Fixed fees: what will it mean?

It is hard to overstate the significance of last night’s speech by Sir Rupert Jackson.

The sweeping imposition of fixed recoverable costs across the whole of the fast track, and for cases up to £250,000 in the multi-track, will stun lawyers. And it will not stop at the quarter of a million mark – the intention is that in time, this will be extended to the bigger ticket litigation too.

Fixed fees may have been in place for a while in personal injury, but litigators in commercial, construction, defamation – they simply will not have been expecting this.

There have, however, been warning signs. For example, Mr Justice Flaux, judge in charge of the commercial court, accurately predicted this development back in October – though he was not terribly keen on the idea. And in the same month, Lord Faulks commented enthusiastically about the benefits of the German fixed-fee model at the Conservative party conference.

But with the possible exception of readers of the Gazette - and its sister publication Litigation Funding which has reported extensively on the prospect of fixed costs, most litigators will not have been prepared for this development - and the news that Jackson believes the whole scheme could take just a year to devise and implement will be even more of a shock.

Inevitably, the first point of focus will be the figures themselves – and the fact that Jackson has actually produced a set of numbers is a clear signal that he means business.

From a few initial conversations I have had with solicitors, the numbers put forward by Jackson, which were put together with input from judges and costs judges, are on the low side. But at his speech last night he made it clear that these figures are not the last word; they are merely the first word.

The figures are a starting point, and the hope is that the Civil Justice Council will do what it did for the personal injury sector, in facilitating ‘big tent’ discussions in which parties can work on the figures and issues can be aired.

The judge strongly cautioned against having a different set of fees for different areas of law. But he conceded that certain areas (in his accompanying paper he suggests possibly construction, defamation, or clinical negligence) could warrant an extra ‘percentage uplift’. No doubt litigators in every field of law will be putting their advocacy skills to good use to argue their case for an uplift.

Who is going to lead all this? First dibs will be given to the Ministry of Justice; but if it declines the opportunity, then it could be a senior judge - not Jackson himself - who, as Sir Rupert put is last night, ‘does not mind being pilloried’.

That leads us to the key question: is government actually up for this? It is not the first time that Jackson has called for an extension of fixed costs; it was one of the recommendations in his 2009 Final Report.

I am told that, yes, the MoJ is keen; and that tallies with Lord Faulks’ comments in October extolling the virtues of the German model.

If the judiciary itself will be taking on the legwork here, then it is hard to see why the government would not want to go ahead with this – it will cost them nothing, and yet in one swoop it will achieve a huge stride forward for clients in obtaining access to justice.

After all, lawyers may be the losers in this reform, but clients - particularly individuals and small and medium-sized businesses - will be the big winners.

Whatever level the fees are ultimately set at, the fixed fee regime will achieve the one thing that clients want more than anything else: certainty over cost. And it will do that far more effectively than costs management or the proportionality rule ever could.

True, the fixed fees may not be the full amount that clients are paying; these only govern what the client can recoup from the losing side, and clients may also agree to pay their lawyers further fees. But that, you can control.  

What you can’t control is the opposition’s costs – that is what leaves so many people and businesses to stop short of enforcing their rights. It is the risk of losing the house; of the business going bankrupt.

Now, the client can enter into litigation with the lights turned on, rather than stepping into the dark.

And perhaps the silver lining for the legal profession is that, I believe, this will actually lead to more people upholding their rights through the courts.

As an aside, it should also lead to much lower after-the-event insurance premiums, now that the adverse costs risk will be clear; going some way to mitigate the loss of premium recoverability.

There is one inevitable flaw with a fixed costs regime. Complexity and size of damages do not go hand-in-hand, and a case that is of relatively low value, but involves considerable work, will not be viable. But sadly, that problem already exists under the new proportionality rule.

There is no denying that it is going to be extremely tough for litigators to adjust their business models to cope with this new fee regime.

But for small business clients and for individuals who currently face so many barriers to accessing the courts, it is a huge step forwards. 

Rachel Rothwell is editor of Litigation Funding

Follow Rachel on Twitter: @rachel_rothwell

Lord Justice Jackson will deliver the keynote address at the Law Society’s Civil Litigation Section spring conference in April.