Carpenters' Hatl, I Thragmorton Avenuc, London, EC2N zJJ
Tet. 020 321 5 I 0l
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www. kain-knight.co.uk
17th September 2015
Alexander Hutton QC
Hailsham Chambers
By email only: alexander.hutton@hailshamchambers.com
david. nelson@pathf inderconsu ltinq.com
Dear Sirs,
Response to Hutton Committee: J-Codes & New Format Bill of Costs
The Kain Knight Group appreciates that the task of reformulating the current format Bill of
Costs ("BoC") will not have been an easy process and is grateful for the time that the
members of the Hutton Committee have committed to the exercise.
Having considered the new format BoC and the accompanying guidance, we foresee a
number of issues that will need addressing before the pilot schemes, let alone a country wide
roll out, are commenced. These concerns fall into two categories; firstly, the logistics of
actually being in a position to prepare the BoC; and secondly, issues with the particular
content and format of the BoC itself.
Staoe One
- Loqistics and implementation
Solicitors' time recording
With the foundations of the new format BoC being J-Codes, it is a pre-requisite that the time
to be claimed is J-coded prior to it's insertion within the BoC. This will require either our
solicitor clients to have already recorded their time in accordance with the J-codes or, in the
absence of such time recording, retrospective coding, by either a fee earner or costs lawyer,
of all time spent on the matter from inception.
Having delivered numerous costs budgeting seminars to solicitors' firms across the country
and also having knowledge of our own client base, it is extremely unlikely that any of our
clients will have J-coded all of their time. At best, some of our clients have the capacity to
phase time record but very few of those, if any, can or have gone one step further to
recording by phase, task and activity. Consequently, in the vast majority of cases, the time
records will have to be retrospectively coded to some degree (if not entirely).
lncreased costs of preparing a new format Bill of Costs
Given the likely disparity between hourly rates of solicitors and costs lawyers, this task is
likely to fall to be dealt with by the costs lawyer. This will nevertheless be a time consuming
and expensive task. Most cases will have been running for anything between 1 and 5 years
before they settle or get to trial - this would leave a significant number of time entries to be
retrospectively J-coded. The increased time in bill preparation unavoidably leads to an
increase in the costs of preparing the new format BoC compared with the current BoC. The
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receiving party will seek to recover these costs from the paying party however, as has been
suggested in the new format BoC Guidance Note (the "Guidance Note"), such increased
costs may well be irrecoverable inter partes and will have to be absorbed by the receiving
party.
Even where a client has J-coded all of their work, a fundamental issue with J-coding is that it
is user reliant. Our experience of firms who have prepared budgets themselves is that when
they have had to phase their incurred costs this is not always undertaken with the utmost
accuracy. Fee earners have repeatedly expressed concerns about phase time recording
especially on significant cases where most fee earners only have time to block time record. lf
these blocks of time have to be J-coded before they can be logged on the solicitors' systems
it is likely that one code will be used where in fact a number are likely to apply. As a result, a
costs lawyer will still be required to undertake an additional check on J-coded work, resulting
in additional and most probably irrecoverable costs.
Counsel's fees required to be J-Coded
A large proportion of many bills comprise Counsel's fees which will also have to be J-coded.
Very few, if any, Chambers are phasing their fee notes. Although the activity is likely to be
self-evident, the applicable phase or task is not, especially if recorded as "Telephone advice"
for example. This will necessitate greater consideration of the file and possibly reference to
Counsel resulting in increased drafting costs.
No n -costs man
aged cases
It is not clear what the position is intended to be in respect of matters which have not been
costs managed, either because budgets were never prepared/required or because budgets
were prepared but never approved. lt is assumed that a separate regime will be required,
perhaps by way of maintaining the present Practice Direction for non-costs managed cases,
where the current BoC is retained?
In addition, it is foreseeable that multi-track cases which have been funded by the LAA might
also be costs managed, however, the Guidance Note states that this was beyond the remit of
the Committee. Are parties to assume that a 6-column BoC would still be appropriate
in
those cases?
Furthermore how will the new format BoC address separate statutes where inter partes cosls
are recoverable, for example a Solicitors Act assessment, Court of Protection general
management BoC, costs under the Arbitration Act, and in many Tribunals, including the
Employment Appeals Tribunal, the Competition Appeals Tribunal and the Land Registration
First and Upper Tier Tribunals.
Pilot Scheme
As to the proposed pilot schemes, there has simply been insufficient time allowed for
reflection on the proposed new format BoC and on the voluntary pilot scheme. The
mandatory pilot scheme in the SCCO is proposed to commence in April 2016 however, given
the current listing times in the SCCO, it is unlikely that any cases using the new format BoC
are likely to be heard in the SCCO before perhaps 6 months after that date and that is likely
only if the parties submitted to the voluntary pilot scheme earlier on. We suggest that the new
format should be mandatory only for matters where potentially costs managed proceedings
are issued/commenced after 1't April 2016 to allow greater time for the profession to embed
J-Codes into their systems.
