principle of fixed costs, which we already knew, and that it will be ‘carefully considering’ the proposals.

But lawyers cannot be left in the dark about something so fundamental. The profession needs answers. Is this going to happen, or not? If so, at what level – and when?

In the meantime, you can bet your bottom dollar that Jackson’s initial costs grid, based on discussions with judges and intended only as a starting point for Civil Justice Council-led ‘big tent’ negotiations on fees, will be making its way into costs proceedings.

Paying parties will inevitably be tempted to whip out the grid as evidence of why they should pay no more than the costs listed under it, which are an indication of what is ‘proportionate’ for each stage of litigation.

Some judges might find that argument persuasive.

Rachel Rothwell is editor of Litigation Funding

@Rachel_Rothwell