The position of fixed costs is still a mystery, particularly with regard to the possible horizontal and vertical extensions of the current regime. Previously, Lord Justice Jackson had warned against the risk of ‘balkanisation’ of different costs regimes for different types of litigation. Balkanisation, it seems, would frustrate one of his main aims; costs certainty and the simplification of the costs process.
Nevertheless, more recently, Jackson has acknowledged the difficulty of a ‘one size fits all’ costs regime, which could cover the entire spectrum of civil litigation. Yesterday, he outlined his suggestions to the rule committee that there be a voluntary pilot scheme in the mercantile courts in London and Manchester and in the other two specialist courts in Manchester for matters up to £250,000.00.
He further confirmed some of the mechanics of the pilot scheme:
“There will be a scale of costs for each stage of the case. The scale figure will be a cap rather than a fixed sum so that if that particular stage requires no or minimal work or less work than envisaged there’s a lower sum. And then on top of the scale of costs for each element of the case there is an overall cap on recoverable costs.”
Lord Justice Jackson’s final report is due to be released in July this year.
What can we take from this?
Given the proposed pilot scheme includes claims issued up to £250,000, this could give an indication as to the likely ceiling for pulling matters into fixed costs. Lord Jackson’s previous negative comments regarding a uniform regime for all civil claims, however, shed light on the reason why this pilot scheme has been recommended for the mercantile and specialist courts only, and not rolled out in County Courts which deal with lower value claims.
In his final report, perhaps Jackson will propose a lower ceiling for other types of claims, especially in the personal injury sector. It has been mentioned previously that a £250,000 damages claim for a severely injured individual would be more significant and have greater importance than a commercial contract dispute between two entities. Perhaps Jackson has taken heed to the Claimant personal injury sector lobbying.
Advice for solicitors
So, what advice can be given to solicitors? When fixed costs are introduced, it seems that solicitors will have two options: to charge their client on an hourly rate basis, with the fixed costs recoverable from the Defendant being a contribution to the Claimant’s costs, as outlined by Master Rowley in the recent Brian May decision; or, accept fixed costs only, which will, unless the solicitor can work more efficiently, lead to profits across these claims decreasing considerably, with the matter run effectively on a CFA lite. The former option is highly unlikely to be accepted by any client other than in commercial type disputes. The latter will probably become commonplace among personal injury matters.
That said, if a solicitor can utilise computer systems and work more productively, there is no reason why profit levels cannot be sustained. Fixed costs, in general, do of course give rise to other issues; will a solicitor be more likely to advise settlement rather than taking the matter to a (likely unprofitable) trial? The positive for a client is that at the outset of a claim there are certainties over their potential costs liability if they are unsuccessful.
What about Counsel?
The big losers in the implementation of fixed costs are members of the Bar, in particular Junior Counsel, who are likely to have their already-squeezed fees diminished further. Solicitors are unlikely to want to lose any of the fixed costs to Counsel, and would in all likelihood undertake the work themselves, where possible. There are also likely to be a number of large firms who, instead of instructing chambers, will employ Counsel in-house, in order to retain the fixed fees for themselves.
We continue to await further clarification as to the ceiling for fixed costs. The proposed pilot scheme is voluntary, and only in the specialised courts. The uptake of such a scheme is likely to be low, as entrance into the scheme itself must be consensual. It will be interesting, however, to see the proposed level of fixed fees for each stage of the proceedings, and the ‘scales’ for fees within each stage.
Regardless, the July release of Jackson’s report will be awaited with bated breath by the majority of the legal profession. As outlined above, now is the time to consider the effect this impending implementation will have on your practice; whether you are a solicitor, counsel or Costs Lawyer.