Fixed Recoverable Costs – the next chapter?

Published 31 julio 2017

On 11^th November 2016, the Lord Chief Justice and the Master of the Rolls commissioned Lord Justice Jackson to carry out a further review and to develop proposals for extending fixed recoverable costs (FRC).  He has today (31^st July 2017) delivered his report "Review of Civil Litigation Costs: Supplemental Report, Fixed Recoverable Costs".  It is now for the Government to consider the report and consult on any of the proposals that it decides to take forward.

The review was broken in to three parts:

1. Gathering in data and submissions from stakeholders, through a call for evidence;
2. Debate and argument at five public seminars and various meetings with stakeholders;
3. Analysis and report writing with the support of assessors, including Andrew Parker, the head of Strategic Litigation at DAC Beachcroft.

The findings and recommendations are summarised below.

Fast Track:

It is noted that the proposed online solutions court will scoop up some of the current fast track cases and assign them to strictly limited costs recovery, but personal injury, clinical negligence, possession, intellectual property and housing disrepair claims are all excluded from that process and fall for consideration within this report.  This report does not consider fixed costs within the RTA and EL/PL portals.  For the existing FRC for those cases that exit the portal no changes are proposed, save for an uprating for inflation.  No changes are proposed to the existing fast track regime on the basis that the focus of this report is cases where costs are currently "at large".  It is proposed that that FRC should be adjusted periodically, with a recommendation that the review happens every 3 years.

Issues raised by cases such as Sharp v Leeds City Council [2017] EWCA Civ 33 and Bird v Alcorn [2016] EWCA Civ 1096 are left for the Civil Procedure Rules Committee to consider. The one issue that Jackson LJ did not consider it appropriate to duck was that raised in Broadhurst v Tan [2016] EWCA Civ 94 and the effect of an order for indemnity costs.  This is a policy decision that needs to be addressed in the consultation exercise that follows this report, but Jackson LJ expresses his view that indemnity costs should be replaced with a percentage uplift of say 30% - 40%.  This allows for claimants who make effective Part 36 offers to be rewarded but maintains certainty for litigants.

It is proposed that fixed costs should now be extended horizontally across the whole fast track with a recommendation that all recoverable costs in the fast track should be fixed specifically to non-personal injury claims and personal injury claims where costs are not yet fixed.  Noise Induced Hearing Loss (NIHL) has been the subject of a mediated agreement via the Civil Justice Council (CJC).  Their report is to be published shortly.  Jackson LJ endorses and supports the mediated agreement reached on costs.  For the rest of the fast track the proposal is that cases are placed in to one of four bands based on the level of complexity.

Examples of each are as follows:

Band 1: RTA non-personal injury claims (bent metal), defended debt cases
Band 2: RTA personal injury claims (within Protocol), holiday sickness claims
Band 3: ELA and PL accident claims, RTA personal injury (outside Protocol), ELA, PL, tracked possession claims, housing disrepair, other money claims
Band 4: ELD claims (non-NIHL) and the most complex fast track claims, including particularly complex tracked possession claims or housing disrepair claims, property disputes, professional negligence claims and other claims at the top end of the fast track.

The report includes a proposed matrix for recoverable costs.  A band 1 "bent metal" case that settles pre-issue for between £10,001 and £25,000 will attract costs of £500.  A band 4 complex professional negligence claim settling pre-issue for up to £25,000 will attract costs of £2,250 + 15% of damages + £440 per extra defendant.

There is no recommendation to ring fence fees for counsel in relation to bands 1, 2 and 3.  For band 4 and NIHL cases it is recommended that £500 be ring-fenced for settling the particulars of claim.  It is also proposed that separate fees should be recovered in respect of the some specified items done by counsel or specialist lawyers. Where counsel is instructed in respect of other matters, fees should not be recoverable in addition to the fixed costs proposed.

The pre-action protocols should be amended to encourage the parties to agree which track and where that track is fast track, which band that the case falls into.  Claimants should address this in the letter of claim and defendants should do so in their letter of response.  Where the case reaches allocation, the judge should allocate in the normal way and state which band applies.

It is proposed that the existing escape clause will be extended to cover the whole of fast track, but exceptions are likely to be rare because any case of exceptional complexity is unlikely to be allocated to the fast track.

A new intermediate track:

Despite noting that there has been considerable improvement in costs management over the last two years, Jackson LJ still sees benefit in extending FRC to the lower reaches of the multi-track. No "great leap forward" is proposed as regards extending FRC and it is accepted that it is necessary to proceed with caution so as to protect access to justice.

The creation of a new "intermediate" track is recommended.  The proposed criteria for allocating a case to the intermediate track include that the claim is for debt, damages or other monetary relief, no higher than £100,000, if the case is managed proportionately, the trial will not last longer than three days and that there will be no more than two expert witnesses giving oral evidence for each party.  The claim is not for mesothelioma or other asbestos related lung diseases which are excluded from this track.

It is proposed that cases will fall into 4 bands dependent on the complexity of the case ranging from band 1, a simple claim, over the fast track limit were the trial will take 1 day e.g. many debt claims or quantum only personal injury claims, to band 4, for the most complex claims e.g. a business dispute or employers liability disease claim where there are serious issues of fact / law and the trial is expected to take up to 3 days.

As with the fast track it is proposed that the pre-action protocols should be revised, so require the parties to seek to agree the track and appropriate band for a case.  On allocation to intermediate track, a judge should assign it to a band.  A new streamline procedure is proposed for cases dealt with in the intermediate track to include: restricting the length of statements of case, witness evidence and expert reports, limiting disclosure and restricting oral evidence to issues directed to matters identified by the Court.

The proposed FRC are set out in a grid by reference to chronological stages.  So for example in band 1, pre-issue or pre-defence costs are £1,400 + 3% of damages, whereas band 4 costs for the same stage are £8,000 + 8% of damages.

Clinical Negligence:

Jackson LJ notes that it is vital to link procedure to FRC.  Lessons can be learnt from the CJC's NIHL process and he suggests that the same can be done for clinical negligence cases of up to £25,000.  The recommendation is that a joint working party should be set up to develop a bespoke process for clinical negligence claims and FRC.  This should be a stand-alone scheme catering for cases up to £25,000 regardless of the track that they are suitable for.

Business and Property Litigation:

The focus for this section is lower value litigation in the Business and Property Courts and in the planned Business and Property Lists of the County Court.  By lower value Jackson LJ means litigation where the sum in issue or the value of the property or rights in dispute is up to £250,000.  He concludes that low value business and property cases form a vast and inhomogeneous mass and in some cases FRC would promote access to justice, and in others costs management would be preferable.  In Jackson LJ's view, capped stage costs are the best variant of FRC for this class of litigation, which will also require a streamlined procedure and robust case management.  The best way forward is noted to be a voluntary pilot in a small number of Business and Property Courts.  Draft rules for the pilot are set out in the report.

Judicial Review:

The report does not recommend FRC for JR.  What is recommended is the Aarhus Rules should be adapted and extended to all judicial review claims and that costs management should be introduced, at the discretion of the judge, in heavy claims.

Conclusions:

The report concludes that the only effective way to control the costs of civil litigation is to do so in advance.  That means either FRC or costs budgeting on a case by case basis.  The time has now come to extend FRC and at the same time, work must be done to streamline the litigation process and control the amount of work which litigants and their lawyers are required to do.