A thought on fixed costs reforms

Some time ago the Voice of Common Sense on the District Bench reminisced about those halcyon days pre 1999, now long gone, when there was little law on costs, no CFAs and a dispute about costs was usually settled by agreement in advance of any taxation hearing.

I pointed out that was not quite the case: even in the days of scale costs fixed by the County Court Rules, every scale 1 bill seemed to start with a request for the exercise of a discretion for an award of costs in excess of the scale.

There have always been disputes about costs, and always will be, as long as there is a shifting of costs from the losing party to the winning party in litigation. What has changed, is perhaps the enthusiasm for reform.

Each legal generation notoriously has re-invented the wheel, whether in the Civil Justice Review of 1988, the Woolf Report of 1996, the Jackson Report of 2010 or in earlier reforms.

What has changed this time round in my view is the degree of enthusiasm for reform. For instance, after fairly seismic changes in 2013, a period of stability might have been appropriate, if only to assess whether the changes had actually produced a net benefit to the public.

Far from it. At the current time the misleadingly entitled whiplash consultation has closed, which contemplates the enactment of primary legislation to remove from an entire class of claimant a substantive common law right to damages and less significantly a fairly sweeping change in the small claims track limit.

A clear issue exists about whether such claimants will be able to effectively source legal advice and representation. What I found interesting in the documents was the indication that perhaps 70% of claimants in road traffic claims have the benefit of legal expense insurance.

In which case one would have thought that the problems of collective funding and ensuring access to justice would have been best addressed by ensuring that the legal insurance market worked effectively in this field and was extended to cover the remaining 30%.

That however is an issue which is curiously absent from the government’s own documents, the responses I have seen from compensating parties and those who represent claimants. Such a solution, would render the raising of the small claims limit something of a side issue as claimants would claim on their legal expense insurance policies to obtain advice and representation in the Small Claims Court.

In addition, there is further work being undertaken by Jackson LJ, in relation to an overarching scheme of fixed costs, presumably applying to all cases, possibly worth up to £75,000. It is this exercise which I think should be of the greatest concern, as it will represent a development easily on a par with the abolition of additional liabilities in terms of its impact on access to justice and the funding of the legal profession.

Such a change to the recovery of costs would have sweeping consequences for access to justice and whether the “polluter pays” principle is maintained in a recognisable form, whether the viability of litigation is adversely affected or improved and the viability of certain sectors of the legal profession.

It also would be introduced presumably because costs budgeting and management would be perceived to be an expensive failure and hence fixed costs would be the cheaper and simpler solution to bespoke costs management in the context of an individual case.

And yet still further, there is a long promised consultation on fixed costs in clinical negligence cases, and on the horizon a digital bill of costs, whose use is compulsory from October 2017 and which may yet prompt a surge in the sales of “Microsoft Excel for Dummies” as the most modest of the expenditures solicitors would have to make in order to draw their bills.

With these reforms in mind, it struck me that the fires of satellite litigation are being banked ever higher, as rules are tested, explored and arguments made by those who perceive an advantage in doing so. Even relatively small points, which should be uncontroversial can give rise to argument.

A little while ago, I was asked to advise on whether in the context of a road traffic accident case, which concluded at trial where a single firm of solicitors represented three claimants, that meant a single amount of fixed costs should be awarded, or three sets of fixed costs. The paying party contending the former, the receiving party the latter.

Each claimant in the proceedings was jointly represented and solicitors issued a single claim form, naming the claimants as first, second or third claimant.

Turning to consider the rules, rule 2.3 defines a claimant as a person who makes a claim. It defines claim for personal injuries as meaning proceedings in which there is a claim for damages in respect of personal injuries to the claimant or any other person or in respect of a person’s death. The rule further defines a statement of case to mean a claim form, particulars of claim where these are not included in a claim form, defence, Part 20 claim or reply to a defence.

A “claim” is not the claim form, nor even the proceedings before the court, but rather the individual demand by a particular person for damages which is included in proceedings. Each claimant has an individual “claim”.

Turning to consider 45.29A, the starting point to note is that section IIIA of part 45 only has application where “a claim” is started under the protocol. Rule 45.29B provides that the fixed costs in rule 45.29C apply where “a claim” is started under the protocol and where the claim notification form is submitted after July 2013 and limits those costs accordingly. It does not limit costs by reference to “proceedings”.

It follows, that the wording of the rule, relates to “a claim”, being the individual’s demand for damages, indicating that costs are awarded per claim, not per claim form or per set of proceedings. It would be an absurd result, if the contrary were true and the fact that three claims are brought in one claim form, as opposed to three claims in three claim forms might make a material difference.

There exists in any case the possibility of individual part 36 offers being made in relation to individual claimants at varying stages, and the rules make no provision for apportionment of a single award of costs.

It can be mere chance that all three claims will go to trial  as opposed to one settling pre-issue, one settling after issue, and one being determined at trial, all of which predicate different awards of costs.

Finally the old PD 45.7 made it plain that costs accrued per claimant, cases of this nature were always settled, per claimant: if a radically different approach were to be taken, then one would have thought that there would be something clear to this effect. The rules are clear, once it is appreciated, what a “claim” is, from rule 2.3.

I was told it took half a day’s argument before the court concluded that indeed three sets of costs were recoverable. If a point like that can absorb so much argument, the new framework of fixed costs as and when it emerges may create just as many difficulties as those it purports to solve.

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