The move towards more fixed claimant costs is gathering speed
11 November 2015
If the signs are being read accurately, two and a half years after most of Lord Justice Jackson’s recommendations were introduced through LASPO, we may now be moving towards the introduction of an across the board system of fixed costs for all claims worth up to a level which may be as high as £100,000. What are the signs which are now visible, what may be the fixed costs landscape which develops, and why is this happening now?
For this type of key development to occur in today’s world, there needs to be synergy between the key influential members of the judiciary on the one hand, and the position taken by government ministers on the other. That position seems now to be developing. The senior judicial figures are not only coming forward with the proposal but also repeating their position in favour of it, while government is receiving the message which seems to confirm its own views and appears willing to act.
Latest judicial signals in favour
The positions taken by the Master of the Rolls Lord Dyson, and by Lord Justice Jackson remain key. At his lecture on “Magna Carta and Compensation Culture” last month, Lord Dyson referred to “exorbitant” legal costs. He went on: “The obvious solution is to introduce reasonable and proportionate legal costs. The government is taking a long time to grasp this nettle.”
3 days later, when giving the Mustill Lecture, Sir Rupert Jackson said that “The Master of the Rolls has for some time been pressing for a fixed costs regime in respect of (claims up to £50k). I strongly support that proposal.”
It is now being said on Twitter that it will be Sir Rupert who will address the Insolvency Practitioners’ Association on 28 January at their IPA Annual Lecture, and that when doing so he is expected to give a “major speech on further radical law reform” which is again expected to centre on costs, and will give further support for the view that the time is now right to press ahead with the introduction of fixed costs at a much higher level than currently, which we would see as likely to be for cases worth up to £100k.
So while Dyson and Jackson have spoken up to now of the next reform of fixed costs needing to include lower value multi track claims (a reference of course to claims worth upwards of £25k), or alternatively claims worth up to £50k, that figure is now starting to look out of date if we are talking of a more radical response. It seems to us that if this reform is introduced, the government may take the view it is not worth doing unless the level at which it takes place is as high as £100k.
Fixed costs at that level would have the advantage too of taking the pressure off costs management. While Sir Rupert remains firmly in favour of costs management, the system continues to creak under the weight of the extra work involved, evidence for which is the recent need to exclude a batch of London clinical negligence claims from the process. Fixed costs at up to £100k would allow costs management to be concentrated on the larger claims.
Latest government views
We have always taken the view that the Department of Health-led proposed introduction of fixed costs into clinical negligence work, in order to reduce that strain on the public purse, was likely to be influential more broadly into other types of claim. The formal consultation exercise is due to open later this month and to close before Christmas, in the hope of having news rules in place ready for implementation next October.
The DH was originally to consult on implementing a new process for claims worth up to £100k. Then they indicated that this level might be proposed instead at £250k. We would see a leap to that level as a step too far for government from where we are now.
The claimant lobby is fearful of the fees being set too low, and believes that the value of the claim and the stage at which it concluded are not the sole factors which should govern the level of costs. They are not satisfied either by a suggestion that the number of experts should be taken into account as well. Attention will be focused going forward on what types of claims are sufficiently exceptional to be outside any such regime.
The Ministry of Justice position
The MoJ are as you would expect involved in what is going on in clinical negligence, even though the momentum comes from the DH. The Justice Minister Lord Faulks, speaking at a fringe event at the Conservative Party Conference last month, said that the government wanted to do more to reform “enormous” legal costs, and accepted that they had not yet got a grip on the overall amount charged by lawyers.
Lord Faulks praised the German system: “The Germans, for example, have very much more in the way of fixed costs. Once you decide to go (down) the court routes, you know what is coming at the end of the road.”
What is the position in Germany in fact? In his Provisional Report, Sir Rupert sets out his findings from his research. He explains that legal costs over there are set by statute, and that the amount payable varies by reference to factors such as the claim value and the stage reached. The level of fixed costs is low, with the example being given of a €100k claim attracting fixed costs of only €5,123.
