Unintended consequences of the Jackson Reforms (Part 4)

Unintended consequences of the Jackson Reforms (Part 4)

As the costs regime ushered in by the Jackson reforms enters its second year, tensions between existing and new provisions have begun to show. In the final part of our series we ask Luke Wygas, barrister at 4 Pump Court, to provide his views and predictions for the future.

What impact did the Jackson Reforms have on Part 36 offers by a defendant?

When you are a defendant making an offer there was always an element of uncertainty around costs. The degree of uncertainty is diminished by the costs budget regime. Once you have a costs budget and, even better, a costs management order (CMO), you can make Part 36 offers understanding your exposure on costs a lot better than in the past.

Costs budgets are a problem because it is very much crystal ball gazing. So not only clients but solicitors are struggling at times to do costs budgets because the details of the case aren’t certain and you don’t know how long anything will take until you have done it. In the case of Willis v MRJ Rundell & Associates Ltd [2013] EWHC 2923 (TCC), [2013] All ER (D) 36 (Oct), the judge declined to approve either party’s costs budget because they were ‘disproportionate and unreasonable’, and therefore did not make a CMO. However, because you haven’t got a costs management order doesn’t mean that the parties don’t get costs—they go back to the old fashioned detailed assessments. If parties haven’t had opportunity to get a costs management order that’s one thing. If they have had an order refused because it’s too high, then that will be taken into account by the costs judge.

What consequences does the 10% increase in damages have if the Part 36 offer is beaten?

I don’t think there has been a big change. The changes may impact on the lower value claims. The increase is capped at 10% of the claim’s value up to £500,000 and 5% for any amount up to £1m. So really you’re only going to get £75,000.

Have you come across any other areas where you consider there might be a clash between old provisions and the new CPR Jackson provisions?

I think the main issue was that parties had no experience of what cost budgeting was about. There were teething problems but largely they’ve been ironed out. There are still issues to do with how do you amend cost budgets, but they are being resolved too. As costs budgeting deals with lawyers’ fees, it was clearly going to be controversial. In reality, it has come in, judges are dealing with it properly, and clients understand better what their recoverable costs will be, which is a good thing.

There are minor things surrounding amending a cost budget. For example I will have incurred a number of costs since the last approved budget and CMOs can’t deal with incurred costs—do I just present the court with the part of the budget to be amended or do I have to produce a new budget showing the additional costs that I’ve incurred? How do the additional costs incurred since the original cost management order impact on the cost budget?

Do you have any tips for lawyers when advising their clients?

The first case management conference is an opportunity to gain an advantage over your opponents to a greater extent than it was before. This is because you should now know what the other side think they are going to spend on each part of the litigation. It may be possible to reduce the other side’s budget in significant areas which may well upset any strategy the other side had.

What are your predictions for the future?

It still has to bed in yet. Let’s just leave it for a bit before tampering with it any more.

Interviewed by Dave Thorley. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

First published on Lexis®PSL Dispute ResolutionClick here for a free one week trial of Lexis®PSL. 

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