Some hints on fixed costs

Last week’s ‘progress report’ by Lord Justice Jackson - in a costs conference speech - contained some interesting hints as to where the fixed costs review may be heading.

Previously, the judge had warned against the risk of ‘balkanisation’ if different rules were applied to different cases. But last week he acknowledged the ‘force’ in the ‘frequent message’ that respondents to the review have clearly been driving home, that ‘one size doesn’t fit all’.

As far as the fast track is concerned, fixed costs throughout now seem certain, and Jackson seemed to confirm this in his speech. He noted that the Bar Council and ‘many other respondents’ broadly accepted that costs should be fixed in the fast track, and he said that the main task here was to figure out what the actual numbers should be, and ‘whether any process changes are required’.

But what about the multi-track? It appears that as they stare down the barrel of fixed costs, claimant lawyers have been keen to enthuse to the judge how well costs management is now working.

The gaping hole in the costs management net, though, is incurred costs, which are not captured by budgeting.  

Jackson’s preliminary analysis suggests that incurred costs account for a whopping 31% of claimants’ total costs, and 14% of defendants’. These are not finalised figures, but it’s clear that if indeed costs management is to hold its ground in some parts of the multi-track, rather than stepping aside to be replaced by fixed costs, then something will be done to control incurred costs. Will they be brought within the costs management regime, for example?

Jackson’s talk last week also briefly touched on what is meant by ‘lower value’ cases in the multi-track.

In his January 2016 speech on fixed costs, he suggested that these were needed throughout the lower reaches of the multi-track, and stunned the profession by suggesting that this meant cases worth up to £250,000.

But last week, he acknowledged that ‘lower value’ might mean different things ‘according to context’.

Jackson said he is told that ‘lower value’ means up to about £250,000 ‘in the mercantile courts’ – but crucially he acknowledged that in personal injury litigation ‘the upper limit for “lower value” claims would be well below that figure’.

This seems to suggest that we may see fixed costs being applied at different damages thresholds for different types of case; which seems like a more sensible approach.

Jackson is worried about the ability of small businesses to access the courts, and this is part of the driver behind fixed costs. In last week’s speech, he alluded briefly to a plan to pilot a voluntary scheme in which litigants in small business disputes involving individuals and SMEs would be able to opt for fixed costs and a streamlined process.

A pilot scheme would clearly be valuable, and if take up were high, this would be the proof that there is truly an appetite for fixed costs among this type of client. One difficulty, though, might be convincing enough law firms to take part in the pilot.

The mention of a possible pilot also makes one wonder about the timing of these reforms; perhaps they will not be introduced with as much haste as feared?

In the remaining three seminars that Jackson will be holding with lawyers and clients as part of his review, he will look at lower value business disputes, judicial review, and also ‘structural’ questions relating to fixed costs. These include whether there should be an ‘intermediate track’ for lower-value multi-track cases where fixed costs apply; and if so, what procedural rules should be created for it. No doubt lawyers will be stressing the need for a streamlined and more efficient system.

The current position – in which lawyers find themselves at the mercy of badly run, under-resourced and inefficient county courts – is entirely incompatible with fixed costs, and this issue needs to be tackled in the review.

If the mechanism for remunerating litigators is set to change, so too must the environment in which they operate.

Rachel Rothwell is editor of Litigation Funding magazine