Reforming fixed recoverable costs

The problem of controlling costs in civil litigation is one with which law reformers, judges, practitioners and academics have grappled over the last two centuries. A universal regime of fixed recoverable costs (FRC) is, in the eyes of many, the ideal to which we must aspire.

Professor Zuckerman in his writings has consistently espoused the German system and has urged that we should adopt something like that in this jurisdiction. Let me turn, briefly, to the costs regime prevailing in Germany.

Costs in Germany

For litigation work, the German scheme of FRC prescribes a statutory fee for lawyers on the basis of the value of the claim. This gives the base fee to which a number of multipliers – changing according to the stage of proceedings and the nature of the instructions – can be applied to give the fixed costs figure. Section 13 of the Law on the Remuneration of Lawyers (RVG) provides that when the value of the claim is less than €500, the base fee shall be €45. For claims above €500, the base fee rises progressively in accordance with the value of the claim.

Annex 1 to the RVG provides a full and comprehensive list of legal fees. The schedules in annex 1 cover everything from initial appointment as the client’s attorney through to an appeal to the Federal Court of Justice (Bundesgerichtshof).

The German costs regime brings undoubted benefits.

1. The fact that recoverable costs are limited has the effect of reducing what lawyers charge their own clients in everyday cases.
2. It is within the means of ordinary citizens to bring and defend modest claims.  
3. The costs of litigation are certain and predictable.  
4. As a consequence of the above, before the event insurance against the costs of litigation is widespread – this in turn promotes greater access to justice.

Indeed, the efficiency and accessibility of Germany’s civil justice system has probably been one of the factors contributing to that country’s remarkable economic success over the last 60 years. The Mittelstand firms (small and medium-sized enterprises) can afford to bring or defend claims when the need arises and the costs of doing so are not ruinous.

The courts of Germany are not a magnet for international litigation in the same way that the English courts are

Before we get carried away with enthusiasm for adopting the German costs regime, there are two important points to bear in mind. First, the courts of Germany are not a magnet for international litigation in the same way that the English courts are. Language may be part of the reason, but it is not the sole reason; some German courts now offer an English language service. 

The context is also different: under German civil procedure, disclosure of documents is strictly limited; the court establishes the facts using the Relationsmethode – under this procedure the judge does some of the work which in England is undertaken by the parties; the German courts make much greater use of court-appointed experts than we do; there is far less oral evidence; litigation is quicker and hearings are shorter than in England; so a German-style grid of costs cannot be appropriate for all cases in England and Wales.

Extending fixed recoverable costs in England and Wales

My Final Report of January 2010 (implemented in 2013) and Supplemental Report of July 2017 (now the subject of a Ministry of Justice (MoJ) consultation) both represent attempts to identify the appropriate categories of litigation for FRC and the procedural rules which should govern FRC cases.

An important feature of the later report is that 14 assessors with a wide range of experience worked through the data with me and debated the issues in robust monthly meetings. They were (in alphabetical order): 

• Sara Ashby, intellectual property solicitor
• Nicholas Bacon QC, chair of the Bar Council Fixed Fees Working Group
• Professor Richard Disney, professor of economics at Sussex University
• Professor Paul Fenn, emeritus professor at Nottingham University Business School
• Master Barbara Fontaine, Senior Master
• Master Andrew Gordon-Saker, Senior Costs Judge
• Richard Lander, Manchester counsel specialising in property litigation
• David Marshall, claimant solicitor, chair of the Law Society Civil Justice Committee and former President of APIL
• His Honour Judge Martin McKenna, Designated Civil Judge for Birmingham and member of the Civil Procedure Rule Committee)
• District Judge Simon Middleton, a regional costs judge
• Andrew Parker, defendant solicitor and executive member of the Civil Justice Council
• Vikram Sachdeva QC, Queen’s Counsel specialising in public law and human rights
• Nicole Sandells, chancery counsel
• Iain Stark, chairman of the Association of Costs Lawyers.

At the end of our labours, all 14 assessors and I were in agreement (subject to one area of disagreement concerning Broadhurst v Tan [2016] EWCA Civ 94) about how far FRC should extend, what the grid of recoverable costs should be and what procedural rules should govern FRC cases (see Supplemental Report, chapter 1, paragraph 4.2).

Now that I have retired from the bench, it is not appropriate for me to intervene in the MoJ’s consultation exercise in the same way that I did last time. (When the MoJ consulted about my January 2010 report, I submitted a vigorous response explaining why I disagreed with the MoJ’s modifications to my proposals. I put that response onto the internet for all to see early in the consultation period.) Even so, perhaps I might venture the comment that, if the MoJ introduces my proposed grid of FRC for “intermediate” cases, then the recommended case management reforms for those cases should also be put in place.