Is the fixed costs extension putting justice at risk?

There is no doubt that October’s extension of fixed costs to most civil claims worth up to £100,000 represents a huge challenge for claimant solicitors. Why, then, is it being introduced?

In September 2021, writing the foreword to the government’s response to the consultation on fixed costs, then Justice Minister Lord Wolfson of Tredegar (who resigned his post in April 2022 in protest of Covid-19 rule breaking in Downing Street) explained the thinking behind the reforms. He wrote:

“One area in need of further reform is costs, and particularly those that a losing party has to pay the winner. This is especially true in lower value claims which people and businesses are most likely to face, either as claimants or defendants.

“These cases, while no doubt important to the parties themselves, are for relatively low damages and there is currently no certainty as to the costs that may be recovered or paid. Without being able to predict what the costs may be, it is difficult for either side to take an informed decision on the appropriate way forward.

“If cases are to be litigated, then we want them to be resolved as early as possible, with costs as proportionate and as fair to both sides as possible… The case for extending fixed recoverable costs remains strong: uncertainty of costs hinders access to justice, while certainty of costs set at a proportionate and fair level enhances it.

But will these reforms achieve these laudable aims of making costs predictable and fair?

While on the face of it, fixed costs ought to be very predictable, this will not necessarily prove to be the case. Experts have warned that the way the new rules have been designed leaves considerable scope for arguments over issues such as which fee band will apply to a particular claim; and whether a claim should move down a complexity band where there is a late admission by a defendant, for example. Such arguments obviously take away costs certainty for the client.

The other important factor is that, while the amount that a claimant solicitor can recover from a losing defendant will be fixed, there is nothing to stop solicitors from charging the client an extra sum to make up the ‘shortfall’ between what it cost them to bring the claim, and the amount that can be recovered from their opponents. As the new fixed fees are regarded by the claimant community as too low, it is expected that, in the new regime, claimant lawyers will increasingly be charging clients for this shortfall.

This will then inevitably eat into the sum of damages that was awarded or agreed as compensation for the loss suffered by the client – meaning that the effect of fixed recoverable costs is not particularly ‘fair’ from the client’s perspective. In effect, these claims will become more expensive for clients to bring, but cheaper for defendants to defend – because their costs liability will now be limited to these fixed costs.

Vulnerable claimants

One area that claimant lawyers have highlighted as particularly problematic is in relation to vulnerable clients, who need extra help and support from their lawyers in order to bring their claim. In the new regime, acting for such clients may no longer be economically viable.

The Ministry of Justice (MoJ) has made provision for claimant lawyers to receive a limited extra fee for acting for vulnerable parties; but in doing so, the MoJ bent over backwards to make sure it did not inadvertently create an easy means for claims to qualify for an extra uplift in fees – presumably fearing that this would be overused by claimant lawyers.

Unfortunately, the result is a framework that arguably goes too far in the other direction. Claimant lawyers have criticised the high threshold required to qualify for a vulnerability uplift, and the lack of certainty at the outset of a case as to whether or not the extra fee will ultimately be available. The result is that many lawyers will undoubtedly decide they cannot afford to act for vulnerable parties.

Access to justice

It is clear that these reforms pose a considerable risk to access to justice; both for vulnerable clients, and for litigants more generally. Margins will be tight, and firms will need to think carefully about creating even more efficiencies than they already do – with technology no doubt playing an even greater role.

As the reforms bed in, the government must ensure that it closely monitors the number and type of claims going through the system. As the former Justice Minister himself acknowledged in his consultation response above, claims in this bracket are precisely those that people and businesses are most likely to face. It is essential that they can still afford to gain access to a qualified solicitor to advise them.