UK: Fixed Recoverable Costs - Coming Soon To A Court Near You?

At the end of July 2017, Lord Justice Jackson presented a report recommending, among other things, the expansion of fixed recoverable costs in the fast track; the introduction of a new streamlined intermediate track for claims worth £25,000 - £100,000, and a pilot scheme for capped costs in certain business and property cases worth £100,000 - £250,000.

Haven't we already had a Jackson report?

Yes. In 2010, Lord Justice Jackson presented his Review of Civil Litigation Costs: Final Report. He concluded that the then-current system of the winning party adding up its costs at the end of proceedings and seeking to recover what it could from the losing party was a recipe for runaway costs, and that the only way to control costs was to do so in advance. His report contained recommendations for widespread reforms to promote access to justice at proportionate cost.

Following consultation, a number of Jackson LJ's recommendations were implemented starting from April 2013. These are known as the Jackson reforms. They included:

  • Proportionality - the introduction of a rule whereby to be recoverable, costs must be proportionate as well as reasonably or necessarily incurred
  • Costs management - in multi-track cases (broadly speaking, those worth more than £25,000) parties must exchange and seek to agree costs budgets for the proceedings. If not agreed, the court will amend or approve the parties' budgets, and these budgets are then subject to control by the court.
  • Fixed recoverable costs (FRCs) - in some fast track personal injury cases, the costs which are recoverable by the successful party were fixed according to a scale.

What's the latest report about then?

This latest report picks up where the last left off. It is a supplemental report looking specifically at extending the use of FRCs to other cases. FRCs, says Jackson, allow parties to know at the outset what costs they will recover if they succeed, and what costs they will need to pay if they lose - and to decide whether to pursue a case accordingly.

What are Jackson's latest recommendations?

Jackson LJ has made a number of recommendations to further control costs and to streamline the litigation process. In addition to recommending that FRCs now be extended to all cases in the fast track (i.e. all claims worth £10,000 - £25,000), he has also made the following recommendations.

  • New 'Intermediate track' with FRC
    • Jackson recommends the introduction of a new "intermediate" track, subject to FRCs, which will sit in between the fast track and the multi-track (which is currently for claims in excess of £25,000)
    • The intermediate track will deal with cases with a value of £25,000 to £100,000, of modest complexity and where the relief sought is mainly monetary
    • Trials in intermediate track cases will be no more than threedays, and there will be no more than two expert witnesses for each party
    • There will also be a streamlined procedure, with limits on the length of statements of case and witness statements, restricted disclosure, and concurrent expert evidence (hot-tubbing)
    • There will be four bands ranging from the least complex cases (band 1) to the most complex (band 4), and FRCs will be scaled accordingly
    • Jackson LJ recommends that the current part 36 costs consequences (where a party who does not accept what turns out to have been a reasonable offer of settlement can be ordered to pay the other party's costs on the indemnity basis) be changed from indemnity costs to a 30 - 40% uplift on FRCs
  • Capped costs pilot for business and property cases up to £250,000
    • The report recommends an opt-in capped costs pilot scheme for cases in certain Business and Property Courts (the new umbrella name for the specialist civil courts - Commercial, Admiralty and Mercantile Courts, TCC and Chancery)
    • The pilot will apply to cases worth £100,000 - £250,000, (so would sit above the proposed new intermediate track, at the lower end of the multi-track) where the trial will be no more than two days
    • Recoverable costs for each stage of the litigation will be capped (not fixed), with an overall recoverable costs cap of £80,000. Cases in the pilot will not be subject to costs management
    • Again, there will be a streamlined litigation process to reflect the cap on recoverable costs - statements of case will stand as evidence in chief, and there will be no automatic disclosure, witness statements or expert evidence
    • The pilot is proposed to operate in the London Mercantile Court, and in the Mercantile, TCC and Chancery Courts in both Manchester and Leeds. It is proposed the pilot will begin as soon as possible after the summer 2017 court vacation
  • Other recommendations
    • A bespoke process for clinical negligence cases up to £25,000, to be formulated by a working party of the Civil Justice Committee and the Department of Health and claimant and defendant representatives
    • Adaption and extension of the Aarhus rules (which allow the court to cap parties' costs liability in environmental judicial review claims) for all judicial review claims

Comments

These proposals recognise that the cost of litigating lower value claims in the multi-track can be disproportionate to case value. The introduction of an intermediate track and separate procedure for what are currently lower value multi-track cases will limit the amount of work to be done by lawyers, and remove the need to budget these cases on an individual basis. The hope is that FRCs will make costs clear, transparent and predictable, and allow parties to determine at the outset whether a matter is worth pursuing. There had been discussion of FRCs being extended to cases worth up to £250,000. The report does not recommend that at this stage, but proposes that matters be reviewed in four years (in the same way that this report reviews the impact of the 2013 reforms) with a view to extending FRCs to cases worth more than £100,000 at that stage.

What happens next?

Jackson LJ's latest recommendations are just that - they are now subject to review by the Lord Chancellor, Master of the Rolls and government. Furthermore, the government has indicated that it intends to consult on implementation. It seems likely though that, having been recommended in two subsequent reports, FRCs will now be extended to higher value claims, leading to certainty about recoverable costs over a wider range of cases, and streamlining the litigation process accordingly.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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