Innovation and Change – Bill of Costs

With reference to Jackson LJ’s final report[1] three requirements were required to be satisfied for any new bill format. These canbe found at Paragraph 5.3 of Chapter 45. Two key recommendations were made:-

106.     Anew format of bills of costs should be devised, which will be more informative andcapable of yielding information at different levels of generality.

107.     Softwareshould be developed which will (a) be used for time recording and capturingrelevant information and (b) automatically generate schedules for summaryassessment or bills for detailed assessment as and when required.  The long term aim must be to harmonise theprocedures and systems which will be used for costs budgeting, costsmanagement, summary assessment and detailed assessment.

Jackson LJ was clear that bills should be prepared by reference tophases, tasks and activities, summarising costs and disbursements by task andphase and setting out tasks in each phase in chronological order.

The Hutton Committee was established in 2012, first phase of theCommittee’s work being to focus on the creation of electronic time recordingcodes, better known as “J-codes.

Set to commence as a compulsory pilot in Spring 2016, J-Codes requirethat a fee earner selects from a list the appropriate code which bestcategorises the work they are doing. These, include phases and tasks that,because of their nature, are not currently included in Precedent H (such asfunding costs).

Ahead of the pilotscheme, Senior Costs Judge, Master Gordon-Saker, has givenguidance as to how current format bills should be divided.  Reference is made to the case of BP v.Cardiff & Vale University Local Health Board [2015] EWHC B13, acomplex clinical negligence case, in whichthe receiving party’s bill of costs had only been divided into parts whichreflected the changes in funding arrangements and changes to the rate of valueadded tax. 

Reference was made tothe different approaches in relation to proportionality with the oldproportionality rules applicable (for cases commenced before 1^stApril 2013) at CPR 44.4(2) and the new, for cases commenced on or after 1^stApril 2013), at CPR 44.3(2) and (5). 

This case was commencedafter 1^st April 2013 but work was done prior to that date.  Accordingly the old proportionality testapplied to work done before 1^st April 2013 and the new test for workafter that date. 

Reference is made toParagraph 26 of the Judgment:

            “The approach toproportionality in respect of work done on or after 1^st April 2013is different to that in respect of work done before that date.  In any case in which both approaches need tobe taken it will be necessary to identify the work which falls before and afterthat date and to identify the sums claimed for the work done before and afterthat date.  In my judgment where the case commenced on or after 1 April 2013, thebill covers costs for work done both before and after that date and the costsare to be assessed on the standard basis it must be both convenient and necessaryfor the bill to be divided into parts so as to distinguish between costsclaimed for work done before 1 April 2013 and costs claimed for work done after1 April 2013.

Master Gordon-Sakercommented that he could reach no conclusion, when considering theproportionality of costs incurred after 1^st April 2013, whetheradditional liabilities should be taken into account.  However, it was later noted, the present,non-exhaustive, definition of costs, to which CPR 44.1(1) refers, does notexpressly include additional liabilities.

Further guidance wasgiven by Master Gordon-Saker in relation to division of the bill to reflect thebudget phases and the costs of budgeting. Upon detailed assessment, where acosts management order has been made, the court needs to know which costs areclaimed in relation to each budget phase and the court will need to know whichcosts claimed within each phase were incurred before the budget was agreed orapproved, as those costs will have to be assessed, and which costs wereincurred thereafter.  It will benecessary to identify the costs of completing Precedent H (which should notexceed the higher of £1,000.00 or 1% of the approved or agreed budget) andshould identify the other costs of budgeting and the costs management process(which should not exceed 2% of the approved or agreed budget).

In summary, so that the court may comply withthe CPR, the bill needs to be drawn in parts which reflect the new and oldproportionality rules and the phases of the budget.  It will also be necessary to distinguishbetween the costs incurred before and after the budget was agreed or approved.

Master Gordon-Sakersuggested that for bills already drawn, and prior to the implementation of thenew format Bill of Costs which should avoid these difficulties, to avoid there-drawing of a bill, one possible course would be to serve a schedule settingout the individual items of costs claimed in relation to each phase.

The guidance on the formatof bills given by Master Gordon-Saker can be simplified as follows:-

·     Division between periodswhere the different proportionality test applies (pre and post 1^stApril 2013);

·     Division to reflect thephases of the budget;

·     Division to show workrelating to costs budgeting

Warning

Although not imposed on this particular case, MasterGordon-Saker made comment that where bills are not properly divided and it wasnecessary for parties to spend time identifying work, there is a suggestion ofcosts implications.

As has been noted in his Judgement, with effectfrom 1^st October 2015 in any case in which a costs management orderhas been made a receiving party will be required to serve with the notice ofcommencement a breakdown of costs claimed for each phase or proceedings.  The breakdown will only show the TOTAL sumsfor costs incurred before and after the budget which are claimed in eachphase.  It will not identify the phaseinto which the individual items of work in the bill fall.

Written by KellieBarnes, Trainee Costs Lawyer, A&M Bacon Limited