J-Codes…a Help or a Hindrance? – Part 2

First approved in 2014, J-Codes are the means to achieve the optimum benefits of costs management and the new format bill of costs, as envisaged by Lord Justice Jackson. In Part 1 of this blog series, I worked through the J-Codes evolution, as well as guidance on how to use them. In this Part 2, the focus will be on the 86th update of the Civil Procedure Rules (CPR) in relation to costs management and the assessment of costs.

J-Codes – most recent developments

Firstly, some minor changes were made to the Precedent H costs budget contained within CPR Practice Direction 3E (Costs Management). These changes consisted of adding the date to the statement of truth and making the wording throughout Precedent H consistent.

Next came the amendment of Practice Direction 51L – the New Bill of Costs Pilot Scheme. The amendment was introduced in the 84th update of the CPR and its effect is to substitute the earlier precedent bill of costs AA, with the new precedent AB. Important to note is the fact that Lord Justice Jackson’s recommendation has now come to pass: the Pilot Scheme (PD 51L, as amended), which came into effect from 3rd October 2016, will now be mandatory from 1st October 2017.

So, those who venture into the world of Detailed Assessment now have less than a year to adopt a new bill of costs that represents the single biggest departure from the traditional bill of costs in its entire history. The new “e-bill” is a spreadsheet, with all the functionality that brings. I have the utmost respect for the Hutton Committee, which was tasked with the invention of the new bill. However, concerns over its complexity and potentially counter-intuitive provisions remain.

Digitisation of the civil courts

There is no doubt that, with the digitisation of the Civil Court system planned by 2020, the Detailed Assessment of Costs is the ideal first step to take down the digital path stretching ahead of us. Even for those law firms without a sophisticated time recording system - which would maximise the benefit of using an e-bill - a readily available spreadsheet format, which dovetails with a costs budget and has the usual spreadsheet functions, represents a great advantage over the existing manual bill of costs.

Of course, most of those who regularly draft bills of cost already use bill and budget drafting software, which has all the same spreadsheet abilities as the new e-bill. However, for those who don’t, the advantages of a spreadsheet format court precedent will soon be obvious.

The need to test and feedback

At Burcher Jennings, using technology that saves time and produces more accurate and efficient results is part of our ongoing strategy. So, to us, many of these changes make sense. However, my concern is that, notwithstanding the huge amount of work undertaken by the Hutton Committee, such a complete change in practice should not be set in stone until it has been tested by those who will be using it every day. I firmly believe that it is these daily users, above all others, whose views should take priority. All too often it is the practitioners who are overlooked when making major changes in practice, which makes little sense.

The own format bill option

The practice direction states:

“1.4 The electronic spreadsheet version may be either the spreadsheet version which can be found online at http://www.justice.gov.uk/courts/procedure-rules/civil or any other spreadsheet which—

(a) reports and aggregates costs based on the phases, tasks, activities and expenses defined in Schedule 1 to this Practice Direction;

(b) reports summary totals in a form comparable to Precedent AB;

(c) automatically recalculates intermediate and overall summary totals if input data is changed;

(d) contains all calculations and reference formulae in a transparent manner so as to make its full functionality available to the court and all other parties.”

This does, therefore, give practitioners the option to use their own format bill, providing it has the functionality set out above. I, personally, believe that it is crucial for those using an e-bill under the Pilot Scheme to experiment with the format and explore any benefits that they may see, beyond sticking to precedent AB.

The Association of Costs Lawyers (ACL), clearly major stakeholders in the new bill format, have already devised their own version, which I find much more user friendly and intuitive. I’m not the only one to hold this view - apparently a national law firm with a major in-house costs team has already adopted the ACL version over precedent AB. If you’d like to obtain a copy, you can do so from the ACL. Bear in mind that the ACL version, too, will be constantly revised as Costs Lawyers identify possible bugs or helpful revisions.

Identifying the advantages of a more agile practice

What is clear is that, in the ever-competitive legal profession, anything law firms can do to be operationally leaner and more agile must be an advantage. An e-bill and costs budget (precedent H) will only be of optimum benefit to those with time recording that matches J-Codes in its detail. This will enable the easy export of that time recording to populate a budget and bill. With respect to budgeting, the continuity between the two will also allow firms to track work being done against an agreed or approved costs budget, enabling a prompt application to vary a costs and case management order before a budget phase is exceeded.

Time recording system upgrades

A year passes quickly in our busy legal lives and, given the increasing speed of change, “if you snooze you lose.” Now that there is such a pressing need to evolve with the times, I would urge all firms to evaluate the effectiveness of time recording systems currently in use. This is a good time to explore how existing systems could be updated if they are inadequate. It’s also a prime opportunity to investigate a more up-to-date package that will provide the functionality to take full advantage of the benefits that digitisation of costs management and the detailed assessment of costs brings.

Those who doubt the value of more sophisticated time recording also overlook the huge advantages this brings to management information. Lord Justice Jackson has now been entrusted with a review of the proposals to introduce fixed costs and has a deadline to complete this by 31st July 2017. It is conceivable that a new fixed cost regime could be introduced as early as October 2017. With Lord Justice Jackson having previously suggested a figure of £250,000 as the level at which fixed costs may apply, it is not difficult to see that the more detailed the management information a firm has, the easier it will be to draw on data to assess what work is being done and how best future work can be conducted to remain profitable within a fixed costs regime. Sophisticated time recording systems can make accessing this information much more straightforward.

A more profitable future

To remain profitable, law firms must be far savvier with respect to resourcing, financial budgeting and forecasting, project and case management and – in particular – how work is priced. The whole industry is in the process of change and it will be those who embrace the opportunities to revise, rethink and restructure that see the most positive results.

This article was written by Richard Allen who brings 30 years of unique commercial experience to Burcher Jennings. He was one of the first professionals to achieve Costs Lawyer status, and is one of a select group of Costs Lawyers to have made partner in a solicitor’s practice. Richard is Practice Manager for the Cambridge office.

Burcher Jennings, as well as providing traditional costs drafting services, also provides pricing and funding solutions for Solicitors.