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Civil Litigation Section

Extending fixed recoverable costs: change is coming for litigators

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The government is consulting until 17 January on extending fixed recoverable costs across civil litigation. If implemented, they will represent some of the greatest changes for civil litigators since the 19th century, says Kerry Underwood.

Last month, the Judicial Office announced that Lord Justice Jackson has been commissioned to undertake a review of fixed recoverable costs, to be completed by 31 July 2017.

The review’s recommendations will be followed by a public consultation on proposed reforms to extend fixed recoverable costs to further areas of civil litigation. Lord Justice Jackson has invited written evidence or submissions to assist the review by Monday 23 January 2017, to be sent to: fixed.costs@judiciary.gsi.gov.uk.

The terms of reference for the review are:

  • to develop proposals for extending the present civil fixed recoverable costs regime in England and Wales so as to make the costs of going to court more certain, transparent and proportionate for litigants; and
  • to consider the types and areas of litigation in which such costs should be extended, and the value of claims to which such a regime should apply.

Lord Justice Jackson said:

‘I have been commissioned to undertake this review because it is integral to the overall package of reforms which I originally proposed. Chapter 16 of my final report recommended that serious consideration should be given to extending fixed recoverable costs to the lower reaches of the multi-track after the other reforms had bedded in.

‘Although the momentum is heavily for reform, the review will provide ample opportunity for comments and submissions on the form and scope that reform should take. I am inviting the views of practitioners, users of the civil courts and any other interested parties on these points. Seminars will be held in London and elsewhere to discuss the issues. There is a great deal to be done on the detail of the review, which will inform the Government as it prepares proposals for formal consultation in due course.’

Evidence submitted should take into account the concept of proportionality as set out in the Civil Procedure Rules, in particular the factors set out in CPR 44.3(5).

Views are also sought on:

  • the level of claim which fixed recoverable costs should stop, and costs budgeting apply instead
  • whether claimant’s costs and defendant’s costs should be different
  • how to accommodate counsel’s fees, expert’s fees and other disbursements within a fixed recoverable costs regime.

In January 2016, Lord Justice Jackson proposed that fixed recoverable costs be extended to cover civil work of all kinds where the damages do not exceed £250,000. His speech is here.

On 4 May 2016. the then justice minister Lord Faulks said that the government agreed in principle and is ‘considering the way forward, including how best to deal with differences between different types of civil litigation’.

Here is the text of the lecture delivered by Lord Justice Jackson at the Westminster Legal Policy Forum on 23 May 2016.

In that speech, Lord Justice Jackson said that the five factors set out in CPR 44.3(5) in relation to proportionality should be converted ‘into hard figures: in other words, to create a fixed costs regime’.

He suggested that this be done by determining for each level of claim (eg £25,000 to £50,000, £50,000 to £100,000 etc), what amount of costs would be proportionate for such litigation and then devising a set of rules for adjusting those costs to take into account the complexity of the litigation, any additional work generated by the conduct of the paying party and any wider factors involved in the proceedings, such as reputation or public importance (those matters, of course, reflect CPR 44.3(5)).

He said that there may then be a need to add an escape clause or some other provision to deal with exceptional circumstances. He quoted a survey by the Federation of Small Businesses which showed that a majority of small businesses were in favour of fixed costs in business disputes up to £500,000.

Currently, the scheme applies to only personal injury work with a maximum value of £25,000, and even some personal injury work, such as clinical negligence, is excluded.

There is no doubt that progress had slowed on the whole issue of legal funding reform. The Civil Justice Council had an initial meeting to plan implementation of fixed costs up to £250,000, but there has been no follow-up meeting.

Everything now appears to be on fast-forward again, although any implementation of any significant extension to fixed costs is unlikely to take place before April 2018.

Any extension may or may not be straight to £250,000, but there is no doubt that a significant extension, both in terms of the type of work and the maximum value of that work, is on its way.

Lord Justice Jackson had this to say about the limit:

‘The first question is whether we should be fixing costs for all civil cases (like Germany and New Zealand) or just for the fast track and the lower reaches of the multi-track. This is a policy decision for others. I would favour the latter course (as recommended in my Final Report), but I acknowledge that some favour the former course.’

Lord Justice Jackson proposes a multi-track grid covering 10 stages of work, reflecting the 10 stages in Precedent H – the costs budgeting form, plus a single fixed costs grid for all types of cases, with an uplift for certain types of work if appropriate and a 15 per cent London uplift. Consideration should be given as to whether specific categories of claim, eg defamation, clinical negligence and construction, should automatically receive a percentage uplift on the figures in the fixed costs grid.

The speech did not deal with fast track claims (ie currently those up to £25,000). There is already a fixed costs regime in place for most fast track personal injury claims, but the amounts vary depending on the type of claim. It is not clear what regime is proposed for other civil fast track work, as compared with multi-track work.

The financial bands proposed are:

Band 1 - £25,001-£50,000

Band 2 - £50,001-£100,000

Band 3 - £100,001-£175,000

Band 4 - £175,001-£250,000

The fixed recoverable fee is based on a combination of value band as above, the stage reached and the phases worked on. This third element, phases worked on, is new and does not form part of the current fixed costs regime.

I will write more in due course, but it is important to note once again that the consultation ends on 23 January 2017 and that these changes will be of enormous significance to all civil litigators.

Next March Kerry will be trekking the Sahara to raise money for the Lord’s Taverners’ charity for disabled and disadvantaged children and for the EY Foundation which raises funds to help young people find alternative routes into work and education. Donations can be made on the My Donate website here.

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