Extension of Fixed Costs Explained

What is clear from these bands is that they are going to lead to disputes. The key question is going to be whether Defendants more readily and quickly concede aspects of the case in order to limit their adverse costs. The Judiciary’s hope, no doubt, will be that it encourages parties to settle cases earlier but it could have an adverse impact. If the adverse costs of going to Trial are fixed and known then parties may be more willing to go to Trial, the uncertainties of costs can sometimes bring pragmatism. It remains to be seen what the short, medium and long-term consequences will be. 

 

The level of fixed costs for each complexity band are set out under Table 12 of the new Practice Direction for Part 45 for Fast Track and Table 14 for the Intermediate Track. They are far too numerous to set out here but it’s safe to say that the sums, for most cases, are less than what would have been recoverable had standard basis time costs applied. 

The Judiciary were keen to stress that the fixed costs themselves have been uprated to reflect inflation. The MoJ have proposed to review these again in three years’ time and it is proposed it will include uprating for inflation in line with the SPPI. 

 

The actual fixed recoverable costs are set out in the new Part 45 Practice Direction. The moving of the tables to the Practice Direction was a deliberate one as it will make them easier to update. The various tables can be found here. 

 

For Intermediate Track cases the lowest rung of fixed recoverable costs (i.e. complexity band 1, settling pre-issue) would provide for £1,600.00 plus 3% of the damages plus VAT and disbursements. The permutations are numerous but for a claim on complexity band 4 which settles following a 1-Day at Trial with no approval, ADR or specialist advice from the legal representative, then the fixed costs would be around £36,200.00 plus 22% of the damages plus VAT and recoverable disbursements. The Intermediate Track has lots of additional fixed costs for matters like ADR, Approval (see below) and advice in writing or conference at various stages including after issue and following the service of the Defence. This will afford greater flexibility than for Fast Track claims. 

 

One other notable point of interest is that there is no distinction for pre-and-post issue fixed costs. Stage 1 of the Intermediate Track covers all work undertaken up to and including the service of the Defence. 

Disbursements will remain a hard-fought battleground. Those familiar with fixed costs already will be well aware of the satellite litigation that arises. Disbursements will have their own section in the new CPR 45 rules, highlighting just how expanded and complex this area is. With expanded fixed costs there are an increasing number of permutations for consideration. It would be impossible go through all of these here. Some notable observations are that interpreter and translator fees are explicitly recoverable. For the Intermediate Track the Court may allow any disbursement which has been reasonably inccurred, other than a disbursement covering work for which costs are already allowed. This is significant as it is much broader and less onerous than disbursement claims on the Fast Track. 

 

There are some notable omissions too, no clarity is given on costs which may be covered by the fixed costs themselves, such as agency fees and for certain Counsel fees (i.e. should you get on an Intermediate Track claim Counsel’s fee for say settling the Particulars of Claim and the fixed costs for that stage?). The answer to this is a likely no, Table 14 has sums for a specialist legal representative to provide post-issue advice in writing or in conference or drafting a statement of case as well as advice post-Defence. It’s likely the fixed recoverable costs will be a catch-all for such work irrespective of who does it. There is also no clarity on the fee remission point and the recoverability of Court Fees where no remission is investigated. On that particular point ensuring there is a file note setting out that relevant considerations have been given remains the best practice. Legal Representative is defined under CPR r2.3 as a barrister, solicitor, solicitor's employee, manager of a body recognised under Section 9 of the Administration of Justice Act 1985 or a person authorised for the purposes of the Legal Services Act 2007. This is an important detail as in principle, the specialist legal representative providing post-issue advice in writing or conference or drafting a statement of case OR advising in writing or conference following the filing of a Defence could be any of the described individuals. It appears to allow a claim, in principle, for a solicitor to have the fixed recoverable costs at the relevant staging plus the ancillary fixed sums. It's likely arguments will still persist, as they do now, about precisely what the FRC covers and whether, for example, elements of work undertaken by Counsel or a Medical Agency are already covered by the FRC amount.  

 

The wording of S2 states it is an additional fixed amount for a "specialist legal representative providing post-issue advice in writing or in conference or drafting a statement of case". S1 covers all work undertaken from Pre-Issue up to and including the date of the service of the Defence. The wording of S2 is unclear but we take it to mean either post-issue advice or drafting a statement of case i.e. the drafting of a statement of case could, in principle, be pre-issue, despite the fact that S1 covers all work up to the Defence. It could be an area open for interpretation but we cannot foresee how the intention would be for an additional sum to draft a statement of case only after issue.  

