Lord Justice Jackson has released his Review of Civil Litigation Costs: Supplemental Report – Fixed Recoverable Costs.
At the conclusion of the 135 page report he makes the following recommendations:
(i) All recoverable costs in the fast track should be fixed and the figures should be reviewed every three years.
(ii) A new ‘intermediate’ track with a streamlined procedure should be created for monetary relief cases above the fast track, which are of modest complexity and up to a value of £100,000.
(iii) There should be a grid of FRC for intermediate track cases and the figures should be reviewed every three years.
(iv) There should be FRC for (a) applications to approve settlements for children and protected parties and (b) costs only proceedings, in respect of intermediate track cases.
(v) Save as set out in recommendation (iv) above, Part 8 claims should be excluded from the proposed FRC regime.
(vi) The Civil Justice Council should, in conjunction with the Department of Health, set up a working party, including both claimant and defendant representatives, to develop a bespoke process for clinical negligence claims up to £25,000, together with a grid of FRC for such cases.
(vii) There should be a pilot of capped recoverable costs, in conjunction with streamlined procedures, for business and property cases with a value up to £250,000.
(viii) If the pilot is successful, such a regime should be made available at the judge’s discretion for any suitable case in the Business and Property Courts or the Business and Property Lists of the County Court.
(ix) The Aarhus Rules should be adapted and extended to all judicial review claims.
(x) Costs management should be introduced, at the discretion of the judge, in ‘heavy’ judicial review claims.
(xi) When the reforms recommended in the report have bedded in, consideration should be given to:
a. developing (1) a grid of FRC for incurred costs in different categories of case, and (2) a pre-action procedure for seeking leave to exceed the FRC in that grid; and
b. extending the scope of the intermediate track and the range of FRC.
To the relief of many Jackson LJ has not gone anywhere near as far as it was suggested he might in January 2016 when he gave his Fixed costs – the time has come lecture to the Insolvency Practitioners Association and argued for an extension of fixed costs for all cases up to a value of £250,000. One reason for this appears to be an acceptance that cost management is starting to work. On this, Jackson LJ observed:
“I am bound to accept that improvements in costs management (especially in the last one-and-a-half years) have eliminated any need to develop FRC on the scale canvassed in my lecture of January 2016. Nevertheless, the possibility remains of substantially extending FRC in the future, if the costs management process either fails to deliver effective control over costs or becomes unduly expensive.”
However, he continued:
“Although I do not propose any massive extension of FRC, I still hold the view, expressed in chapter 16 of my previous report, that after the main reforms have bedded in (which has now happened) we need to work on developing FRC for the lower value cases above the fast track level. This is because:
(i) Many cases which are currently in the lower reaches of the multi-track are sufficiently straightforward to be accommodated within a fixed costs regime.
(ii) A fixed costs regime will eliminate the process of costs budgeting and assessment. In lower value cases, there is a greater risk that those process costs will themselves be disproportionate.
(iii) The extension of FRC to such cases will bring a greater level of certainty than costs management can achieve.
(iv) Such a regime will promote access to justice for some individuals and SMEs, who may otherwise be unable to litigate.
(v) We now have four years’ experience of FRC in the fast track and of costs management in the multi-track. The profession and the judiciary have a much better understanding of litigation costs than they did in 2009, when I wrote my previous report. With the assistance of experienced practitioners, judges and economists, it is now possible to draw up a realistic grid of FRC for straightforward lower value cases outside the fast track.”
In relation to costs management generally, he concluded:
Assessment costs management. Costs management is now working distinctly better than it was two years ago, although there is still room for improvement. This is borne out both by the written submissions during this review and by numerous contributions during the seminars. That does not, however, dispense with the need for extending FRC.
Incurred costs. The principal problem is incurred costs which on average represent 32% of the claimant’s budget and 15% of the defendant’s budget. That is not an argument against having costs management. The lion’s share of the costs still lie in the future and it is well worth controlling those future costs. Nevertheless, we do need to take steps to control incurred costs. PIBA have made some proposals which merit consideration. So has Master Cook, supported by the Senior Master.
Recommendation. When the reforms recommended elsewhere in this report have been implemented and have bedded in, consideration should be given to developing (a) a grid of FRC for incurred costs in different categories of case and (b) a pre-action procedure for seeking leave to exceed the FRC in that grid.
Whilst the proposed extension of fixed costs has not been the “giant leap” many feared, it is clear that that the issue has not gone away and will remain under consideration and review for some time to come. Now might be the time for practitioners to fully accept and embrace the costs management regime as being the “lesser of two evils“.