Costs management pilot expanded

In his final report following his year-long costs review, Lord Justice Jackson recommended that judges should have a discretion to adopt "costs management" procedures where these would be beneficial for a particular case. (Click here for a summary of his recommendations affecting major commercial litigation.)

Following a pilot of these procedures in the Birmingham Mercantile Court and Technology and Construction Court (TCC), the pilot is to be extended to all Mercantile Courts and the TCC through a new Practice Direction. The pilot will apply to proceedings in which the first case management conference (CMC) is heard on or after 1 October 2011 and will continue for one year.

The essence of the scheme is that, as part of its preparation for the first CMC, each party will produce a detailed budget setting out estimated costs for each stage of the proceedings. The court will have power to make a "costs management order" approving the costs budget of any party, if appropriate after making revisions. Where an approved costs budget later becomes inaccurate, the party must produce a revised budget, giving reasons for any increase, and the court may approve or disapprove any departures from the previous budget. When assessing costs, the court will have regard to a party's last approved budget and will not depart from it unless satisfied that there is good reason to do so.

Judges will receive training in costs management during the year-long pilot. Lord Justice Jackson has expressed the hope that, if the outcome of the pilot is favourable, the Practice Direction will be rolled out to all courts in October 2012, although the Commercial Court is likely to be excluded from the scheme at least initially.

This is a significant development. Currently, the court's principal focus in controlling costs is retrospective, in that it normally determines recoverable costs once a matter has concluded. The costs management reforms, if rolled out more widely, will shift the court's focus to determining upfront how much should be spent on litigation.

There is a separate pilot of mandatory costs management procedures in defamation proceedings in London and Manchester, which has been extended to September. It is not yet known whether this scheme will be continued once the pilot comes to an end.