SJ interview: Peter Hurst

Historically, the cost of detailed assessment proceedings were moderate. Since the late 1990s, we have seen an alarming increase in the costs of this process. Earlier this year a case involving the repudiation of a distribution agreement attracted Points of Dispute amounting to a full lever arch file and costs of the proceedings were estimated at £350,000. Twenty years ago even allowing for inflation such a level of costs was never encountered. Isn't this a negative development and what would you attribute to?

The introduction of points of dispute and optional replies was an attempt to streamline detailed assessment procedure and to do away with the old objections procedure, which effectively meant that, in most large cases, there had to be two hearings to decide the costs, followed, if necessary, by written reasons so that the matter could be appealed, for which no permission was needed.

Paragraph 35.2 of the Costs Practice Direction is clear: 'Points of dispute should be short and to the point.' Experience has shown that they are becoming longer and longer. Many of the challenges are standard clauses, which costs draftsmen deploy in every case; this in turn prompts a response of the same or even greater length.

One reason for the length is that the same point is repeated time after time. If there are numerous conferences with counsel, it is only necessary to say that the number of conferences with counsel appears excessive and that the paying party is of the view that, eg, four conferences would be reasonable (rather than 17). Similarly, where many fee-earners attend at conferences, or on hearings, it is only necessary for the paying party to state once that the numbers involved are excessive and to suggest that the appropriate level of fee-earner should be, eg, the assistant solicitor having conduct of the litigation and a trainee/paralegal (as against two partners, two assistant solicitors and sundry others). It may be that on each occasion when the point arises when the bill is being assessed, the point will have to be decided on the facts at that time, and the decision may vary depending on how the litigation has developed. It is, however, unnecessary to repeat the assertions in the points of dispute every time where the point is being made.

Another reason for the length of the points of dispute appears to be the increasingly technical nature of challenges, particularly in the field of conditional fee agreements (CFAs) and after-the-event (ATE) insurance. This is to some extent understandable, since a victory by a liability insurer in one case can result in savings across several hundred, if not thousands, of similar cases.

In my personal view, the present system of detailed assessment is excessively time-consuming and expensive. On the other hand, summary assessment is disliked by judges and the parties and can result in very rough justice.

In the Marchioness litigation ([1998] 1 Costs LR 32), the claim for costs by the successful claimants was fiercely resisted by the paying parties. The result of this was a significant reduction in the costs allowed. On the other hand, the costs of the detailed assessment came to more than the costs of the litigation. Such an imbalance is not justifiable. It is now not uncommon for the costs of litigation to exceed the damages award, and for the costs of the detailed assessment to exceed the litigation costs.

Is there any way these escalating costs could be reduced in the short-term?

In my view, the system of assessing costs is in need of radical reform. As to ways in which these escalating costs could be reduced in the short term, the only tools available to a judge are the rules and practice directions. These could however be enforced with more rigour and by more active case management.

You have been very much embroiled in the decision-making process required to attempt to make workable sense of recovery of costs under the CFA regime and the legal expenses insurance policies which often accompany such agreements. Has this new regime been a successful alternative method of funding litigation in England and Wales?

One only has to look at the number of appeals reaching the Court of Appeal and, indeed, the House of Lords in relation to recovery of costs under the conditional fee regime, to answer this question. The Court of Appeal now regularly sits with an assessor on costs matters. Although the use of assessors in the Court of Appeal was possible pre-CPR, the procedure had never to my knowledge been used.

Because of the difficulties that have arisen, the government has thought it right to revoke the Conditional Fee Agreements Regulations 2000, leaving the professional bodies to regulate legal representatives. It was felt that claimants, who are now able to litigate at no risk to themselves, did not need the extensive protection provided by the Regulations. The Civil Justice Council is actively involved in investigating methods of funding litigation in other jurisdictions with a view to reducing the stream of technical challenges currently being made.

The current position with regard to enforceability of CFAs and recovery of additional liabilities appears to have been rendered less complex by the revocation of the CFA Regulations 2000. The requirements of the Client Care and Costs Code of the Law Society are far less stringent than in the defunct regulations. Nevertheless, the admirably simple single page Law Society CFA is usually accompanied by very detailed notes that repeat many of the features of the old arrangements. Is this not likely to ensure a continuation of the technical challenges condemned by the judiciary?

It is too early to answer this question, and, so far as I am aware, no challenges to CFAs entered into after 1 November 2005 have yet reached the Supreme Court Costs Office (SCCO). In the nature of things, these challenges will first appear in small cases in the County Courts. Having said that, there is anecdotal evidence that liability insurers are scrutinising the Law Society's model form of CFA with a view to raising challenges.

There is a widespread belief amongst costs practitioners, based on experience, that the detailed assessment system outside London has become something of a 'postcode lottery'. Long and well established costs principles, which would not even have to be argued before experienced costs judges, are having to be argued with no guarantee that these established principles will be followed by district judges.

Is there not a persuasive argument for properly trained costs officers to be put in place in the provinces under the direct control and responsibility of the Senior Costs Judge in London?

It was because of the unpredictable nature of detailed assessment around the country that the system of regional costs judges was introduced. Regional costs judges are all district judges who have volunteered to take on the heavier and more difficult assessments outside London. It is hoped that this will create a collegiate atmosphere between the costs judge in the SCCO and the regional costs judges, and will also promote expertise and consistency. The Costs Office holds an annual seminar for all its deputies, costs officers and the regional costs judges. In addition, regional costs judges are encouraged to raise any queries which they may have on FELIX [the judiciary's communications network], or direct with the Costs Office.

The second part of your question is whether there is a persuasive argument for properly trained costs officers to be put in place in the regions. If by costs officers, you mean authorised court officers, there would, I think, be immediate resource problems. It would first be necessary to identify those willing to take on this work, they would then need to be trained, which would in effect mean spending up to three months in the SCCO, and there would have to be constant training of new costs officers to cover those who retire and to cover holidays and sickness. In my personal view, the idea is certainly worth considering but resource implications would probably prevent its implementation.

The senior judiciary have made it clear that it will be a difficult hurdle to persuade appellate courts to grant permission to appeal in costs matters. But there are many decisions on such important matters as proportionality or retainers that justify a review which is usually refused because they are simply costs cases. Should not all applications for permission be considered on their own merits without any pre-determined influence being imposed from the outset simply because the matter under review relates to a costs issue?

I am not aware that the appellate courts approach permission applications any differently merely because the appeal relates to costs. If the appeal is as to quantum only, it may well be difficult to persuade an appeal court judge to grant permission, but where there is a point of law or principle to be argued I would expect the permission application to be considered on exactly the same basis as any other matter. It has to be acknowledged that many appeals, although in respect of small cases, have a significant knock-on effect because of the many similar cases waiting in the pipeline for a definitive decision.

Do you see an eventual role for contingency fees in the English legal system?

I have already mentioned that the Civil Justice Council is carrying out research into litigation funding in other jurisdictions. It is clear that the ATE market in this jurisdiction is still in its infancy and is fragile. If the ATE market were to collapse, I do not see how the CFA regime could continue. The CFA regime is in fact a contingency fee scheme which has been legalised by statute. If ATE insurance becomes unavailable, and the CFA regime therefore becomes unworkable, the only viable option would then seem to be to do away with fee shifting and permit contingency fees, albeit controlled by the court.