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Civil Litigation Costs Interim Pilot Report: An LPM Perspective

In a well-known passage from Home Office v Lowndes, Lord Woolf pointed out that:

‘In modern litigation, with the emphasis on proportionality, there is a requirement for parties to make an assessment at the outset of the likely value of the claim and its importance and complexity, and then to plan in advance the necessary work, the appropriate level of person to carry out the work, the overall time which would be necessary and appropriate spent on the various stages in bringing the action to trial and the likely overall cost.’

The first half of the quote above is now widely referred to as the ‘proportionality test’ ie, that costs in litigation be proportionate to the claim at issue.  Personally I find the second half of the quote just as (if not more) interesting.  This is a pretty good description of key activities which make up Legal Project Management (LPM). I’d suggest ‘proportionality’ is still key in this context as well: the emphasis should remain on executing the legal work, not project management as such.  Clearly many lawyers recognise the value of project management techniques applied to law, even if they are sparing in their references to the relatively new phrase of legal project management.

In England and Wales, if there is a 20% difference in uplift between cost estimates first submitted and costs ultimately claimed by a party, the claiming party must provide a detailed statement of explanation to the Court for review.  Providing detailed statements can be time consuming and will often require input from experienced cost draftsmen.  Obviously courts will not allow cost claims they believe are disproportionate, but the law has gone further.  Law firms which charge disproportionate costs to their clients based in inadequate initial estimates can be made to repay them (see Reynolds v Stone Rowe Brewer).  Not a good situation for anyone, client or law firm.

It seems accepted that the courts do not, for various reasons, fully use the powers they already have to take a more muscular approach to cost management during litigation.  This point was one of many picked up by Lord Justice Jackson in his review of Civil Litigation Costs, the final report being published in January 2010.

In his report Lord Justice Jackson proposed a pilot scheme to be set up to investigate the benefits and disadvantages of a more explicit cost estimation and management processes during litigation.  A pilot scheme is currently underway and interim results have recently (3rd February 2012) been published.  A copy of the interim pilot report is available for download from the web site of the Judiciary of England and Wales.

The pilot started in all Technology and Construction Courts and Mercantile Courts on October 1st 2011.  The Pilot applies to any case which has its first case management conference on or after 1st October 2011. The Pilot is scheduled to run until 30th September 2012.

In cases which fall within the pilot parties have to complete, file and exchange a detailed cost budget form early on in the case.  The cost budget form (‘form HB’) is filed at the same time as the case management information sheet.  The cost budget estimate is then to be discussed and, by implication reviewed, at each significant stage of the litigation process including Case Management Conference hearings.

From a legal project management point of view the interim pilot report makes fascinating reading, even after noting the report author’s caveats about the interim nature of the report and therefore treating results with caution.  Some particularly interesting points:

  • Generally, solicitors thought that filling in the HB form and having to provide a detailed estimation of costs quite early on in a case would itself add to the overall cost of a case (filling in the form took on average 2 to 3 hours); many did concede however that with further practice and training (see below) this time taken to do the cost estimates would be reduced.
  • Several solicitors commented that filling in the HB form was a useful exercise because ‘it makes everyone realise what needs to be done to build the case, and what the costs of the process are likely to be’.
  • Some solicitors also pointed out that filling in Form HB ‘educates the parties about the costs of not settling at an early stage, which might assist settlement’.
  • Solicitors were concerned that they did not necessarily have the skills to complete a detailed cost budget early in a case and that they would welcome some training in this area.  This point was echoed by the Judges and, indeed, it was also recognised by Lord Justice Jackson in his original report.  The interim Pilot Report authors note that the form (and, I assume, scope) of training required is yet to be discussed.
  • One solicitor suggested, and this was also echoed by Judges, that it would be a good idea if clients were required to make a formal declaration that they agree with the cost budget – as, it was pointed out, ultimately it is the clients who fund the litigation.

The last point above – securing clear client approval – would actually be the very start point of a client engagement driven by a legal project management process. The key point of legal project management is for lawyers to really understand what clients need and then build a framework to meet that need.  Agreeing potentially acceptable, and realistic, cost ranges with clients is fundamental.

Personally, I find the implication behind some of the comments is that some (many?) solicitors don’t currently build a case plan early on with reference to likely costs to be a cause for real concern.

The other obvious issue is the need for solicitor (and judicial) training in cost estimation and cost management.  Lawyers are lucky here as a huge amount of work has been done over the years by project management professionals, active in various disciplines, about cost estimation and cost management.  In my next few posts I will discuss these issues and see how some common practices found in other areas, especially software development, can be applied to the legal sphere.

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