On 28th January 2016, Lord Justice Jackson dropped a bombshell on the legal community. In a speech to the Insolvency Practitioners’ Association in January 2016, he revealed his recommendations to extend fixed costs to all civil claims, including personal injury cases up to a value of £250,000, irrespective of complexity.
Proving that he is keen to move the recommendations forward, Lord Justice Jackson is set to issue a final report into the scheme next month. He also recommended that a pilot scheme should be undertaken.
According to the Law Society Gazette, papers from the Civil Procedure Rule Committee meeting in May show costs during the pilot would be capped at £10,000 for pre-action work, £7,000 for particulars of claim and £7,000 for defence and counterclaim.
Parties can claim up to £6,000 for a reply and defence to the counterclaim, £6,000 for the case management conference, £6,000 for disclosure and £8,000 for witness statements. Expert reports are capped at £10,000, with the trial and judgment costs limited to £20,000.
The overall costs in the pilot scheme would be capped at £80,000.
The pilot scheme will run for two years and be monitored by academics, possibly Professor Andrew Francis and Nick Taylor of Leeds University’s School of Law.
The Gazette stated that “the proposal, backed in principle by the committee, is to run the pilot in certain specialist civil courts: the London Mercantile Court and three courts in each of the Manchester District Registry and Leeds District Registry. Any cases where the trial will go beyond two days, or where the value is more than £250,000, are excluded.”
The legal profession’s reaction to the initial proposal to cap costs
The review of fixed recoverable costs has been met with concern from both barristers and solicitors.
Lord Justice Jackson has argued that by fixing costs, legal clients, especially individuals and SMEs will have more certainty about the costs which may be awarded. This is something that so far, proportionality has failed to achieve adequately.
In addition, fixed costs for cases under £250K may lead to lower After the Event insurance premiums.
Bar Council chair, Chantal-Aimée Doerries QC, told the Solicitors Journal that implementing such a scheme will require careful thought to avoid unintended consequences. “Large corporations and governments may well be willing to spend large sums of money – beyond what is recoverable – on legal disputes with individuals or smaller corporations whose costs are fixed at a much lower rate.
“Instead of levelling the playing field, this proposal could tilt it further in favour of big business and the state,” she said.
Mathilde Groppo, provided an excellent case study of the possible affect fixed recoverable costs could have on less financially flush parties in a recent article. She cited the case of Mahmood v Daily Mail, where the claimant brought proceedings against the MailOnline regarding an article in which members of a Muslim family were reportedly refused permission to travel to Disneyland because of alleged links with Islamic extremism. The paper apologised and paid £150,000 in libel damages, as well as costs. The important point is the Mahmood family were represented under a CFA with ATE insurance, which allowed them to sustain the costs of the lengthy proceedings. If fixed costs had applied in this case, or in any other defamation case involving a powerful media giant such as the MailOnline or The Sun, part of the Rupert Murdoch empire, the defendant could simply keep litigating, eventually “running the claimant out of money”.
Areas of law such as defamation and complex commercial disputes, especially those crossing multiple jurisdictions, can involve multi-faceted, highly tactical legal work which is extremely hard to apply a set budget to. SMEs already find it near impossible to commence litigation proceedings against large corporations who have practically unlimited legal budgets behind them. Capping recoverable costs could lead to increased “bully-boy” behaviour by some large companies, confident in the knowledge that any attempt to bring them to account through the courts is out of the financial reach of most SMEs.
The German litigation fixed costs model
Much discussion has been made of the German model of fixed costs in litigation. According to The Costs and Funding of Civil Litigation: A Comparative Perspective the German model applies a costs tariff with a scale depending on the amount of money involved in the dispute. Although this is beneficial in its simplicity, it does not consider the complexity of the case or the type of case being litigated. The German model provides predictable costs for almost every cost item (i.e. court costs, lawyer’s fees, expert witnesses, etc.). This works well for simple cases but is not altogether adequate for highly complex cases, especially those involving commercial law.
When comparing the German model, it is also important to remember the different contexts between the English and German legal system. In Germany, the disclosure of documents in civil litigations proceedings is strictly limited. Judges undertake some of the work which is traditionally done by counsel in the England. This procedure, known as ‘Relationsmethode’.
In addition, court appointed experts are used far more in Germany, there is less oral evidence, litigation is quicker and hearings are shorter.
Therefore, although it may be possible to duplicate the success of the German model of fixed litigation costs, it is not feasible to use their method without making considerable modifications to the English Civil litigation system.
There will be a great deal of interest in Lord Justice Jackson’s final report and the trial of the pilot scheme. We will keep you up to date on any developments and commentary on what is likely to be the most momentous change to civil litigation since the Jackson Reforms of 2013.
R Costings is a leading firm of Costs Lawyers, Law Costs Draftsmen and Legal Costs Consultants, based near Cambridge. For advice and/or information about costs, please call us on 01480 463499.
Do you have any comments to make on this article? Please let us know your thoughts.