In his 2012 Review of Civil Litigation Costs in England and Wales report, Jackson LJ said this....
"A new format bill of costs should be devised, which will be more informative and capable of yielding information at different levels of generality... Software should be developed which will (a) be used for time recording and capturing relevant information and (b) automatically generate schedules for summary assessment or bills for detailed assessment as and when required. The long term aim must be to harmonise the procedures and systems which will be used for costs budgeting, costs management, summary assessment and detailed assessment."
In response to the requirement of the Jackson Review the Association of Costs Lawyers (then known as the Association of Law Costs Draftsmen), established a working group of costs professionals, whose first report entitled "Modernising Bills of Costs" was produced in October 2011. The report recommended that the possibility of adapting LOC UTBMS standard time recording codes (a series of codes used in the US to classify legal services performed by a legal vendor) for litigation in this jurisdiction should be investigated.
Following publication of the ACL’s report, a working group chaired by Jeremy Morgan QC was set up to move forward with the recommendations made. The group was titled the ‘Jackson Review EW-UTBMS Development Steering Committee’ and consisted of costs professionals and industry experts. The chair was passed to Alexander Hutton QC following Jeremy Morgan's retirement in 2013 and became known as the Hutton Committee.
In July 2014, a set of "J-Codes" (a set of codes adapted for use for litigation in England and Wales from those developed and used in the US) were approved by Lord Dyson, Jackson LJ and the then Senior Costs Judge, Master Hurst. Following endorsement by the LEDES Oversight Committee work began to design a Bill of Costs to replace the current familiar 3 and 4 column model bills of costs contained in the Practice Direction to CPR Part 47.
In his 2015 Harbour Lecture Jackson LJ summarised the work of the Hutton Committee, saying...
"The new scheme will work as follows. The J‐Codes are designed to be compatible with commercial time recording software. Participating solicitors will adapt their time‐recording systems by using the following codes. A number with J as prefix denotes a task (i.e. the subject matter of the work). A number with A as prefix denotes an activity, i.e. what you are doing within that subject matter. For example, if you wish to record your time drafting a witness statement as a result of an earlier meeting with the witness, you would select your Task Code as JG‐10, defined as "Taking, preparing and finalising witness statement(s)" and then select your Activity Code as A103, namely "draft/revise". There is therefore no need to select a Phase Code, only a Task Code and Activity Code as the Task Code always includes the Precedent H phase within it (in the above example, JG‐10 relates only to Witness Statements). Thus all time‐recorded work is assigned to the Precedent H phases. You can then additionally enter manually on the time recording system for that same entry as detailed a description as you wish of the particular work done, such as "drafting the Claimant’s witness statement, including…"
The Hutton Committee published its final report on 31 July 2015. The purpose of the report was to explain what the new format Bill of Costs is, how it will work and the key changes in working practices that will be required to achieve maximum benefit from it.
The report is lengthy and detailed. Some key issues identified
- Bills will need to be produced in the new format whether or not fee earners and barristers have recorded time using J-Codes. If the process of preparing a Bill of costs takes longer because time has not been recorded using J-codes it may well be difficult for receiving parties to recover the costs of the process from the paying party but the work will still need to be carried out.
- The full benefits of the Bill of Costs will not be felt unless and until fee earners are prepared to record their time and fees using the J-codes. This means that the electronic time recording and billing systems currently in common use by solicitors’ firms will need to be adapted to allow time recording using J-Codes.
- The incentive for recording time using J-Codes is that the time and cost of work surrounding the payment of costs by the paying party to the receiving party will be reduced significantly.
- Simply using a ‘lite’ version of phase/task/activity recording confined to the current Precedent H phases will help with monitoring budgeted against actual cost in the short term but it will be more costly and time intensive in the long run and will not provide fee earners with the additional benefits referred to above.
- Preparing bills from un-categorised or over-generalised time records may require a high degree of retrospective manual intervention (by the fee earner or Costs Lawyer) to attribute costs information to appropriate tasks and activities. It will also take longer to create a bill where time recording has only been by phase (rather than also by time and activity). In either case it is likely that a large number of time entries will need to be artificially apportioned after the event.
- All of this will add inefficiency to the process, detract from accuracy and increase the time which is needed to construct a bill of costs. This will increase the cost of the process. Paying parties are likely to object forcefully to paying the additional cost of an inefficient retrospective process and courts are unlikely to allow such costs on assessment. Early adoption of the J-Codes for time recording and to assist with the generation of claims for costs at the end of the litigation is the best tactic that firms of solicitors can adopt.
A voluntary pilot under Practice Direction 51L came into force on 1 October 2015. This allows any receiving party in any court in England and Wales to use the new bill format instead of the existing model. A mandatory pilot is expected to commence on 1 October 2016 for all cases issued in the Senior Courts Costs Office.
So, J-Codes are here and the new format Bill of Costs will soon be mandatory. Firms are strongly recommended to start using the codes as soon as possible. At the very least firms are being urged to start recording work under Precedent H phases. Failure to do so will make the task of drawing a compliant Bill of Costs at the end of a case much more difficult, although not impossible.
"Plotting costs information into relevant categories is a core skill for Costs Lawyers who already have the expertise to construct a bill in whatever format is required. However, where fee earners and counsel have used J-Codes to time record, the process of constructing a Bill of Costs will be substantially quicker and cheaper."
TMC have been closely monitoring the development of the new Bill of Costs. Although we shared the early widespread trepidation, which understandably continues in some areas, we recognise that change is needed, it is coming and it cannot be avoided. We are therefore ready, able and willing to embrace it. Over the last several months we have been familiarising ourselves with the new bill format and requirements, and putting in place the technology needed to make the very most of the efficiencies offered by the change. Whether or not you currently record time in the manner anticipated going forward (very few will be) we will be able to assist you.
"Change is the law of life and those who look only to the past or present are certain to miss the future"
John F. Kennedy