The fix is in

The spectre of a sizeable extension to fixed recoverable costs (FRCs) in civil litigation has been looming ever since Sir Rupert Jackson first threw out the idea in a shock-and-awe speech in January 2016. His detailed plan drew gasps of horror from claimant lawyers – primarily because Jackson, who was fed up with litigators complaining about costs budgeting, was threatening to replace it with fixed costs in cases worth up to an alarmingly high threshold of £250,000.

However, when faced with a choice between costs budgeting and fixed costs, litigators appeared to decide that the former was not so bad after all; and criticism of the costs management regime died down. As a result, Jackson concluded in 2017 that, thanks to a ‘sea change’ in attitudes towards costs management, such a high ceiling for FRCs was no longer needed. He instead recommended that FRCs should apply throughout the ‘fast track’ for cases worth up to £25,000; and to a new ‘intermediate track’ for cases worth £25,000-£100,000. While still a high ceiling for fixed costs, this was far more palatable to the profession.

Time ticked by, but eventually the Ministry of Justice tasked the Civil Procedure Rule Committee (CPRC) with implementing Jackson’s proposals, and it drew up a set of rules. Colin Birss, the proactive deputy head of civil justice, was keen to give the legal profession time to review the new rules. The draft rules were therefore published in April this year, six months before they were due to come into force.

As lawyers highlighted various difficulties with the draft rules, the MoJ rushed out a short consultation in July seeking views on certain limited aspects of them; and some changes are expected as a result – though any amendments will not come in until April. Meanwhile the FRC regime will proceed at full steam ahead; applying to cases where proceedings are issued on or after 1 October; or for personal injury claims, where the cause of action arises on or after that date (and FRCs will only apply to disease claims where the letter of claim has not been sent to the defendant before 1 October). The CPRC is confident that the six-month gap between the start of the rules, and the introduction of any changes in April, will not pose any problems in practice.

So we are weeks away from reforms that are deeply unpopular with claimant lawyers, and which the Law Society has warned pose a risk to access to justice. The Bar Council, which has concerns about the fee level and conditions for recoverability of the advocacy fee, has sent the MoJ a letter before action, but has not yet received a reply.

Clinical approach

The most controversial aspects of the new fixed costs regime relate to clinical negligence claims. A major issue is that at the lower value end (for ‘fast track’ claims worth up to £25,000), the Department of Health and Social Care (DHSC) is drawing up a fixed costs regime for clinical negligence claims but it is not yet in place. So clinical negligence cases worth less than £25,000 will not be shackled by fixed costs; while some valued between £25,000 and £100,000 will now fall within the new regime. This creates an obvious problem for cases valued somewhere around the £25,000 threshold.

Solicitor Brett Dixon, secretary of the Association of Personal Injury Lawyers (APIL) and a former member of the CPRC, says: ‘There’s more than one government body looking at the area, which is an absolute recipe for disaster. What I’ve always picked up on in meetings with civil servants is that there’s a slight unease about how that works. The MoJ aren’t used to someone having a big say in relation to the civil justice system and how the rules might work. Judges are a little uncomfortable with the fact that the NHS is [obviously] conflicted in looking at the rules… And the DHSC has never really embarked on any rule-making in the past. So I always get a sense that there’s a real possibility of unintended consequences.’

Dixon adds: ‘It’s odd that you have, in the current rules, a system that would drag cases above £25,000 into a fixed costs regime in certain circumstances; yet below that, you don’t. I suspect this will lead to a lot of arguments around that boundary area [of] £25,000 – which is not what the courts need because they just don’t have the resources.’

Another big sticking point relates to clinical negligence claims worth between £25,000 and £100,000. According to the new rules, such cases will enter the new intermediate track if ‘both breach of duty and causation have been admitted’.

David Marshall, managing partner of Anthony Gold and a member of the CPRC that drew up the rules implementing Jackson’s fixed costs proposals, says: ‘It is plain in Jackson’s report that if breach of duty and causation are admitted early, then those cases can go into the intermediate track as appropriate. So what [Jackson] was basically saying was, if the hospital puts their hands up straight away… those cases, [probably] a smallish number, might be appropriate for the intermediate track.’

