140 people converged on a poorly air-conditioned room (affectionately referred to as a “sweatbox” by one leading High Court Judge), at over 30 degrees, to discuss the future of costs reform.

This was the first conference held as part of the Civil Justice Council’s latest consultation on costs reform. Future, remote, events are planned for September and attendance is strongly recommended as the views shared appear likely to form a critical part of the consultation.

As expected, there was a significant divergence of views on most issues…

Budgeting – hated, adored, never ignored

Reinforcing its position as the Marmite of the costs industry there were some strong views shared on the merits or otherwise of costs budgeting. The conclusion reached seemed to be that whilst budgeting was proving beneficial, the process needs tweaking.

Suggestions that directions and budgeting should be diverged met strong resistance in some quarters. HF’s view is that a budget can be a useful tool in controlling directions and that benefit would be lost or at the very least heavily diluted if this proposal was carried through.

A major benefit of budgeting is the insight it gives the parties on the costs and risk of settling at any particular stage. The suggestion that a budget should be a single sum for the entire case, departing from the current phase structure, must therefore be opposed.

Given the strength of feeling in the room and the appetite for change apparent from those on the working committee it seems clear that change is coming but the complete abolition of budgeting seems unlikely.

Guideline hourly rates – the need for data

Well, it all appears to be a bit of a mess with little consensus beyond “judges need something”.

A potted history of the guidelines by the Senior Costs Judge shed some light on the fact that hourly rates had never really been set on what is likely to be considered a sound evidential basis.

The major challenge remains the lack of useful and reliable data upon which to base guideline rates. It seems that those who wish to see the guideline revised upwards are those in possession of the data. Before any further increases are approved, they should provide the data in support.

It was suggested that we should perhaps look at fixed hourly rates. This suggestion comes with significant risks and is arguably a case of putting the cart before the horse. Before rates can be fixed, the methodology for setting them needs to be acceptable. As we know the methodology behind the 2021 guidelines was flawed and led to an inevitable increase. Fixing rates based on that methodology brings obvious problems.

There was also a suggestion that we move away from the concept of valuing lawyers input by reference to time. This may well have merit. The civil justice system is bedeviled by the hourly rate model which rewards inefficiency and penalises innovation. This fundamental shift will be met by strong opposition as change often is.

One aspect that did receive significant support is that any guideline rates (and fixed fees) should be index linked to some extent to ensure they do not become so out of date as to be useless. Again, whatever merit this may have, is underpinned by ensuring the methodology used to reach the starting point is not flawed.

Unintended consequences

As the day progressed it became clear that any reform need to be treated with a great deal of caution due to the significant risk of unintended consequences.

One delegate highlighted that in his niche area of housing law, fixed costs were about to destroy his law centre leaving those he serves in society with no legal support. A more nuanced approach to reform and in particular fixed costs is needed to protect the most vulnerable in society.

Solicitors Act 1974

The one area where there did appear to be general consensus was that the Solicitor’s Act 1974 is badly out of date and in need of an overhaul. The only dissenting voices were those who doubted the political will for change given the Governments other priorities at present.

The flaws in this Act have been brought to light of late in a string of Solicitor/Client disputes such as Belsner v CAM which is currently awaiting a listing in the Court of Appeal. A great deal of money and Court time is going to be spent dealing with the problems without wholesale reform of the Act.

When the temperature has dropped and the dust settled, one thing that does seem clear is that change is coming. Responding to the consultation and supporting views with evidence is going to be vitally important to ensuring the success of any reform.