Fixed Costs Inevitable?

Calls by Lord Justice Jackson to introduce fixed costs for civil claims worth up to £250,000 have come under heavy criticism from the legal profession. Jackson made the suggestions during a speech last week, calling for recoverable costs to be fixed in all claims valued at up to £250,000.

Jackson argued the present level of costs and complexity of civil litigation has evolved over time and that shifting costs and the system of hourly rates, creates a civil justice system which is ‘exorbitantly expensive.’ He argued that the fixed costs matrix should apply to claims of every type, with no distinction on the level of fixed costs allowed between different classes of claim.

He said the profession is now more willing to accept fixed costs than in the past, due to the ability to dispense with costs budgeting, while the fixed costs regime for fast track personal injury cases is ‘working reasonably well’ as evidenced by high levels of personal injury claims in the fast track and widespread advertising for claimants.

He added: ‘We now have enough experience to devise a coherent scheme of fixed costs for the whole of the fast track and for the lower reaches of the multi-track. The time for doing that has now come.’

Law Society president Jonathan Smithers said while the body supports the principle of fixed costs for lower value and less complex cases, it is ‘extremely concerned at the proposal that costs should be fixed for all claims up to £250,000. This represents a tenfold increase on the current limit for many claims. The application of fixed costs for highly complex cases is likely to be totally inappropriate and would raise significant questions about the ability of many people to access justice.’

Bar Council chair Chantal-Aimée Doerries QC echoed the Law Society’s sentiments, and said: ‘Where litigation is straightforward, fixed costs may help to resolve disputes more efficiently, but designing and implementing such a scheme will require very careful thought to avoid unintended consequences. Large corporations and governments may well be willing to spend large sums of money – beyond what is recoverable – on legal disputes with individuals or smaller corporations whose costs are fixed at a much lower rate. Instead of levelling the playing field, this proposal could tilt it further in favour of big business and the state.’

So what will the new proposals mean?

At present there are of course fixed costs for RTA, EL and PL claims both in the Portal, and for when they drop out, but these can be distinguished. For a claim proceeding all the way to trial and obtaining Judgment of exactly £25,000, the recoverable costs in an RTA claim would be £9,360, for a PL claim they would be £12,370 and for an EL claim £14,318, all exclusive of VAT and disbursements.

Jackson proposes introducing four bands but it is unclear whether a band would apply based on the level of damages recovered. The bands would be: £25,000 to £50,000; £50,000 to £100,000; £100,000 to £175,000 and £175,000 to £250,000. Jackson also proposes that level of costs awarded should be based on the stage at which the claim reached, using the same 10 stages that can be found in the Precedent H that is currently used in Multi-track claims. The actual proposed figures are as follows:

For the first stage (pre-litigation) the proposed fixed costs would be:

  • Value of £25,000 to £50,000 = £3,250
  • Value of £50,000 to £100,000 = £5,250
  • Value of £100,000 to £175,000 = £8,750
  • Value of £175,000 to £250,000 = £12,000

If the claim proceeded to trial  the proposed fixed costs would be:

  • Value of £25,000 to £50,000 = £18,750
  • Value of £50,000 to £100,000 = £30,000
  • Value of £100,000 to £175,000 = £47,500
  • Value of £175,000 to £250,000 = £70,260

The above figures are exclusive of VAT and disbursements.
The move towards greater use of fixed costs is inevitable but it still needs to be determined as to how it will be implemented.