Moreover, concerns are raised as to whether the SCCO will have the applicable technology,
both hardware and software, available by the commencement of the voluntary pilot scheme
in October 2015 or mandatory pilot scheme in April 2016.
lmpact on CPR 47 and beyond
The Kain Knight Group also has concerns as to how the new format BoC will affect other
sections of the CPR, specifically CPR 44.6 (1Xb) - which version of the new format BoC is
served on the paying party?; CPR 47.9 and CPR 47.13 - ls Precedent G appropriate or
should a new version be incorporated in to the new format BoC?; Filing the Request for
Assessment Hearing (Form N258) - what is required to be filed at Court and will this also be
electronic?; CPR 47.14 -what should be filed, the practicalities and technology required to
undertake a detailed assessment hearing; CPR47.15 - again what needs to be filed, how
will a provisional assessment be affected by the new format BoC?; CPR 47.16 - what will
need to be filed in support of an application for an interim costs certificate and how will this
be determined?; and CPR 47.17 - what will be required to complete a f inal costs certificate?
Stage
1
Summary
In summary Kain Knight Group has significant and substantial concerns surrounding the
logistics and implementation of the new format BoC in the following areas:
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Solicitors'time recording;
Increased costs of preparing a Bill of Costs;
Counsel's fees to be J-Coded;
Non-costs managed cases;
The pilot scheme; and
lmpact on CPR 47 and beyond.
Staoe Two
-
Content and format of the proposed Bill
Given the number of issues identified by various fee earners within the Kain Knight Group,
we intend to bullet point the issues taken concerning the particular format of the BoC and its
content:
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The new format BoC appears unwieldy and cumbersome in contrast to the current format
BoC. This is a concern particularly in courts outside of the SCCO, where quite often
judges who have little costs training still less adequate experience of detailed and
provisional assessment find the current BoC difficult enough to handle, let alone a multiworksheet Excel document with numerous columns of data. This problem will only be
magnified on provisional assessment when there will be no parties available to assist the
court in navigating the sizeable new format BoC.
Given the considerably rigid format of the new format BoC, it will be particularly difficult, if
not impossible, to address complex costs orders, in particular issues-based orders which,
despite CPR guidance to the contrary, are still being made by judges (see for example
Asghar v Ahmad (2015) 4 Costs LR 617 and R(British Academy of Songwriters,
Composers and Authors v Secretary of State for Business (2015) 4 Costs LR 631) and
thus create a very real issue that must be addressed by any new format BoC.
Costs lawyers continue to grapple with the various problems which arise when preparing
phased bills of costs, but such phased bills at least retain a degree of flexibility and
semblance to the current BoC. A transitional provision has been introduced to address
some of the issues arising; however, this is already arguably in conflict with reported case
law (see BP v Cardiff & Vale University Local Health Board [2015] EWHC 813 Costs).
The Guidance Note states that an intermediate knowledge of Excel is required. In order
for a significant number of fee earners to be able to attain this level of experience,
significant time and expense will have to be committed to training. lt is contended that
experience at the upper end of "intermediate" will be a bare minimum for a fee earner to
be completely at ease with the new format BoC and to limit the occurrence of mistakes.
The approach taken to the limiting of the new format BoC in accordance with interim/final
statute invoices rendered appears to be inconsistent with the approach taken by most (if
not all) costs judges on assessment. The BoC applies a pro-rata reduction at the outset
to all items in accordance with the limit applied on the interim/final statute invoices. Any
reductions therefore have an immediate effect on the limited figure in the new format BoC
or any limited parts of it. As a result of this approach, the solicitor is effectively penalised
twice, having firstly limited his fees to what is considered a reasonable sum and then
having to accept further pro-rata reductions to the limited figure, even if the time
reductions would not of themselves reduce the gross sum value to below the limited sum.
lt is also suggested that the limiting is in fact contrary to guidance in General Of Berne
Insurance Company v Jardine Reinsurance Management Ltd, Court of Appeal - Civil
Division, February 12, 1998, [1998] CLC 768,[1998].
Where a party has to undertake the task of retrospectively J-coding time entries there is
concern that a receiving party could manipulate the J-codes so as to allocate items to
phases where there has been an underspend.
The Guidance Note makes reference at page 34, paragraph 5.4 to a "Contingency
Names" worksheet, however, this does not appear to be in the Excel documents
provided. When trying to insert time under one of the Contingencies already provided for
in the example document, there is not an applicable "drop down" code in the "Task Code"
column on the "Bill Detail" worksheet. lt is not clear how the user can go about creating
this additional code in the "drop down" (e.9. XA02 for Contingency B). lt is assumed that
the "Contingency Names" worksheet is required for this to be done.
