Sir Rupert Jackson’s 2017 report is brought to life following a welcomed delay for Claimant’s to the extension of the current fixed costs regime.
Why do we need fixed costs?
Fixed costs are often feared by Claimant solicitors; there is obvious reason for this. It caps the level of costs that can be recovered for the work done. The caps often applied can be considered as disproportionately low and difficult to set given every case differs and every client differs – so how can you apply a one cost fits all approach? As GHR are set to increase, the fixed costs regime is also set to be extended; perhaps giving with one hand, and taking with another. Another question hanging over the FRC is whether enough consideration has been given to inflation and are an accurately measured and true representation of ‘reasonable’ costs – it is commented however that the FRC will be increased to reflect RPI inflation.
There is however, justifiable thought behind implementing, and now extending fixed costs and when you consider the implications of this extension, it may not seem as damaging as initially thought. It is also important to consider the reason for controlling recoverable costs. Sir Jackson puts it as;
“First, this is necessary to impose discipline. The traditional approach of parties doing what they see fit, then adding up the costs at the end and recovering as much as they can from the opposing party is a recipe for runaway costs. Secondly, parties need certainty. They need to know at the outset what costs they will recover if they win and what costs they will pay out if they lose.” (para 1.5 2017 Report).
The catalyst for extension
Sir Jackson’s initial 2010 reform proposals are now well under way with the implementation of the fast track fixed recoverable costs (FRC) and costs management in multi-track cases alongside the new proportionality rule. In 2017, a further report dissecting an extension to the now well-known FRC was produced. Within the report, an approach was favoured by Sir Jackson to create a third track which would sit between the fast track and multi-track to deal with cases with a value between £25,000 (current upper limit) and £100,000 (initial discussions involved a value of up to £250,000) – his suggestion was that this would be referred to as the intermediate track. An APIL conference provided opportunity for practitioners to share their concerns and requirements if such a track/regime were to be implemented summarising the following;
- There must be a streamlined procedure with accurate figures
- Early admissions of liability should be rewarded
- Escape provisions must be provided for – and these must be clear
- Discouraged that the intermediate track would include clinical negligence cases
Lord Jackson also made clear that value shouldn’t be the only basis for using the intermediate track and proposed criterion was put forward for allocation to this new track. In short this included where;
- Small claim and fast tracks are not suitable
- Debt, damages or monetary relief do not exceed the upper limit (£100,000)
- Trial no longer than 3 days (when proportionately handed)
- Limit of 3 experts’ giving oral evidence
- Consideration of wider factors that would make the track unsuitable (public interest etc)
- Not a mesothelioma or asbestos cases (excluded from track)
- There are particulars reasons to allocate to this track
A specific cohort of cases was considered likely unsuitable for this track; clinical negligence above £25,000, multi-party cases, actions against the police, child sex abuse claims and intellectual property cases. Discretion was promoted by Lord Jackson as to the allocation to this track where it would ‘promote access to justice’.
Once allocated to the intermediate track, a banding approach based on complexity would apply to the question of costs and on allocation, cases could escape the fixed costs by reason of the (current) CPR 45.29J or challenge the allocation incurring a costs penalty for failure to change the initial allocation.
So 4 years’ on – what will the FRC extension look like?
The MOJ has now accepted to extend the FRC, however an ‘intermediate’ track will not be created rather the fast track will now include an extension of FRC to those claims valued between £25,000 and £100,000. There will be 4 Bands within the fast track which, in line with the proposals, will be based on complexity (1 being the least complex). The FRC costs awarded will also be determined based on the stage of settlement. The Bands will be as follows;
- Band 1: RTA (non-personal injury), credit hire claims and defended debt claims;
- Band 2: RTA, personal injury claims (within PAP) and package holiday sickness claims;
- Band 3: RTA, personal injury claims (outside PAP), EL and PL claims, housing disrepair, tracked possession and other money claims; and
- Band 4: Complex professional negligence claims, property disputes, ELD claims (not including NIHL), tracked possession claims and other claims at or toward the top of the fast track. This is the only band where Counsel’s fee will be ring-fenced
The following cases will not apply – Mesothelioma/asbestos, complex PI and professional negligence, actions against the police, child sex abuse and intellectual property.
