If the biggest impact on costs budgeting came a year ago under the guise of the Jackson reforms, then the amendments to these, to be introduced on 22 April 2014, can be predicted to have a much smaller effect. The Jackson reforms brought a sea change in the attitude to, and calculation of, civil litigation costs. Enacted under the LASPO Act 2012, they were designed to reduce such costs and promote access to justice, largely through the introduction of new Civil Procedure Rules which, in essence, made costs budgeting compulsory, imposed stricter timetables and guidelines for such, and gave the courts greater powers over the whole budgeting process, especially through the tool of “costs management orders”.
The spirit of the reforms remains unchanged, with careful costs management and control through budgeting as key. The changes are in the detail of CPR 3.12, 3.15 and Practice Direction 3E. Rule 3.12 will now extend to all Part 7 multitrack claims up to £10 million, compared with the 2013 ceiling of £2 million. Rule 3.15 looks set to extend the court’s active role in case and costs management by allowing for the issuing more costs management orders. It is probably this increase to £10 million claims that will most impact on litigation funders. The previous limit of £2 million meant that many such claims were below the interest level of many funders. For litigation funding companies to invest in a commercial case, claims of less than £5 million will not often be viable. Therefore, a likely outcome of the changes is that there will be more funding of cases.
Early feedback on the more budget-led and costs-conscious regime has suggested that some lawyers are struggling with the procedure. (Probably the most notorious case has been the so-called “Plebgate” case of Mitchell v News Group, where the late filing of the budget led to serious limitation of the claim, to the recoverability of the court fees only.) Not surprisingly, much of the initial feedback suggests the unpopularity of the new rules with lawyers. (See the survey conducted by the London Solicitors Litigation Association, April 2014). After decades of hourly billing, stringent budgeting and costs management are anathema to many law firms. However, few clients, whether individuals or companies, nowadays are prepared to embark on litigation if they do not have some idea of the possible, final costs. As litigation costs have soared, so have alternative methods of funding litigation. Jackson addressed these in his review: his report of 2010 in effect gave the green light to the use of third party funding as a legitimate strategy. However, third-party funders have never funded cases without undertaking stringent due diligence to the strengths of the claim and the budget required to make it a viable investment. In this the funders are at one with the ethos of careful cost management of both the 2013 and 2014 rules. Now that lawyers can see that there will only be extension of these rules, the opportunities for litigation funders to expand their business is obvious. Not only can they offer to fund cases, but they can use their budgeting expertise to help lawyers meet the requirements of the courts, especially in the drawing up and management of realistic and proportionate budgets.
Also in tune with the litigation funders’ need for financial viability of a claim, is the greater clarity that the budgeting changes promise, re recoverability of costs. The changes mean that the opportunity to challenge costs at the end of a case will almost completely disappear. This greater certainty will help litigation funders decide whether to fund cases; it may well see more cases securing funding.
All in all, there seems to be every reason for litigation funding companies to be optimistic about the 2014 costs budgeting changes. Without doubt, the most significant change is the extension to £10 million claims.