Fixed Fees – Has The Time Come?

On 28 January 2016, Lord Jackson called for the introduction of fixed recoverable costs for all civil claims valued up to £250,000. The Court of Appeal judge suggested that the time is now ripe to make this initial step and went as far as to suggest a grid of proposed rates.

The grid

The value of a claim would determine which of four bands applies. In the first band, for cases worth between £25,000 and £50,000, costs would be fixed at £18,750; between £50,001 and £100,000, the amount would be £30,000; between £100,001 and £175,000, the amount is £47,500. Finally, where the value is between £175,001 and £250,000, the figure is £70,250.

Fixed costs would only be payable if a work stage is completed. 50% would be payable where proceedings have been issued and the stage has been “substantially started”. 15% could be added for work done in London and fixed costs would not apply where the court has awarded indemnity costs.

“Preferably not me again”

Jackson urged ministers to make reform an immediate priority, meaning that these changes could be arriving in the near future. If the Government did not want to make a decision, he suggested that the scheme should be drawn up by a senior judge who would consult widely. In anticipation of the inevitably strong and conflicting views, particularly as solicitors and clients are still adapting to the last round of reforms, he added that it should be “a senior judge who does not mind being pilloried”, and “preferably not me again”.

Instruct, instruct, instruct?

One interesting omission from the proposed costs grid was disbursements, which generally include counsel’s fees. Any belief that the regime would represent a windfall for barristers, with solicitors instructing barristers to avoid exceeding the fixed phases, appears to be a misconception. Jackson anticipated this, saying the “suggested figures in the grid include counsel, but exclude other disbursements”.

Other disbursements would usually include the costs of enforcing any order, expert reports and VAT.

“Not everyone enjoys” costs budgeting

Jackson intends to dispense with the time and costs incurred in costs budgeting by using fixed costs.  Jackson described costs budgeting as something “which not everyone enjoys”, which is somewhat of an understatement.  He then gives this as one of the reasons for the “growing acceptance of fixed costs by practitioners and litigants” – though we’re not sure who was canvassed on this.

Certainty over costs

Unsurprisingly, much of the reaction from practitioners has so far been negative, with the Law Society and Bar Council voicing significant concerns over access to justice and fairness.

Practically, the proposals would no doubt present a challenge for law firms, but Jackson argued that the certainty and predictability a fixed costs regime would provide “is something which most litigants desire and some litigants desperately need”.

Under Jackson’s proposals the Court may add a percentage uplift for all or part of the case if it considers the claim to be of exceptional complexity or where substantial additional work was caused by the conduct of the other party.

This may go some way to quell worries that well-resourced parties may use fixed costs as a way to drive opponents from litigation by extending correspondence and the matter as far as possible, in the knowledge that their opponent cannot continue to fund the litigation where there is no chance of a recovery, as has occurred in the Intellectual Property courts.

How long any certainty will hold out for, however, would remain to be seen, as clients and their advisors seek to illustrate (or not, as the case may be) why their case is exceptionally complex.

Too great a change…in the short term

In his speech, Jackson considered whether we should be fixing costs for all civil cases (following Germany and New Zealand) or just for the fast-track and the lower reaches of the multi-track.

He felt that limiting fixed costs to so-called lower value claims was more suitable for now, because:

• applying fixed costs to claims valued at more than £250,000 “would be too great a change for the profession to accept, certainly in the short term”; and
• “reform is best done incrementally, so that we can see how it is working out”.

Jackson refused to rule out a universal fixed costs regime then, feeling that it might be implemented once people have considered how it works. It is also interesting that he views the incremental cut-off point as £250,000, especially considering that the vast majority of claims in England and Wales do not exceed that threshold[1].

Click here to view the full grid.

[1] Civil Justice Statistics Quarterly, England and Wales, July to September 2015, Ministry of Justice Statistics bulletin Published 3 December 2015

If you would like to discuss this article in further detail, please contact  Stephen McVey on 0113 227 0245 or at stephen.mcvey@gordonsllp.com.