Before the draft rules were published, however, some lawyers had come to believe that clinical negligence cases would be excluded entirely from the FRC regime.

Marshall notes: ‘During the course of the five years it [has taken since the Jackson report] to get to this stage, the MoJ made slightly different comments from a policy point of view. Certainly, people have read what the MoJ has said to mean that nothing from clinical negligence was going into the intermediate track. I don’t think there’s any great conspiracy, but communication might have been better on this.’

But while it is now clear that the new intermediate track does capture some clinical negligence claims where breach of duty and causation are admitted, there is still a big problem. The FRC rules do not specify precisely when the relevant admissions must be made. Claimant lawyers argue that this hands a powerful tactical weapon to defendants; and APIL has issued judicial review (JR) proceedings against the lord chancellor to challenge this – together with several other aspects of the rules.

Dixon explains: ‘The big problem is that it’s ripe for behavioural issues, because you don’t have a timing for when you have to admit liability. So if you were of a mind as a defendant practitioner, you could leave it until the last minute, before the case is allocated to a track, to suddenly say, you know what, we [drop all of these defence arguments], and going forward it’s going to be an intermediate track case, with all the [fixed costs] implications of that.’

This could undo recent progress on both sides towards a more collaborative approach to resolving clinical negligence claims. Dixon observes: ‘If there’s a system that’s set up that allows you to explore all possible defences, and then at the last minute pop across into a more amenable costs regime, I can see that happening. And I know from discussions with people at NHS Resolution that there’s a degree of pressure that comes from the defendant themselves; the doctor or the surgeon, who wants things to be defended to the absolute full because it’s their reputation at stake. So you can see how it would be attractive if you can do that, but also have an escape valve – which is unfair and may lead to cases taking longer.’

This problem could be solved, suggests Dixon: ‘A simple tweak would resolve the issues by just having a definition of what an admission of fault is – which obviously has to include some element of causation, because that’s always a big battleground – and a time.’ The relevant time for the admission could be in the defendant’s letter of response to the letter of claim, for example.

From the claimant perspective, the positive news is that this question over the timing of admissions has been included in the MoJ’s short July consultation; and it looks likely that changes will be made to address this in April. APIL has stayed its JR until three weeks after the government responds to the July consultation, and will be able to amend its JR grounds according to that response.

Vulnerable position

Another claimant worry is the way the new FRC regime accounts for the extra work involved in looking after vulnerable clients; this aspect of the rules is also being challenged by APIL in its JR proceedings.

Dixon was involved in the CPRC’s 2021 amendment to the overriding objective, which made provision for vulnerable witnesses. He says: ‘A surprising aspect of the FRCs is the way they’ve chosen to deal with vulnerability - and that’s from someone who was involved in writing the rules on vulnerability before I finished with the CPRC… It’s creating a two-tier system.’

Dixon explains that outside the FRC regime, solicitors will have greater clarity much earlier over any vulnerability measures that the court thinks are needed, and what costs solicitors are likely to recover in relation to this: ‘You’ll find out at the CMC [case management conference] what the court thinks needs to happen [in relation to vulnerability of parties or witnesses] and if you’re budgeted, you’ll have an idea of what your spend will be in relation to it; and if you’re successful, you’ll recover [that spend].

‘But in the new world of fixed costs and vulnerability, you may get to a CMC, you may get the directions designed to support your client or a witness to participate fully in the proceedings, but you may not recover that cost. You won’t know until the end of the case, because you have to incur more than 20% of the overall costs of running the case [as a result of the vulnerability].’

Dixon notes that this 20% threshold is a significant barrier; likely to amount to more than £4,000 of extra costs in even a modest intermediate track case. ‘That’s more than the first day fee for counsel at trial, which I suspect is a benchmark most judges will go to if you’ve got someone supporting someone giving evidence; or it’s something like 20 hours’ worth of Grade B national work.  

‘So in all of those cases, you may have had the vulnerability measures, but because you haven’t met this artificial 20% hurdle, you won’t recover it - and it will come from the client’s damages. If you’re unfortunate enough to need vulnerability measures and be in the fast or intermediate track, you may be faced with difficult decisions. Solicitors will be in a difficult position advising clients as to whether they get funding in effect for those vulnerability measures.’

