Legal Costs Update – the New Model Bill of Costs – comments on Lord Jackson’s latest proposals
The current form of bill of costs, Lord Jackson reminds us, follows the style of a Victorian account book; it is anachronistic and makes no use of time recording software. Lord Jackson’s Final Report (chapter 45) identified the need for a new model, which would need to meet three key requirements:
- It must provide a transparent explanation about what work was done and why;
- It must provide a user-friendly synopsis of the work done, how long it took and why;
- It must be inexpensive to produce.
The Current Proposals
Following publication of Lord Jackson’s Final Report, the task of developing a new model bill of costs fell, eventually, to the Hutton Committee. The Hutton Committee first created J-Codes – a standardised way of capturing costs information based on the E-billing UTBMS system in use in the United States. The Hutton committee circulated a draft new model bill at the end of last summer. The Hutton Committee model – an electronic (Excel) spreadsheet – is said to allow a firm’s J-Coded costs recording data to be fed into it, allowing for automatic generation of solicitor/client bills, bills of costs for detailed assessment, and schedules for summary assessment.
The Hutton Committee model received a number of critical responses last autumn, which Lord Jackson (rather kindly in our view) summarised:
- It is too expensive to implement;
- It is too complex;
- It is too time-consuming to transfer historic time costs into the new (J-Code) format;
- The use of J-Codes is too prescriptive.
In the meantime the Civil Procedure Rules Committee had already established a voluntary pilot for the new model bill, commencing in October 2015. That pilot was to end in April 2016, at which point a compulsory pilot would start. However, in December 2015 the CPRC extended the voluntary pilot until December 2016 and postponed the compulsory pilot pending “careful further consideration”.
Lord Jackson’s Response to Criticisms of the Current Proposals
Lord Jackson rejects the suggestion that the proposed changes will require solicitors to pay for expensive new time-recording software. In his view those firms that already use time management software can make the necessary adjustments relatively easy and at relatively little cost. If the profession decides to run with the new model bill then, for those that need to buy new software, suppliers will be able to develop and bring to market new products within six months.
Lord Jackson recognises however that firms may not want to implement J-Coding, and says that it ought to be possible to redesign the model bill so that it will work with or without them – “All the new format bill should ask is for fee earners to record their data in the phase, task and activity format and for those data to be served in an electronic format. How they choose to structure the presentation of those data should be up to them.”
Time/disbursement costs should be recorded in phases, to mirror the now familiar costs budget phases. There is nothing controversial about that. However, if firms are going to be required to split time and costs within each phase by task and activity, which is exactly what J-Coding is supposed to achieve, it makes little sense to leave it up to individual firms to decide for themselves which subcategories should be used. If the ultimate aim is to produce a consistent and transparent account then, surely, every fee earner in every firm should be using the same task and activity categories.
Lord Jackson rejects the suggestion that a simpler bill following the costs budget (Precedent H) stages would have been adequate. Whilst Lord Jackson concedes that there are a large number of J-Codes and that the new model bill looks complex, he makes the point that fee earners will only use those J-Codes that apply to their work, that not all of the spreadsheet’s (very many) columns and cells will be used, and that if there is a demand for it then the software suppliers will no doubt produce new and more user friendly versions. Solicitors, he says, should feel free to adapt and create their own versions. He rejects the simpler version of the model bill produced by the Association of Costs Lawyers, saying that a simpler (by costs budget phase) bill would lose many of its advantages by sacrificing the level of information provided within the bill.
In criticising the proposal that the model should follow the costs budget phases, Lord Jackson said that “A bill which merely states that £3000 was incurred pre-action without explaining how and why it was incurred is unhelpful.” However, he appears to have overlooked the fact that that this is not how the £3000 would be presented. It would, of course, be set out in fine detail – with the costs broken up into routine communications, longer communications, attendances on documents etc. in the normal way. Further, it does not appear to us that Lord Jackson’s proposed phase – task – activity approach addresses, any more than any other approach, his key concerns about why work was done and why it took as long as it did or cost as much as it did.
Lord Jackson accepts the criticism that it would take considerable time and cost too much to apply J-Codes and the new format bill retrospectively – “It will therefore be necessary to implement this reform in a way that avoids the need for restructuring past records of work done.”
