Posted: 22/04/2016
He’s tenacious, Lord Justice Jackson, you have to give him that. In 2009 he suggested fixed recoverable costs across the fast track, to impose proportionality and to avoid satellite litigation. He has returned to this theme several times since, until January’s now infamous proposal that fixed costs apply to all claims up to £250,000.
The Lord Chief Justice, the Master of the Rolls and the Association of District Judges all apparently support the proposal. The Ministry of Justice is “supportive” of the principle, and the CJC has already convened a workshop to discuss it. So, is the writing already on the wall, and if so what exactly does it say?
These reforms are predicated on the basis that “High litigation costs inhibit access to justice” (paragraph 2.1, Jackson LJ’s speech to the IPA on 29 January 2016). So far, so unassailable. Just think about the furore concerning increased court fees, widely regarded as decreasing access to justice for those of modest means.
How will fixed costs resolve this? Jackson LJ believes that remuneration on a time basis rewards inefficiency: the more costs mount up, the more determined each party becomes to ensure that the other party pays (paragraph 2.2). Well, perhaps, sometimes. But equally, the prospect of liability for ever escalating costs can encourage parties towards settlement. Do we really want to lose the current system’s inbuilt disincentive to continue litigation?
And let’s be clear: fixed recoverable costs will limit the unsuccessful party’s liability to the other side. Good news if you lose (after a fashion). The successful party may however find themselves bridging a much wider gap between the costs they have incurred and the costs they have recovered.
Jackson LJ has proposed four bands of fixed recoverable costs, depending on the value of the claim. Each band has fixed costs for 10 separate stages of work, as per our beloved Precedent H. These fixed costs would apply across all types of cases under the £250,000 cap, excluding disbursements, enforcement and VAT. Importantly, however, they do include counsels’ fees. Solicitors may therefore be less likely to instruct counsel, which may impact massively on the Bar, and potentially either deprive claimants of access to legal specialists or increase their non-recoverable costs.
Although they “distinctly exceed” their “popular” counterparts in the IPEC, these figures do not appear overly generous. The suggested recoverable costs for taking a claim worth between £175,001 and £250,000 to trial outside London are £70,250 (with some scope for percentage increases based on numbers of experts/witnesses/days at trial). An uplift of 15% applies where the work needs to be done in London.
These are not the final figures, but they send a clear message that Jackson LJ means business, and they will certainly generate debate, both in terms of the global figure and the individual elements.
Jackson LJ’s view is that fixing recoverable costs will ensure that a party’s recoverable costs and adverse costs risks are proportionate to the claim (paragraph 2.12). He acknowledges that this will depend on the figures used, but states that now is the time to use the information amassed from costs budgeting and the existing fixed fee regimes.
A note of caution: we should avoid careering from what may in some cases be disproportionately high costs recovery straight to disproportionately low costs recovery. Obtaining a consensus on what constitutes proportionate recovery may also prove challenging.
The other major selling point of fixed recoverable costs is certainty and predictability, “which most litigants desire and some litigants desperately need” (paragraph 2.13). This is not controversial; but given the number of exceptions and qualifications to the proposals it is questionable whether they provide that certainty.
For example, Jackson LJ states that there should be one grid to rule them all, so to speak; yet certain, more complex, categories of work may require an uplift (construction, clinical negligence and defamation). The court may also apply an uplift for cases involving “exceptional complexity” or where the parties’ conduct necessitates substantial extra work. It is not hard to imagine a large amount of satellite litigation (and increased costs) on these points. Moreover, fixed costs may be disapplied for any stage where the court has awarded indemnity costs.
There are other wrinkles too. If a claimant wins, the applicable band is determined by the sum/value of the property recovered; if a defendant wins, the applicable band is determined by the sum claimed. There is also no indication as to how fixed costs would interact with the Part 36 regime: will assessed costs prevail over fixed costs where a claimant beats a Party 36 offer, as recent case law suggests? Otherwise, what motivation is there for parties to settle? Will we see defendants merrily racking up costs they know they are (within reason) not liable for?
Jackson LJ notes that fixed costs would be easier to explain to clients and would obviate the need for costs budgeting and assessment. This would save time and cost for the parties, and free up court resources. Part of the attraction for the judiciary is clear: costs budgeting and management has not been an unqualified triumph.
Jackson LJ has also asserted that, if the political will is there, this radical reform could be accomplished by the end of 2016 (paragraph 5.12). Why the rush? Civil litigation is facing a period of fundamental change, and these proposals need to be informed by and locked into the Briggs report, the financial list and the various pilot schemes running in the commercial courts in order to make sure the individual parts add up to a cohesive whole.
These proposals are, potentially, just the tip of the iceberg. While it is not his preference, Jackson LJ says that fixed costs across all litigation, on a sliding scale to prevent ludicrously high recovery, “would not be illogical, now we have DBAs” (paragraph 5.9). Leaving aside the many issues surrounding damages-based agreements (DBAs), do we really want to move so far towards the American model of each party meeting its own costs? There is an inherent fairness in recovery being linked to the result of the litigation, particularly where those costs are assessed by the judiciary.
No one would deny that litigation is expensive, and that proportionality is an issue. There is however a very real danger that, by reducing recoverability of costs for all parties, Jackson LJ may actually reduce access to justice for claimants with meritorious, lower level but complex claims. To conclude in his own words: “If costs prevent access to justice, this undermines the rule of law” (paragraph 2.1).
This article was published in Commercial Litigation Journal in April 2016.
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