What might a fixed costs regime look like?
We do of course already have one for RTA, EL, PL and EL disease claims in the portal, and for those types of claims concluding outside the portal but which started inside it. There are different figures for each of those 4 types of claim, though they bear some relationship one to the other.
This time round we should expect a new regime to include all types of claim up to say £100k. Not just injury claims, but commercial cases too. The gaps which exist in the application of fixed fees to injury claims, not only to clinical negligence but also to disease claims which do not start in the portal or which drop out, would therefore be filled.
Work would be needed after consultation exercises to calculate the appropriate level of fixed costs for each type of claim. We would expect that the 2 obvious factors already seen in the current fixed costs rules, i.e. claim value and stage reached, would continue to be important. But it would be a government decision ultimately as to what level of fixed costs was, for each type of claim, in each value band, and in the words of Lord Dyson, “reasonable and proportionate”.
What constituted exceptional circumstances and so justifying a departure from fixed costs would need to be set out as the current rules do, and what amounts to that type of circumstances may vary with the type of claim involved.
All of that will take time, but we are only 6 months into the current parliamentary term and so that time is available. If we are reading the signs correctly, a new fixed fee process along these lines may be in place in 2017.
In the meantime we have proportionality
The latest case receiving publicity on proportionality of costs, but at the same time showing that it is not easy to operate the new provisions brought in as part of the Jackson package, is Hobbs v Guys and St Thomas’ NHS Foundation Trust, a decision from Master O’Hare in the Senior Courts Costs Office in a clinical negligence case which settled for £3,500.
At assessment, the claimant’s costs which were claimed at £32,329 and so nearly 10 times the damages, were reduced to £9,879, with the first reductions being for unreasonableness, and then a further reduction on the basis of proportionality which trumped reasonableness. This led Master O’Hare to accept that he was disallowing costs which had been reasonable to incur, on the basis that it would be unfair to expect the defendants to pay them in such a small claim. The decision is seen as concerning by claimants.
While we do not have higher court clarification of the new proportionality test which will still be needed for the cases currently flowing through the system, if fixed costs are to apply to a substantially higher level of damages, then the ongoing difficult issue which has lasted since the Woolf Reforms of how to impose a realistic proportionality test will be of less significance.
More on claimants’ solicitors’ success fees
In August, the Regional Costs Judge for Birmingham, District Judge Lumb, gave his first judgment in A&M v Royal Mail Group and was strongly critical of the solicitors acting for the claimant whose success fee was 100%, limited of course in terms of its effect to 25% of PSLA and past losses. He went as far as noting that the solicitors’ duty to take account of the client’s best interests would extend to advising that other solicitors might take the case on without a success fee.
In his second judgment in the same case last month, DJ Lumb went on to assess the success fee at 10%. He noted the pre-Jackson success fees for RTA claims of 12.5% was the starting point, but saw here that as passengers, the claimants’ risks were less than average. To a risk based success fee of 5% he added a deferment-based success fee of a further 5% to make a total success fee of 10%.
He bemoaned that competition as between solicitors on success fees had not developed, at least not yet.
Other success fee developments
It was against that background that a new CMC by the name of Quittance was launched last month, specifically referring to the need to compete, and claiming that the success fees of its lawyers would be limited to only 15% of damages. That said, the FAQ section of their website also refers to a success fee of 20% of damages. Still of course less than 25%, but hardly the sign of keen competition starting just yet.
Last week saw the opening of a consultation on the part of the Northern Ireland government who propose for the first time to permit CFAs in their jurisdiction, with success fees which are non-recoverable from defendants on the LASPO model.
It is interesting to note that for the specific purpose of safeguarding clients’ damages, they propose that while success fees in most types of case should be allowed limited to 20% of damages, in RTA claims, no doubt due to the generally lower risks arising, no success fees should be allowed. A similar view to that of District Judge Lumb is clearly being reached.
We will continue to monitor these developments.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.