 

Turning to ADR in Intermediate Track claims then there are fixed recoverable costs for this of £1,200.00 plus VAT. This is the same irrespective of the Complexity Band. There is also an additional sum allowable for say Counsel or another specialist legal representative (see above) which ranges from £1,400.00 plus VAT for Complexity Band 1 up to £2,300.00 plus VAT for Complexity Band 4. So the Judiciary consider increased remuneration for specialist legal representatives as complexity increases but for solicitors, irrespective of complexity you are stuck with £1,200.00 plus VAT. These fees are fixed so it will not matter what the length of ADR is, there will be some winners but plenty more losers.  

 

One other detail around Fast Track, is that additional disbursements will be permissible for a Fast Track claim which is assigned to Complexity Band 4. CPR r45.46 allows for a post-issue advice in writing or conference, fixed at £1,000.00 plus VAT and/or drafting a statement of case fixed at £500.00 plus VAT. Notably, the Court may only order payment for one advice in writing or in conference unless further advice is justified. No examples are given of what justification might look like but parties will have the opportunity to test this at Court as an interim application which itself will subject to fixed costs! 

The answer is yes, parties can still make applications for costs greater than the fixed recoverable costs where there are exceptional circumstances. We have previously reported on some decisions where such applications were successful (example 1 / example 2) 

It is acknowledged that most FRC claims will be for damages. It has been agreed for that non-monetary claims will be fixed assign values for individual bands and that in mixed claims (those with monetary and non-monetary relief) the fixed costs will be calculated by the two parts taken together. 

 

That said the new CPR r26.9(8) provides that where the relief sought includes a claim for non-monetary relief then it will not be allocated to the Intermediate Track unless the court considers it to be in the best interests of justice to do so. 

The values assigned are as follows: 

 

Band 1 – N/A (as non-monetary relief will not apply in these cases) 

Band 2 – £10,000.00 

Band 3 - £15,000.00 

Band 4 - £20,000.00 

 

For the Intermediate Track it will be: 

 

Band 1- £25,000.00 

Band 2 - £50,000.00 

Band 3 - £75,000.00 

Band 4 - £100,000.00. 

 

The Judiciary have accepted that the intermediate track should generally only be for monetary claims but can be applied in exceptional circumstances in order to limit adverse costs or to save the parties from “ruinous litigation.” 

Generally you will be entitled to separate fixed costs for each Claimant where there are multiple Claimants all represented by the same lawyer. They are, however, some exceptions: 

 

- Where the claim is for a remedy to which the Claimants are jointly entitled; and they are joined to the proceedings to comply with CPR r19.3; or 

- Where the court orders that additional claimants are each entitled only to 25% of the principal Claimant’s FRC plus recoverable disbursements. The Court may only make such an order if it considers it is in the interest of justice to do so and must have regard to whether the claim of each claimant arises from the same or substantially the same facts and gives rise to the same or substantially the same issues. 

 

This issue should be considered and determined by the Court at allocation or assignment (see CPR r26.7(9)). 

Disappointingly, the Government does not propose to make any changes to the arrangements for disbursements for vulnerability in FRC cases. This will leave open concerns and questions surrounding access to justice for those who most acutely need such protections. There are some rule changes at CPR r45.10. This will allow the Court to consider a claim for an amount of costs above the fixed recoverable costs though it has some stipulations in place. 

 

Firstly, a party or witness has to be vulnerable, secondly that vulnerability has to have generated additional work and thirdly that the additional work alone must exceed a sum greater than 20% of the fixed recoverable costs. To be blunt here, this is a lot of work for a Practitioner to undertake and quantify where that quantification could be challenged and an additional sum may not even be allowed (and in fact the Court could allow a lower sum!). It is one of the most disappointing and concerning aspects of the reforms. 

 

On the Intermediate Track there are additional fixed costs allowed for the approval of settlement for children, this varies depending on the assignment of complexity band but ranges from £1,200.00 up to £2,000.00 plus VAT. Practitioners will have to be aware of this as it may not be cost effective for both Counsel and the legal representative to conduct an approval hearing. 

 

If vulnerability drives additional work and the system to be remunerated for this work is cumbersome then some Practitioners may elect to avoid representation of vulnerable parties. At best it will likely see the erosion in the quality of legal services for vulnerable parties. Preserving good quality access to justice for vulnerable parties should be paramount and the Judiciary must keep a close eye on the impacts of changes for vulnerabilities and act quickly if negative impacts transpire. 

 

A reminder as previously mentioned the new Part 45 rules also make it clear that the fixed costs rules it sets out for Fast Track, Intermediate Track and Noise Induced Hearing Loss claims will not apply where a party is a Protected Party. 

