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Lord Justice Jackson publishes his further recommendations on fixed recoverable costs

August, 1, 2017

Lord Justice Jackson has unveiled his much anticipated review of civil litigation costs.

It was suspected that the proposals would seek to introduce fixed costs in most, if not all, forms of civil litigation for claims valued at up to £250,000 but as we expected he has held back from doing so – at least for the time being.

The proposals are limited to the extension of fixed recoverable costs (FRC) for all fast track cases and the introduction of a new ‘intermediate’ track for certain claims with a value of up to £100,000.

Whilst there is also a proposed pilot of capped recoverable costs, in conjunction with streamlined procedures, for business and property cases with a value up to £250,000, in this bulletin we consider the potential impact the proposals may have on those handling insurance claims, rather than business claims, libel, intellectual property, etc.

The Proposals

The complexity of clinical negligence claims is such that they are usually unsuited to either the fast track or the proposed intermediate track and so it is recommended that the Department of Health and the Civil Justice Council should set up a working party with both claimant and defendant representatives to develop a bespoke process for handling clinical negligence claims up to £25,000.

The report sets out a grid for the FRC in non-personal injury fast track cases, depending on complexity and the stage at which the claim is resolved. Band 1 will cover the least complex cases and Band 4 the most complex.

  • Band 1 will include RTA non-personal injury claims (popularly known as ‘bent metal’ claims).
  • Band 2: RTA personal injury claims.
  • Band 3: EL accident and PL accident claims.
  • Band 4: EL disease claims and the most complex fast track claims.

The issues with the existing FRC regime were highlighted to Jackson during his review but he does not consider it appropriate to “start ‘tinkering’ with the existing fast track FRC regime, which overall works well”. In particular, reversal of the decision in Bird v Acorn (2016) has been left as a point for the Rule Committee to consider but he has recommended replacing the award of indemnity costs where a claimant succeeds under Part 36 with a percentage uplift of 30% or perhaps 40%.

This would modify the decision in Broadhurst v Tan (2016) which Jackson recognised will impact upon fixed costs generally. A policy decision is required on this issue which will need to be addressed in any consultation exercise following his report.

The decision not to extend FRC to claims valued at up to £250,000 comes from the perception that costs management ‘is now working distinctly better than it was two years ago, although there is still room for improvement’.

However, when the reforms recommended elsewhere in the report have been implemented and have bedded in, consideration will almost certainly 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.

Nevertheless, Jackson does see scope for fixing the recoverable costs in some categories of cases above the fast track. He proposes that there should be an upper limit of £100,000 and that only cases of modest complexity should fall within the new FRC regime. Those will be claims which are principally for monetary relief, such as damages or debt. The criteria for allocating a case to the new intermediate track include:

  1. The case is not suitable for the small claims track or the fast track.
  2. The claim is for debt, damages or other monetary relief, no higher than £100,000.
  3. If the case is managed proportionately, the trial will not last longer than three days.
  4. There will be no more than two expert witnesses giving oral evidence for each party.
  5. The claim is not for mesothelioma or other asbestos related lung diseases.

The report accepts that more complex personal injury cases, including clinical negligence cases, would be excluded from this track. Part 8 claims will also be excluded for the time being, save for applications to approve settlements for children and protected parties and costs only proceedings, in respect of intermediate track cases.

These are only recommendations and it is not a consultation document. Jackson expressly leaves it to others to take matters forward.

Commentary

We welcome the proposal to introduce a system of FRC across pretty well the whole spectrum of insurance related claims.

However, we have always had concerns that it does not suit all cases and if the rules are not robust enough can be open to abuse. In the low value fixed costs cases we have handled we have made savings for our clients in excess of £12m so the savings will be even more significant on the higher value claims.

One area that concerns us is if the intermediate track is introduced a new battle ground will be created, with parties arguing about the true level of complexity. This exercise will not take place until allocation. Which band a case is assigned to will in many cases make a huge difference to costs.

Claimants may be encouraged, as in the past, to ‘build’ a claim, so as to create an impression that it should proceed on the multi-track. For example a case could potentially fall off the intermediate track simply because statements of case or witness statements exceed the total number of pages likely to be prescribed. It will take stringent case management by the judges to prevent abuse.

This will result in arguments about costs at the conclusion of the case as to whether or not the claimant was justified in avoiding the FRC regime. It could also mean that cost budgeting hearings will need to focus not only on costs’ budgets but also whether the claimant’s budget, once approved, is in fact indicative of a case that should proceed on the intermediate track and be subject to the FRC regime.

Another problem area arises because Jackson has not addressed the thorny issue of incurred costs. He has again deferred tackling that issue until the reforms have bedded in.

At this stage we do not know the extent to which the government will consult upon or fully adopt Jackson’s proposals but significant change to the existing regime is inevitable. We will be providing further strategic advice as the new regime takes shape.

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