Fixed Costs Update
The Department of Health (DoH) fixed costs consultation closed on 2 May 2017. This is separate to LJ Jackson’s fixed costs review and it will therefore be interesting to see how they fit together or whether the DoH review is actually pursued once LJ Jackson publishes his report.
LJ Jackson remains on course to deliver his report by 31 July 2017; no delays are expected.
In the interim, HHJ Waksman QC of the London Mercantile Court has announced that there will be a voluntary 2 year “capped costs” pilot scheme for the Mercantile Court in London, and for the Mercantile, Chancery Division, and Technology and Construction Courts in Manchester and Leeds for claims up to £250,000. It is anticipated that this will run similar to the IP Enterprise Court’s scheme.
It is also anticipated that LJ Jackson may introduce an intermediate track, which would be subject to fixed costs.
Prior to the commencement of his review LJ Jackson was very clear that he was not receptive to a Balkanization approach (different levels of fixed costs for different areas of law/work), however, he seems to be accepting that a ‘1 size fits all approach’ will not work - so do expect Balkanization!
The announcement of the General Election has caused some legal commentators to discuss whether LJ Jackson’s review will be delayed. The GE could well have an impact, particularly if there is a change of government suggestions are this would be October 2017.
We will continue to keep you updated.
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How much reliance can be placed on the budget? - watch this space!
The inter-action between costs budgeting and costs assessment has been considered again in the appeal of the case of Merrix v Heart of England NHS Foundation Trust  EWHC 346 (QB). On appeal, Mrs Justice Carr confirmed that the good reason test to depart from a budget relates to both downward and upward departures.
In the first instance decision DJ Lumb concluded that the budget and the bill of costs were different tools for courts to manage costs, which were applied at different times. Consequently, despite the costs claimed being less than the budget, DJ Lumb (Regional Costs Judge) ordered that detailed assessment was appropriate. However, this decision was appealed to the High Court and the appeal was allowed, with Mrs Justice Carr finding:
“Where a costs management order has been made, when assessing costs on the standard basis, the costs judge will not depart from the receiving party’s last approved or agreed budget unless satisfied that there is good reason to do so. This applies as much where the receiving party claims a sum equal to or less than the sums budgeted as where the receiving party seeks to recover more than the sums budgetet”.
This decision now falls in line with LJ Jackson’s report and the cases of Slick Seating and Safetynet. LJ Jackson’s view of how cost budgeting would work was explained at Chapter 40 1.4 (iv) of his report: “At the end of the litigation, the recoverable costs of the winning party are assessed in accordance with the approved budget”.
So, the question to be answered is - will your costs be allowed in full if they are less than the budget? Yes, unless parties can show a good reason to depart from the budget – Merrix now confirms that this applies to both downward and upward revisions to the budget.
This is not the end – the point of principle is being appealed in Harrison v Coventry NHS Trust, Unreported 16 August 2016 (one of the cases mentioned in the Merrix judgment) to be heard in the Court of Appeal in May. The Merrix decision is not being appealed because they didn’t want to lose the listing date. Watch this space!
Any questions? Please contact Sue Fox at firstname.lastname@example.org or call on 0113 336 3389.
Lord Chancellor Elizabeth Truss drastically reduces the personal injury discount rate and implements a 6 week consultation to explore whether the current system is fair to all
On 27 February 2017, Lord Chancellor Elizabeth Truss announced via the London Stock Exchange that the discount rate applied to personal injury claims would decrease from 2.5% to minus 0.75%, effective from 20 March 2017.
The previous rate, last set in 2001, assumed that claimants were risk averse investors likely to receive a real and net annual rate of return of 2.5%. However, given inflation and the low interest rates of recent years, the rate has been dramatically reduced to ensure claimants are adequately compensated.
As a result, claimants will be rewarded a considerable amount more for future losses and expenses. This was evident in the first decision utilising the new rate, LMS v East Lancashire Hospital NHS Trust, where a 10 year old girl suffering from cerebral palsy saw her damages increase from £3.8million to £9.3million.
Concern has been shown by both the insurance industry and public health sector following the announcement. However, Truss confirmed that the NHSLA would receive appropriate funding to cover the rate change, and, on 30 March 2017, she launched a 6 week consultation paper to consider whether the current discount framework is fair to all parties, and whether the use of periodic payments may be a better way to compensate claimants.
What followed was a flurry of activity on matters where Part 36 offers have previously been made, with either claimants withdrawing their offers or defendants accepting them. Whether the consultation paper kickstarts the introduction of new legislation to alter the way in which the rate is set remains to be seen, however, for now the rate change is very much welcomed by claimants in a climate that seems, recently, to have tipped in favour of defendants.
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