Fixed Recoverable Costs and QOCs Consultation
Posted on 10th May 2022 at 16:58
By Sean Linley, Costs Draftsman
The judiciary have launched a formal consultation into in the implementation of Fixed Recoverable Costs & vulnerability and the extension of Qualified Oneway Costs Shifting (QOCs) in civil cases which allow Defendants to enforce against costs as well damages and interest (currently it's limited to damages and interest with costs ringfenced).
Fixed Recoverable Costs and Vulnerability
It has already been confirmed that Fixed Recoverable Costs will be extended to most civil cases with a value of up to £100,000.00. The judiciary had previously hoped for an October 2022 implementation but this now slipped to April 2023 at the earliest.
The Fixed Recoverable Costs consultation will focus only on provisions for "vulnerable parties and witnesses" and how this should be addressed. The consultation document provides that the "MoJ is keen to ensure that those who are vulnerable (either as parties or witnesses) are not disadvantaged in bringing or defending claims which are within the scope of FRC."
The MoJ are keen to examine "whether or not the vulnerability gives rise to sufficient extra work to justify, exceptionally, an additional amount of costs" and if so how the same can be compensated within the expanded fixed costs scheme.
At present it is contemplated that a party could make an application to seek additional costs (akin to the test under CPR r45.29J for exceptional circumstances). They envisage that the scheme would be retrospective so that a Judge could be "satisified that sufficient extra work had been incurred, not that it may be". It's further stated that to a minimum threshold of 20% additional costs (over the applicable fixed costs) to trigger additional recovery, though crucially there would be no capped maximum. The additional costs would be subject to assessment by a judge to determine reasonable and proportionate costs.
This proposal is at odds and seems more complicated than the proposals in the Clinical Negligence fixed costs scheme. In that Clinical Negligence consultation it is proposed that there will be an extra ‘bolt-on’ for vulnerable parties. That consultation is inviting views as to how the 'bolt-on' should operate and its value. A bolt-on would avoid a costly application and if defined appropriately could be dealt with easily.
The MoJ also want responses as to whether vulnerability provisions for fixed costs should be expanded to the current fixed recoverable costs schemes. In short the current view is that they should not because a) vulnerability is captured in the swings and roundabouts of the fixed costs in place and b) changing the system would encourage vulnerability to be claimed more often.
Fundamentally both arguments are flawed and quite troubling. An additional sum for vulnerability is not about exploitation by lawyers but about preserving and guaranteeing access to justice and the right to a fair trial. If acting for vulnerable clients is not economically viable then what happens to legal representation? Given the fixed recoverable costs have not even altered for inflation since inception and that Aldred v Cham found that vulnerability was a characteristic and not a feature (so Counsel's quantum advice for an approval hearing could not be recovered, even though it was required), it's hard to subscribe to an argument that the current system is designed with vulnerability in mind. There is a suggestion that 'exceptional circumstances' could be deployed but this is costly, not straightforward and its application inconsistent.
On the latter point that it would encourage vulnerability to be claimed more often, given the MoJ envisage parties applying like under CPR 45.29J then parties are not going to expend funds on fruitless arguments, it would not be commercial to do so. Where a party applies it will be under a genuine belief of vulnerability. The bottom line is that not expanding vulnerability into exsisting schemes would likely be detrimental to vulnerable parties and access to justice.
Interestingly one of the questions asked by the MoJ is whether changes need to be made to the arrangements for disbursements for vulnerability in FRC cases. In May last year the CPRC had indicated they would address the issues which arose in Aldred v Cham in this regard, though at the time of writing and some 12 months on, nothing has changed.
The QOCs Consultation paper seeks to re-examine the Supreme Court decision in Ho v Adelekun  UKSC 43 which held that a Defendant could not set-off costs against costs under the QOCs scheme. The current position is that a Defendant must meet costs orders in full and can only enforce costs orders up to the extent of the damages awarded.
The MoJ are now consulting on revising this position and updating the Civil Procedure Rules as the government considers that "the Claimant's entitlement to costs is considered to be part of the overall fund which set-off can be applied" and "extend costs orders to deemed orders, so a defendant can enforce a deemed order for costs (especially following acceptance of a Part 36 offer) without the permission of the court."
The MoJ believe that the implications of Ho is an unintended windfall to Claimants because of a technical distinction between costs and damages.
The proposals will no doubt have fierce resistance from Claimants given it will put greater pressure upon Claimant practitioners when conducting a case. On the other side of the fence Defendants will feel that it will increase the strength of Part 36 and restore balance in the application of QOCs.
Whatever side you sit on the change would be significant as it would mean a Claimant who fails to beat a Part 36 offer at Trial could potentially recover no costs if the Defendant's costs exceeded the aggregate of damages, costs and any entitlement to interest. Presently, the Claimant would still recover costs as these are ringfenced.
The point around deemed orders is also of interest and will have direct implications where, for instance, a Part 36 offer is accepted out of time. It would allow a Defendant to enforce set-off without the need to seek permission from the Court.
Both Consultations invite comments or responses to be submitted in Word or PDF form by 20 June 2022 and to FRCconsultation@justice.gov.uk with 'CPRC costs consultation' in the subject line.
Many practitioners will hold views upon these issues and any responses are to be encouraged as the more responses available the more informed decision can be taken by the judiciary (we hope!).
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