The new format BoC would appear to require every single routine item to be recorded
individually so that it can be J-coded and phased accordingly. On most multi-track cases
there could easily be in excess of 50-100 routine attendances across all parties. The
example BoC "Bill Detail" worksheet is 47 lines long and has no routine items in it
whatsoever. The inclusion of routine items would undoubtedly lead to a significantly
larger and unwieldy BoC.
The "Print Version" of the example BoC includes a reduced "Bill Detail" worksheet which
is only 14-columns wide compared to the 54-column wide "Bill Detail" worksheet in the
main example document. However, the Precedent AA pdf document included within the
81't Update to the CPR does not appear to include any "Bill Detail" worksheet. lt is
assumed this is an error, if not, how will a paying party ever raise specific individual
objections to the time claimed?
The fundamental columns relating to Phase, Task and Activity Code are located 29
columns into the "Bill Detail" worksheet. Given their importance to the entire document
and the fact that this data will populate earlier cells in the worksheet, it is suggested that
these columns be moved so that they are located just after column 5 ("Date" column).
lf the new format BoC is to be the way forward then it would perhaps be useful if there
were fields to be completed in respect of the headline characteristics of the particular
claim (e.9. type and nature of claim, length of trial, damages awarded) so that both
practitioners and the judiciary can build a searchable database of costs on various types
of cases. This would assist with future budgeting.
How does the Committee foresee foreign lawyers' fees being incorporated into the new
format BoC? Should they be included as a disbursement or will they need to be included
within a separate part and/or phased?
On the "Bill Detail" worksheet, is it intended that users input time entries chronologically
and then subsequently sort them so that all items within a particular phase are grouped
together and run chronologically within that grouping of time entries? ln the example
BoC, all of the items are grouped together by phase however all of the entries occur in a
linear timeline. However, it could be reasonably anticipated that, for example, proofs of
evidence may be taken at the outset of a claim and then witness statements are prepared
many months later. lf the items are entered as they appear on a time ledger, a further
sort would have to be undertaken as they would otherwise appear many lines apart. lt is
assumed that this sorting task could be undertaken by reference to the "Phase Code"
column. Please confirm.
The "Last Approved / Agreed Budget" worksheet ignores the fact that judges have been
trained to award/approve totals for each phase of a budget. This phase total takes
account of incurred costs resulting in an overall phase total which is considered to be
reasonable and proportionate. The approved phase total also usually wraps up profit
costs and disbursements without individual allowances. Therefore, in the majority of
cases, nothing other than an artificial apportionment of costs between incurred/estimated
costs and profit costs/disbursements will be possible in the completion of this worksheet.
Regarding the budget comparison worksheet comparing Incurred Costs with the Last
Approved Budget, the "Departure from Last Approved Budget" column seems to ignore
the incurred costs column. See for example, the CMC row which details t960.54 of
incurred costs, budgeted costs of t2,500 and yet the party is still deemed to be under
budget by the full t2,500. This is in any event odd because the "Last Approved / Agreed
Budget" worksheet indicates pre-budget costs of €3,000. Although the judge at the
budget hearing is only there to approve estimated costs, the phase total is an overall
reasonable and proportionate sum for the receiving party to have spent on that phase.
Accordingly, the costs assessing judge should surely take account of the overall phase
total when considering whether a party is "in budget" and not just the allowance for
estimated costs?
to how costs budgeting and
management impacts upon detailed assessment recovery and the various issues that
can be raised on detailed assessment. The new format BoC simply adds another
complicating factor into the detailed assessment melting pot. This can only serve to
lengthen and complicate costs disputes and resultant hearings.
There are still numerous issues to be resolved as
Stage 2 Summary
Kain Knight Group has identified concerns as to the intricacies of the new format BoC and its
accompanying Guidance Note as detailed above. These are summarised as being:
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Past judicial experience and requisite training;
Complex costs orders and issue based costs orders;
The flexibility of the phased BoC being utilised at present;
Expense of training all Costs Lawyers, Solicitors, Barristers and Judges in Excel to
requisite level (upper intermediate);
The indemnity principle and limiting costs;
Integrity and the manipulation of phases;
Contingencies;
Routine items:
Precedent AA pdf document and the 81"t Update to the CPR;
Foreignlawyers'fees;
Costs Management Orders and the new format BoC; and
lssues remain as
to the interplay between costs
management and detailed
assessment.
As a result of all of the above concerns, we are of the view that although significant time and
effort has been dedicated to the creation of the new format BoC, it will not, at least in the
short to middle term, meet Lord Justice Jackson's aim of creating a quicker and cheaper
costs assessment regime. Unfortunately, quite the opposite is likely to occur as a result of
increased costs of bill preparation and longer detailed assessments brought about by the
format of the BoC itself.
Yours faithtully
MKc;^
Michael Kain - Chairman of Kain Knight Group
michael.kain@kain-knight.co.uk
Endorsed by:
Retired Co
CC: Association of Costs Lawyers