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Costs reforms – where are we going next?

23 July 2020
On 31 July 2017, Rupert Jackson unveiled his proposals for fixed costs cases where damages were worth between £25,000 and £100,000.  The MOJ have taken some time to react however later advised that their final proposals would be out on 6 September 2019 – we are still waiting.

Some key questions

Where are we going with fixed costs? 

Fixed costs are being extended, they are not going away and will happen! So be ready! 

What impact could fixed costs being extended have?

Cost Budgeting will fall away and of course there will be no costs at conclusion to deal with.

What is being proposed?

The figures recoverable are set out on a scale which the MOJ have broadly accepted following proposals by Sir Rupert Jackson.

Initial proposals were that this area would be called the Intermediate Track however this was disputed and the Fast Track will simply be extended. Initial proposals comprised of four bands of this kind of work rising with complexity with the most complicated being professional negligence however the four bands were disputed and it has been agreed that there simply be three bands bottom, top and middle.  We are looking at possible dates of October 2021 when fixed costs are going to be extended in this way.

What if there is a good Part 36 Offer in a case?  

In order to avoid an assessment and to keep things simplified, the MOJ has accepted Rupert Jackson's proposals but in the event of a good Part 36 Offer the recoverable costs will be bumped up by 35%.  

What matters are excluded?

Clinical negligence ad unduly complicated cases will be excluded. The case was either likely to last more than three days at trial or it would involve calling at least two experts.  

Any attempts to bring Clinical Negligence into the fixed costs arena have so far been unsuccessful however watch this space.

Current issues

Damages Based Agreements - DBAs

At the moment,  these are simply not working.  Proposals were brought to vary the rules although do not hold your breath in relation to any changes. However they were proposing that one should be allowed to act on a hybrid agreement whereby if you feel you could still charge your client something.

Disclosure Pilot Scheme

A report on this is imminent.  The report itself may recommend some tweaks however if this happens the pilot scheme will then have to be extended to see how the tweaks themselves pan out.  

Current Issues in Costs Disputes in the Fixed Costs Arena

The Court do appear to have been busy determining fixed fees in the lower value cases.  A recent example being  Aldred –v-Cham which concerned the recoverability of counsel's fees in the sum of £150.  We are still seeing counsel's fees regularly being claimed.  Translation fees following on from this case are also unlikely to be recoverable.  Qadar –v- Esure was also a recent case as to when fixed costs can or cannot apply to any cases that have been allocated to the Multi Track.

Contracting Out of Fixed Costs

It is crucial before any payments are made regarding damages that a counter offer for fixed costs is made.  

Cases being valued at the outset of more than £25,000

Have the Claimant's solicitors acted unreasonably in sending a letter of claim as opposed to starting a matter out in the portal? This is something to be aware of. 

Outsourcing of work 

We are seeing agency fees for witness statements and external companies to paginate and copy records and of course excessive reliance on Counsel.

Budget hearings during Litigation

This effectively can be a preliminary detailed assessment and it is vital for all parties to instruct costs experts to make sure that the correct arguments are raised and that costs strategies are formed early in the litigation. Prompt applications relating to vary the budgets should be made as and when.

What successes do we have in relation to challenging hourly rates?

One example  was hourly rates of £450 per hour being reduced to £310 per hour at assessment in a case which was a brain injury case which settled for £1.5m in damages.  We are however seeing a lot of inconsistency from Court to Court.  Hourly rates are of course out of date and have not been amended since 2010.  The Civil Procedure Rule Committee have appointed a sub group to review the hourly rates and data will be submitted at the appropriate time.

Covid and how we are proceeding

What has been the Covid impact on costs?  Positives have been the cooperation of all parties.  Of course in the case of Stanley –v- London Borough of Town Hamlet where the Courts took a very dim view of the Claimant taking advantage of the Covid situation.  In this case proceedings were served by post two days after lockdown.  The Court found that this displayed poor judgement. 

Changing and working environments during and post Covid

Given the rise of working from home we are going to be seeing interesting arguments relating to hourly rates when the people are simply not in the office.  You can see plenty of arguments relating to AI in the future.

Use of video conferencing and working from home

Is it reasonable for a client to attend on their office list or to attend on their client when they can simply do it by video conference?

Are we going to see a consolidation of the market following Covid and the reforms proposed in 2021? Something to bear in mind.

Costs in the Future

The whiplash reforms have been put back until April 2021 and fixed costs of up to £1,000 are going to be back on the agenda.  We also have the official injury portal valuation and valuation is going to be key moving forward.

When fixed fees are extrapolated to £100,000 in damages the arguments made above will be significant and then hourly rate cases will be more important than ever once a further block of cases fall away under fixed fee.

Thank you to Nicola Critchley and Professor Dominic Regan for giving us their insight into the 2021 reforms at our recent webinar. To discuss any of these issues in more detail, please contact Aoife Murphy.

Further Reading