Source | New Law Journal

Richard Harrison looks at the treatment of costs management in the Merrix case and finds some interesting parallels

Brexit, as well as meaning “Brexit”, means that the political establishment can talk about and do little else. We seem to have a single issue administration. It has devoted itself to implementing the “will of the people” even when that desire was expressed by a very small majority, apparently bamboozled by misrepresentations and manipulated by demagogues and self-interested media, into voting for a simple “yes” or “no”.

That binary solution is one which no sensible person would want to apply to a complex cultural and commercial tapestry built up over 40 years. It simply cannot be unravelled without immense effort and possibly immense damage.

By presenting the British people with such a misconceived, simple choice about which to express a “will”, the last Conservative government gave a poisonous legacy to the present one and it is one which Mrs May and her colleagues are struggling to implement rationally. Some believe it will cause immense damage but, whatever the outcome, the process is gobbling up government time and resource which would be better employed in solving real problems.
 

Costs management/Brexit

I see parallels with the costs management provisions introduced into the Civil Procedure Rules in 2013 following the uncritical acceptance of the Jackson recommendations.

These have been interpreted in the recent case of Merrix v. Heart of England NHS Foundation Trust [2017] EWHC 346 (QB) where Mrs Justice Carr held specifically that CPR 3.18 (b) means CPR 3.18 (b):

“the court will…not depart from such approved or agreed budget unless satisfied that there is a good reason to do so”.

The detailed and rigorous process of detailed assessment is not considered to be a good reason for these purposes: early and speculative engagement in disputatious budgeting will generally trump it. This applies as much where the receiving party claims a sum equal to or less than the sums budgeted as where the receiving party seeks to recover more than the sums budgeted.

As the court said:

“The expensive costs of the detailed assessment procedure are reduced and the case is dealt with justly and with both parties knowing from an early stage what their potential costs liability is, absent good reason to depart from the budget.”

The problem may well be with the rule rather than the case interpreting it. If so the rule should be changed. Extremely able judges, whose efforts would be welcomed in engagement with the determination of issues and the resolution of substantive disputes at hearings, are now even more likely to get stuck in a mire of costs management. The fear is that omission to argue every point may haunt a party in the future.
 

Flaws in the reasoning

Some flaws in the reasoning need to be exposed. One is that judges’ experience focuses on the end results of trial preparation and they therefore look at the matter through the wrong end of the telescope. Having seen the issues presented and resolved, they think that the way in which matters were presented could have been simply and efficiently predicted at the outset and thus the future steps of detailed assessment could have been avoided.

The second flaw is the idea that time saved on detailed assessments is more worthwhile than time saved on preliminary cost management. Yet the reality is that most cases settle. If there is an outcome resulting in an order for detailed assessment, most of those assessments settle. So there is far more scope for costs management hearings than there is for detailed assessment and they take up far more resource in the system.
 

Pinning the tail on the donkey

Anyone completing a precedent H for a reasonably complex commercial case knows that what they are doing is a ritual to produce a figure which may bear some relation to the costs which will ultimately be expended but whose constituent parts have very little to do with what is actually going to happen. It is pinning a tail on the donkey: a process of guesswork and speculation however well that may be disguised. It may help with overall predictability of adverse costs exposure but to suggest that a product of informed guesswork should be a substitute for a review of tasks actually completed and time actually spent is rather misguided.

The judge in Merrix referred to, and dismissed, a concern that treatment of costs budgets as binding would lead to longer and more expensive costs management hearings. She thought that, with proper and realistic co-operation and engagement between the parties, this should not be the case.

The point is that once a costs budget assumes the importance it is now ascribed, it becomes less susceptible to agreement on a broad brush basis with the parties accepting qualifications and reservations for the detailed assessment process.
 

Gumming up the works

Now the parties know that they will be held to it and they will therefore try to maximise their potential recovery and defend each challenge vigorously. There will be less flexibility: contentious time-consuming costs management hearings will need to be fitted into the schedule on a regular basis. The judges will be doing little else than hearing hard fought costs management conferences.

Like Brexit becoming the all-pervading focus of government, costs management has taken that role in the civil justice system. It threatens to gum up the works. We are devoting precious resources to the solution of problems that should never have been allowed to arise in the first place.