Here, we feel, Lord Jackson has failed to address a key issue, which is that J-Coding (or similar, if the approach is really going to be left up to individual firms) will take up a lot of fee earner time if it is to work in the way that the reformers envisage. It is also unlikely, in many cases, to be necessary. Every letter, every call, every review, every change of activity, will need to be recorded separately and in the prescribed way. A busy fee earner may need to make 20 or 30 separate time entries for a single day. Whilst accurate and detailed time recording should be par for the course, we feel that it is far from clear that contemporaneous J-Coding (or similar) would ultimately result in time or costs savings. We feel that the ACL’s proposed approach – which would encourage time recording by budget phase – probably goes quite far enough. Further, the introduction of task and activity subcategories at the time recording stage, we feel is unlikely to facilitate the production of a more accurate account. This is particularly so on larger matters, where different fee earners will have different views on which of the many hundreds of possible combinations of phase – task – activity codes might apply. Breaking time and costs down by task and activity can be done more accurately, more consistently, and at far less cost at the conclusion of a case if and when a bill of costs is required (and it must be remembered that a very large number of costs claims settle without the need for a bill of costs at all, also that many defendant litigators are unlikely to need to produce bills of costs very often).
The Prescription of J-Codes
Lord Jackson confirms that it was never intended to make J-Codes mandatory for the new bill of costs but says:
“Nevertheless, the professions would be wise to give serious consideration to J-Codes. There are considerable advantages to using them. They make the process of drafting a bill considerably quicker, easier and cheaper, if J-Coding is done contemporaneously with the work carried out….
If the professions wish to create alternative time-recording standards are to present their billable time in another way, then the J-codes represent the standard which they will have to equal or exceed.”
Again we have serious doubts about whether J-Coding (or similar) would result in the efficiencies and transparency that Lord Jackson believes would follow. It is unlikely that those that routinely act for defendants (and in particular in personal injuries and clinical negligence cases) will be especially keen to invest time and cost and ongoing extra effort on new time/cost recording systems when they are only relatively rarely required to produce a bill of costs for assessment. Most practitioners are already more than capable of producing, with relative ease, statements of costs for summary assessment. Most practitioners are now used to producing Precedent H costs budgets and many are already recording time and costs by budget phase category. Most commercial litigation costs claims settle without the need to produce a bill of costs and, with great respect, we have to wonder if Lord Jackson is overlooking the fact that if costs budgeting is to work as intended then within a few short years the requirement for bills of costs for assessment will have dropped off to a very low level. Thus, whatever the level of detail required by the new model bill of costs, we are far from convinced that there is a need, in many cases, for J-Coding (or similar) to be done “contemporaneously with the work carried out”.
Lord Jackson’s Proposed Solution:
Lord Jackson suggests that the work of the Hutton Committee should be preserved whilst allowing greater flexibility in the new model bill:
“The Hutton Committee’s proposed version of the bill should be adopted as the new bill format, albeit with the references to the J-Codes removed. The CPR should allow practitioners to prepare that bill in any manner of their choosing; whether with the assistance of J-Codes, automatically generated by an Excel spreadsheet or by hand.
A digital copy of the bill should be served on the court and the paying party along with an electronic spreadsheet, which clearly and accurately details the work done in the course of the litigation, following the Precedent H stages. This should be in the same format of phase/task/activity and adopt the Precedent H guidance for what work falls in a given phase. Time entries can either be generated automatically by time recording software are inputted manually by those who prefer to record their work done on paper. For those using J-Codes, the Hutton committee spreadsheet provides an excellent tool for preparing the bill.”
Lord Jackson’s proposal, he feels, has three elements to commend it. Firstly, we already have the new format bill which, he feels, meets those three key requirements set out in chapter 45 of his Final Report. The new format integrates with Precedent H and can be generated automatically, giving software designers a framework within which to operate. Secondly, it makes use of the work done by the Hutton committee (to the extent that J-Codes or something similar is adopted). Thirdly, he says, it sidesteps much of the criticisms that have given rise to the delays (cost, complexity etc.).
Lord Jackson suggests that his proposal seriously diminishes the criticism that retrospective application of the new bill format and J-Coding would cause significant additional expense, but also suggests a “complete solution” to that problem, which is that the CPRC should choose a future date for implementation. Work done up to that point may be recorded in the old way and set out in the old format, work done after that date would be in the new format. Lord Jackson suggests that the new format bill should be mandatory for all work done after 1 October 2017. The voluntary pilot should be extended until that date.
Given our views on Lord Jackson’s response to the criticisms of the Hutton Committee model bill and J-codes, it is obvious that we do not agree that his current proposal in fact addresses or even “sidesteps” those criticisms. However if, which seems inevitable, the compulsory use of a new model bill of costs becomes necessary, we believe that an implementation date of October 2017 is probably too soon, given the need to assess the impact that costs budgeting will have on the incidence of detailed assessment. Further, we believe that a more sensible approach would be to follow the ACL’s proposal, to base the new model bill primarily around the (cost budget) phases. In any event, we are left to wonder whether contemporaneous phase – task – activity time recording would result in greater consistency and or/time and cost savings. We look forward to keeping you updated.