Two sets of FRC are recoverable where a party is successful in defending a claim and in bringing a counterclaim. There are exceptions to this. Where the only remedy sought by the counterclaim is a defence then there will be no costs of the counterclaim or where in a claim to which the RTA protocol applies there is a counterclaim which does include a claim for personal injuries. With the latter, any order for costs will be equivalent to one half of the applicable Type A and Type B costs in Table 11. 

The rules neatly deal with the issue of pre-issue and interim applications with the Court confirming that any party who obtains a costs order will be entitled to the costs set out in Table 1, together with the appropriate court fee. Application costs (exc. court fees) will vary from £250.00 plus VAT up to £750.00 plus VAT. 

Where FRC applies and there is a Preliminary Issue Trial , the costs of any preliminary issue trial are recoverable separately. The rules governing Preliminary Issue trials can be found at CPR 45.48 for the Fast Track and CPR 45.51 for the Intermediate Track. Parties will be entitled to additional fixed recoverable costs if a claim continues after a Preliminary Issue Trial. 

The writer has long loathed the situation in fixed costs matters where a Claimant could beat its Part 36 offer and it have next to no impact on costs. There will now be a more punitive scheme in place. This is set out in Sections II and III of the updated Part 36. 

 

For certain Fixed Costs cases indemnity costs awards are out and in truth given indemnity costs had next to no bite anyway it is sensible to do away with it. Instead additional costs equivalent to 35% of the difference between the fixed costs for the stage applicable when the relevant period expires and the stage applicable at the date of judgment. Get your calculators ready! 

 

The 35% uplift will apply to claims where Section VI (Fixed Costs in the Fast Track), Section VII (Fixed Costs in the Intermediate Track) and Section VIII (Claims for Noise Induced Hearing Loss) apply. There will be some tedious considerations as to precisely what applies in each claim but some punitive impact is no bad thing. Will it be enough of a deterrent and whether it is fair remuneration are questions left for another day. 

 

If a Part 36 offer is beaten at Trial by a Claimant, then the Defendant will have to pay enhanced interest on the fixed costs payable at a rate not exceeding 10% above base rate. 

A Paying Party can apply to the Court where the Receiving Party has acted unreasonably. The Court has the power to reduce the fixed recoverable costs payable to an amount equivalent to 50%. On the flip side a Receiving Party can apply to have the fixed recoverable costs uplifted by 50%. 

 

The rules define unreasonable behaviour as “conduct for which there is no reasonable explanation.” 

It is pleasing to see that for claims on the NIHL cases and where Restoration Proceedings are required to restore a Defendant company to the Companies Register and the claim is ultimately successful, the fixed costs may include the sum of £1,280.00 plus VAT and applicable disbursements. 

The extension to FRC is relevant to Litigants too and what they may recover. Where a party is a Litigant in Person throughout a claim, the costs allowed cannot exceed two-thirds of the fixed recoverable costs which would be allowed under the relevant section. Disbursements will be recoverable pursuant to the relevant sub-section of the rules and will not be limited. The full detail is set out in CPR r45.4. 

The best advice at this stage is to be ready. Make sure you know the key dates for changes and act accordingly to reasonably protect your position. Make sure you check your client care and retainer documents so that they address the changes to include the recovery of costs from your client above the fixed recoverable costs. 

 

Be wary of offers from opposing parties and scrutinise any costs terms. Even where the new rules do not technically apply, you could inadvertently contract into them. If in doubt, check the offer/proposed order with a costs specialist before it is accepted or agreed. 

 

Make sure where the new rules do apply, you are recovering everything you are entitled to. The expansion of the rules makes it more important than ever as margins will be reduced. Moreover, the permutations are now more numerous and complex so it would be easy to overlook something. 

 

Make sure you know your case from the outset, the allocation and assignment hearings are going to be pivotal in not only determining whether a case is fixed costs but also what level of fixed costs are recoverable. Do not sell your cases short! 

 

Be mindful of what disbursements are and are not recoverable and the challenges you may face. You can plan to mitigate this because any short-fall will otherwise potentially come out of your fixed costs. 

 

Finally, remember this is new for everyone with newness comes inevitable teething issues and parties seeking to exploit opaque areas. There will be uncertainty but by familiarising yourself and asking questions where you’re unsure you will put yourself in the strongest possible position. 

 

The short, medium and long-term impacts are all unknowns and there will be strong opinions on all sides. Right now we have to face the reforms head-on and make the best of them as we can. Those making these decisions though need to be aware of the impacts on legal representation and the quality of it and most importantly upon access to justice. If negative consequences arise then there will need to accountability and a willingness to change and adapt the rules as time goes on. 

If you want to have a chat about the Jackson Reforms or you have a specific question, give us a call on 01482 534567 or email info@carterburnett.co.uk - we'll be happy to have a friendly discussion.