Fixed Costs – Where are we?
On 31 July 2017, LJ Jackson delivered his report in relation to the extension of fixed recoverable costs and not much has happened since! LJ Jackson retired on 7 March 2018 and since that time there has been no announcement as to who will take over the baton from him.
The issue of fixed costs remains on the Government‘s list of things to do, but in terms of priority, it seems to be very low. Recently, a Ministry of Justice spokesman (Lord Keen) spoke at the Association of Personal Injury Lawyers annual conference and said that the Government supports the principle of extending fixed recoverable costs but gave no indication regarding when the planned consultation would take place. Lord Keen said: “The benefits of fixed recoverable costs (FRC) in civil cases are that they provide transparency and certainty for all parties, and incentivise the amount of work done to be proportionate to the value of the claim, rather than encouraging higher costs irrespective of the value of the claim.
“Legal costs remain disproportionate in many areas of civil litigation and it is now time to consider the extension of FRC. The Government supports the principle of extending FRC and… in light of Sir Rupert’s report, the Government is now considering the way forward, including how best to deal with differences between types of civil litigation.
“The Government will consult before implementing any changes so stakeholders will have a further opportunity to express their views.”
My personal opinion is that an extension of fixed recoverable costs will not happen until October 2019, at the earliest.
Any questions? Please contact me at firstname.lastname@example.org or call me on 0113 336 3334.
What role does the hourly rate play in the budget?
This continues to spark debate. The rules states that the hourly rate cannot be set (CPR 3 PD 3E, para 7.10), but further explain that the constituent elements of the budget should be considered when assessing the amount to approved (CPR 3 PD 3E, para 7.3). So, with the hourly rate falling under the umbrella of a ‘constituent element’ the hourly rate can be taken into account, but importantly, not fixed. There will usually be a number of factors that contribute to a reduction of the budget and on occasions the level of the hourly rate may be one of those contributing factors.
Parties are often working blind in respect of the logic that the case management Judge applied. If the court did take the hourly rate into account when reducing the amount of estimated costs sought, and no evidence exists to support the Judge’s thought process, what happens when the costs are finally assessed?
At the moment there is conflicting case law in this regard.
In RNB v London Borough of Newham  EWHC B15 (Costs) Deputy Master Campbell said “If (as it is the case) the hourly rate is a mandatory component in Precedent H which is not and cannot be subjected to the rigours of detailed assessment at the CCMC, it makes no sense if it is automatically left untouched when the rates for the incurred work are scrutinised at the ‘conventional’ assessment."
"Such an approach would offend against the guidance given in Harrison at paragraph 44. Indeed, as [counsel for the defendant] points out, it is only on that occasion that a paying party has an opportunity to challenge the rate.”
This was therefore a “good reason” to depart from the costs allowed in the claimant’s last approved budget.”
However in Nash v Ministry of Defence  EWHC B4 (Costs) - Master Nagalingam found that “a reduction in hourly rates of the incurred costs is not a good reason to depart from the budget in respect of the budgeted (future) costs”.
And finally, in Jallow v Ministry of Defence  EWHC B7 (Costs) Master Rowley found “that there is no good reason to depart from the budget by virtue of the reduction to the hourly rates in this case”.
How can the legal profession employ the rules as currently drafted? Is it possible to gain clarity and a clearer view of the blind logic/working approach adopted by the Judges? If, during the course of the CMC, the Judge does comment on the hourly rate, ask him/her to record a note on the case management order that the hourly rate was considered when approving the budget and that it played a role in the reduction to the rates.
Any questions? Please contact Sue at email@example.com or call me on 0113 336 3389.
Getting your orders right – Fixed Costs
The introduction of fixed costs was expected to create certainty in the amount which parties would recover at the conclusion of a claim. However, the rules as drafted leave numerous lacunas and gaps which parties can exploit, which in turn has lead to satellite litigation.
This is not what the drafters of the rules intended and is often not in the interest of the parties, as it leads to additional further cost which, in many cases and given the already low amount of costs recoverable, can be disproportionate. You can read my full article on this topic here.
As a quick-reference guide, these tips will help you to avoid the ‘fixed costs trap’:
1. Claims which leave the portal
If a claim leaves the portal on the basis of value, fixed costs may still apply. To avoid this:
a. A settlement agreement should specifically state that “it is agreed that costs will be assessed on the standard basis by detailed assessment, and that the claimant’s costs are not limited to fixed costs”
b. If your opponent will not agree settlement on these terms, refuse to settle until after allocation to the multi-track (see Qadar -v- Esure that fixed costs do not apply to claims allocated to the multi-track).
There is of course a risk with (b) that the claim either is not allocated to the multi-track or that even if it is, the court will find that conduct in refusing to settle before allocation is ‘unreasonable’. However, if the claim is settled pre-allocation and without a provision such as that at (a), fixed costs will apply despite the fact that the claim was valued at more than the portal limit. Practitioners must therefore take a calculated risk when taking such a step, however, the rules in their present form do not provide any other solution.
2. Settlement by CPR 36.20
Where fixed costs do apply and the claim is settled by Part 36, there is no right to detailed assessment. If a dispute arises over fixed costs then one of the parties must apply. Accordingly when settling by CPR 36 in a case to which fixed costs apply, parties should try to reach a simultaneous agreement in respect of the costs payable.
3. Non-Part 36 settlement
Parties should seek to agree the amount of costs payable as part of any settlement. There is little reason not to do so and if the amount is not agreed it leaves the amount of fixed costs and disbursements open to challenge. This can of course prove costly and it is currently unclear whether further costs incurred arguing the point are recoverable.
Any questions? Please contact me at firstname.lastname@example.org or call me on 0113 222 3248
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