The need for scepticism
Commentary on the Jackson reforms as implemented in this year’s April rule changes tends to be influenced by the conventional view that budget control by the courts is an overwhelmingly good thing and that it enables sensible clients abetted by sensible judges to keep profligate lawyers in check.
This is a rather simplistic approach. It is judge-driven. A judge sees the end result of case presentation in the form of trial bundles and live witnesses. The package is presented to him so he thinks it must have been a forecastable and linear process to get to that stage. This perception creates a judicial tendency to believe that litigation costs budgets can be both straightforward and realistic. This is rarely the case.
The more strident proponents of the cost management process have said many times that a piece of litigation is like a construction project. However, not many buildings are put up whilst trying to avoid the malign attentions of a wily demolition expert. One very strange comment has been that ‘lawyers must become more like quantity surveyors’. I doubt this is really a good analogy.
The two practical points about litigation that are ignored in most of the commentary are:
- many difficulties, though it pains me to say it, can be caused by clients, whether by reason of funding difficulties or lack of perspective (for further discussion, see below, under contingencies);
- the other side will be trying to undermine your relationship with your client, however co-operative they manage to appear to the outside world.
It is also said that the business discipline in which lawyers must excel is project management. In the real world, disputing parties and their advisers are rarely capable of having a business meeting to plan a project. If they could do that, there would be no need to litigate. In my experience of litigation, the most relevant business discipline is probably crisis management.
Precedent H and its shortcomings
‘Precedent H’ is the form that needs to be completed at the time of the first directions questionnaire. Unless a case has been run as a predictable exercise through a well-managed protocol process with a co-operative client and a reasonable opposition, this is going to be at an alarmingly early stage in your real knowledge of the pathology of the dispute. Yet if you do not produce one, your recoverable costs will be confined to court fees. If you underestimate, you will be held to your lowball figure. If you overestimate, you may be restricted to what a judge thinks are ‘proportionate’ costs
It only takes an attempt to produce a working Precedent H in a real live case for its absurdities to become apparent. The producer of the form appears to be a spreadsheet geek with a classroom exposure to the theory of civil litigation. Those eminent practitioners on the rules committee who approved it appear to have ignored their experience in practical litigation for the sake of the legal establishment’s version of ‘political correctness’.
So we turn to those absurdities.
Division into artificial stages
This is my fundamental objection and most constructive suggestion for reform. Most litigation outside very standard case types is messy and does not fit into clearly separate stages. The theory adopted by the framers of the precedent is that you can identify ten distinct phases of a case (or eight if things have gone to plan and directions are happening after ‘investigations’ and ‘statements of case’). The remaining eight are, for ease of reference: CMC (case management conference), disclosure, witness statements, experts’ reports, PTR (pre-trial review), trial preparation, trial and settlement.
This is not how litigation works in the messy real world. It is unhelpful to have to do at least eight different calculations (investigations are still going to be going on and pleadings are going to be changed, in the real world), trying to determine how much time will be spent on each stage, when what we know is that in fact everything is going to overlap.
As well as being artificial, it exacerbates the inaccuracies in the hourly rates methodology discussed below. In summary, the risk is that it multiplies errors by up to ten times.
How much better it would be to work out a realistic time period over which the litigation will pan out, and then try to plan for the peaks and troughs and periods of intense activity over that period. It would be one calculation based on projected activity over months rather than splitting that activity in work-types. It would make for an easier and more accurate process.
I personally use such a spreadsheet (because I am in fact a keen advocate of realistic case planning and budgeting and find it a much more valuable tool).
Applying numbers of hours to hourly rates
Once you have hourly rates for different categories of fee earner it is tempting to put in a reasonable balance of hours split over those categories. It is tempting to try to estimate the bare minimum that you think the exercise might merit if done reasonably, but such are the sanctions for coming up with an underestimate that it is even more tempting to make use of the spreadsheet’s capabilities by putting in a large number of hours for each of the categories of fee earners. The fact that this might then be done ten times over the artificial categories outlined above is a recipe for unduly high estimates.
Counsel: brief fees and refreshers
We are asked to calculate counsel’s involvement by time and hourly rates. The spreadsheet appears to recognise that this is not the normal way in which counsel’s fees are calculated by not performing the calculation. Counsel’s main involvement is at the trial, where fees are calculated on the basis of a brief fee plus a daily refresher for each trial day beyond the first.
This suggests a spreadsheet model under which a variable number of days of trial is applied to the refreshers and the estimate of the solicitors’ daily trial costs. It would be helpful if Precedent H enabled this because it is such an obvious tool.
Contingencies
There are two obvious contingencies which will probably be calculated in every matter, because they are given by way of example: the ‘specific disclosure application’ and ‘mediation’. All sorts of other contingencies could be dreamed up, were there sufficient time and interest. I have mentioned two of them: further investigation and amended statements of case.
Of course, the main contingency cannot be planned for: that is how reasonable, co-operative and responsive the client is going to be. I emphasise that most clients of course are excellent. They know who they are. But the most difficult also tend to feature in the most difficult cases. The battle with the other side and the courts is easy and predictable: the battle with the clients can often be what causes the uncertainty, delay and frustration.
Assumptions
‘Assumptions’ are apparently treated differently from ‘contingencies’. The threat is that they will be ignored. There will be need to refer to them and use them if it is sought to revise a budget for any reason. The temptation is going to be to spend an immense amount of time drafting detailed assumptions to cover all eventualities on the basis that you do not want to be caught out in the future.
‘Fee earners work’
Assembling bundles for PTRs and trial is said not to be ‘fee earners work’. There is a difference between ‘copying’ (which can properly be said to be an overhead or disbursement) and assembly or collation which can be quite a skilled job of assessment and ordering. We tend to assemble bundles electronically these days. It is part of the process of managing and presenting a case and should not be denigrated.
So, a sweeping assumption by the creators of an unrealistic form somehow compounds the resentment.
Conclusion
I now have an expanded form costs estimation spreadsheet that is so detailed it is pointless. It forecasts what each fee earner may be doing on a weekly basis for a year. The reality is you do not know. But the detail when entered looks meretriciously impressive.
Of course, you want to get it right. You can enter figures that you believe will be right. However, you do not want to be penalised for low balling. So you beef it up with a worst case scenario in mind. The worst case is influenced by the two ‘practical facts’ set out above. You are then criticised for lack of proportionality. But it seems that an unduly high estimate is going to be better than one that is too low.
Courts are woefully underequipped to understand the process which happens before everything arrives before them in neat bundles. They will be reduced to mechanistic and formulaic decisions driven by the culture of sanctions. The result will be higher risk, higher cost litigation. And no real benefit for clients.
The costs management process presently threatens to be a shambles with the smug and complacent faith in the benefits of the present Precedent H being the major contributing factor.
Richard Harrison is a partner at Laytons: richard.harrison@laytons.com
