Thursday, 9 June 2016

Fixed Costs - Facing the Fear

The Department of Health has given up on the idea of introducing fixed fees in clinical negligence claims in October 2016. No consultation or new implementation dates have been announced but there can be no doubt that, barring massive political upheaval in the wake of the EU Referendum, fixed fees will be introduced, probably in 2017.

Fairly or unfairly there is a perception amongst the public, politicians, opinion formers in the media and the upper echelons of the judiciary, that the costs of civil litigation have got out of hand. It has been decided that costs have to be controlled and fixed costs have been identified as the most effective means of achieving that end. 

It is time to face the fear of fixed costs.



The Grid


In his speech to the Insolvency Practitioners Association earlier this year Lord Justice Jackson started a wider debate about the introduction of fixed fees for fast track and "the lower reaches" of the multitrack (claims up to £250,000) for all civil litigation. He spoke out against "Balkanisation", i.e. the introduction of fixed fees only for certain areas of practice, such as clinical negligence. Lord Dyson has made a similar plea. Perhaps the Department of Health will now pass the issue of recoverable legal costs to the Ministry of Justice, where it belongs.

Lord Justice Jackson proposed a grid of fixed fees for cases according to the band of value of the claim and the stage reached in proceedings. It has been regarded as a frightening spectre by many within the legal sector. 






Alternatives


The prospect of fixed costs is less unappealing when you consider the alternatives: assessment after the event, and budgeting. The recent decision of Master Gordon-Saker in MNM v MGN Limited EWHC B13 (Costs) (understood to be under appeal) in which he halved costs which had been adjudged to be reasonable on a line by line assessment, including a significant reduction to the "reasonable" ATE premium, demonstrates that the new (ish) rules on proportionality can be applied with rigour. Better to know in advance what your recoverable costs are than to find out too late that whilst you have spent costs reasonable you can only recover half of them.

Costs budgeting is time-consuming, costly, and subject to significant variation of outcome depending on the judge involved. 

By whichever means recoverable costs are determined, the government and the judiciary are clearly determined that costs should fall. The choice is not between fixed costs and some other regime that will allow for markedly higher costs recovery. Viewed that way, perhaps the certainty and speed of payment that fixed costs should provide is quite attractive.

Stage Two


In a recent paper and evidence to the Westminster Legal Policy Form Lord Justice Jackson gave grounds to believe that the most worrying aspects of The Grid, will be ameliorated. He emphasised that:
  • The grid was designed to start a debate. Someone, he said, had to take the plunge. The figures in the grid were not intended to be the final word but an "illustration" only.
  • There was a legitimate debate to be had about what constitutes "the lower reaches" of the multitrack. 
  • The grid marked stage 1 of any fixed costs process. Stage 2 would include considerations of the complexity and importance of the litigation. He referred to clinical negligence as being an example of complex litigation. There would have to be additions to the basic figures in the grid in certain cases.


Remaining Concerns


The devil, as they say, may well be in the detail. There will be much lobbying on the figures, escape routes and enhancements within any fixed costs scheme. I remain concerned however about two issues that go to the principle of fixed costs:


  1. The impact on the Junior Bar. I hope that any fixed costs regime will include separate provision, perhaps by way of fixed fees, for barristers. If not, then there is little to no incentive for solicitors facing a fixed remuneration for a stage of proceedings to pay part of that to an outside contractor such as a barrister.
  2. Inequality of arms: a fixed costs regime limits the costs a party to litigation can recover from the other party but it does not limit how much a party can spend. Thus the wealthy party, including institutions such as the NHSLA or motor insurers, can choose to spend more than they know they can recover. A private individual is unlikely to be able to afford to make the same choice. Any fixed costs regime has to guard against this risk by (a) allowing a low threshold for departing from fixed recoverable costs due to the paying party's conduct and (b) allowing for that departure at an early stage in the proceedings (not only after the conclusion of the case).  

I am grateful to the Leeds Law Society and Clarion Solicitors for inviting me to take part in and hosting a Breakfast Panel Discussion on Fixed Costs on 8 June 2016, an event which prompted this post.







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