Allocation to a band will be at the discretion of judges – and reference is made to the description set out within Sir Jackson’s reform report; it is anticipated that a practice direction will be provided in this respect. No case allocated to the extended fast track can exit the proposed FRC (as is currently the case in pre-action protocol claims). However, banding can be contested (as the reform proposed) with a costs penalty of £150 if unsuccessful and allocation can be challenged with a £300 costs liability. There will be continued use of CPR 45.29J for exceptional circumstance – providing reasonable opportunities for banding and allocation to be reviewed and considered.
The applicable court fees which are currently in place for multi-track claims will continue to apply but again, will be kept under review.
In terms of the fixed costs, there is emphasis on penalising delays in resolving claims with an introduction of a 35% uplift where Part 36 offers are beaten and a 50% uplift where there are conduct issues resulting in a party’s “unreasonable behaviour”. This seems to be the crux of the reforms – to encourage and reward good conduct resulting in earlier resolution of cases and controlling the timeframes in favour of the parties.
Contrastingly to the proposals, it is presumed cases will not escape on the sole basis of multi-party claims given that there will be an automatic uplift of 25% on costs for each additional claimant where the claim arises from the same facts. The current 12.5% London weighting will also continue to apply.
NIHL will be dealt with as a standalone – and a new process for claims valued below £25,000 is anticipated with more rigour expected in terms of the initial claim and response letters.
The proposed Recoverable costs can be reviewed within the MOJ’s consultation paper; Extending Fixed Recoverable Costs in Civil Cases: Implementing Sir Rupert Jackson’s proposals (justice.gov.uk) pages 16 & 17.
Initial thoughts
It has been a long-time coming and all practitioners have been waiting for the extension to fixed costs to be announced. The delay from the Government has been a saving grace (albeit the reasoning for delay has not been) but now the extension and ‘intermediate’ track is on its way. What is clear is that there will be provision made for cases to escape the extended fast track, with the court being able to apply discretion. In addition, exceptional circumstance can be sought and there will be opportunity for what may seem to be a straightforward appeal of the application for a small fee (hopefully outweighed by the costs benefit if successful). There are also a number of cases that will automatically escape the intermediate track with clinical negligence, intellectual property, mesothelioma/asbestos and abuse cases automatically falling outside of the extension which will be welcome new. It is likely that a form of fixed costs will be implemented in the future for lower value clinical negligence cases.
On the flip side, undoubtedly insurer firms will be pleased with the extension; providing more certainty on the costs payable in a case. I suspect however, this could encourage more insurers to defend cases more rigorously impacting negatively on those justifiably perusing claims and solicitors willing to take on the cases – let’s hope the uplifts discourage this otherwise the hope for the extension to promote early resolution will be lost. The extension will be beneficial for individuals as it promotes the opportunity for access to justice with certainty of payable costs without the fear of costs skyrocketing too.
There will be teething issues, and I suspect a flurry of applications early on at which point the courts will start to set the parameters of what should/shouldn’t fall within the intermediate track. Eight years’ on we are still haggling over the specificities of the current pre-action protocol and escape routes/exceptional circumstance, and one would presume the extension of this will be no quicker to determine hard and fast ‘rules’ on allocation with discretion of Judges being available.
The extension to the FRC has not been given a date as yet; we will be carefully monitoring this and will keep you updated. There will of course always be a backlog of cases in any event to filter through before the extension will have effect on new cases. We will keep you up to date with any news, views and updates so keep an eye out.
If you have any questions, on this or any other topic please don’t hesitate to contact one of our team for a chat on 01480 463499 or email kate@rcostings.co.uk