Daniel Murray, associate costs lawyer at Clarion, says: ‘This could have been much simpler. But instead it’s set up so that you first have to establish that you’ve got the 20% additional costs – and obviously, you don’t know what your base costs are going to be, so that’s hard to keep track of… Then those costs have got to be assessed. So it creates extra work just to potentially get those extra fees – and there’s no guarantee of doing so.’

Could this lead to solicitors reluctantly declining to act for vulnerable clients? ‘Yes, potentially,’ says Murray. ‘I’m sure there are firms that are thinking, is it actually worth it – it’s a lot of extra steps to take if they want to seek these extra costs, which defeats the purpose of creating greater access to justice.’

Dixon points to a recent ruling allowing the recoverability of interpreters’ fees in Santiago v MIB: ‘The Court of Appeal touched on this in relation to interpreter fees, and said it would be surprised if solicitors wanted to take this on if it didn’t resolve the issue. So it’s not just solicitors saying it, it’s Court of Appeal judges saying the obvious effect of having a mess like this is that people won’t be able to access justice.’

Playing the game

The expanded fixed costs regime is intended to simplify litigation, making it less expensive and more efficient. But will it?

Murray is concerned that the rules could discourage collaborative litigation. He gives the example of a typical employer’s liability personal injury claim, with liability admitted and only quantum in dispute (with damages at around £30,000). Murray says: ‘In the new intermediate track, this is likely to be a band 1 case. If it settles pre-issue, base cost recovery will be about £2,500. For that work, solicitors might even have issued proceedings at that point and be awaiting a defence.

‘So if a request comes in [from the defendant] for an extension of time for filing a defence with an offer, there’s not going to be any real incentive for the claimant side to agree that extension now - because the jump in costs is so significant to push it onto a stage 3, where the costs jump by about 280% [to £7,000] following service of the defence.

‘We will see tactics from both sides. Defendant lawyers will want extensions [to delay moving to the next stage] because that’s going to keep the costs down, whereas claimant solicitors will want to move things through the gears and through the stages as quickly as possible.

‘The way that the intermediate track in particular is shaped and designed, there are chunks of it where a great deal of work can be done that may ultimately not be paid if it settles just before that court deadline.’

Murray also expects arguments over which of the four ‘complexity bands’ a claim belongs in. He predicts that where defendants make admissions, they will then push to get the claim moved into a lower costs band – whereas claimants will argue that much of the work has already been done.

‘The rules have got to bed in,’ he says. ‘So you’re probably looking at least six-12 months before [the arguments] start to heat up. But from this time of year onwards, I expect there to be a lot of reporting on assignment decisions [about which band a claim should be assigned to]. The commentary has always been that [the new rules] will simplify things, that there won’t be any costs disputes because everything is clear. But perhaps now there’s a realisation by the relevant parties that this might not be the case - because one of the things that [the MoJ] is consulting on for April is a streamlined assessment process [to resolve disputes over which fixed costs apply]... So perhaps people are starting to wake up to the fact that there is going to be a lot of satellite litigation on the back of this.’

Marshall says: ‘This is a huge change, a big expansion of fixed costs; and people will try to use it for tactical purposes. Hopefully the rules are robust enough to deal with that – but I’m sure there’ll be some litigation.’

Budget constraints

While the imminent fixed costs extension has stolen the limelight in terms of costs reform, further changes lie ahead – and are rather more welcome. In May, Lord Justice Birss revealed the outcome of the Civil Justice Council’s holistic costs review, which proposed piloting a more streamlined approach to budgeting in some cases; as well as recommendations relating to hourly rates and other issues.

The report was generally welcomed by the profession, and Birss’s clout within the justice system should ensure that it is ultimately acted upon. But Marshall notes: ‘There were some sensible proposals to improve budgeting, so I imagine they will eventually find their way into the rules; but don’t hold your breath. My experience with these reports is that they don’t seem to get implemented very quickly.’

 

Rachel Rothwell is editor of Gazette sister publication Litigation Funding