Lord Justice Jackson today published his long-awaited report into the recoverability of costs in civil litigation.
It promises to mark the latest in a line of reforms to the civil justice system as it is likely to lead to potentially significant changes being introduced within the next 12 months.
Traditionally, the civil justice system has operated on a basis of a successful party being reimbursed the majority of the legal costs it has incurred in conducting its case against an opponent. This has been the exercise carried out at the end of the case. Consequently, the potential recoverability of an often indefinable amount of costs has loomed large in the consideration of parties to litigation in bringing and defending legal claims, and has also been a significant reason why cases settle in negotiation or mediation before a Court imposed decision.
Lord Justice Jackson believes that accessibility to justice will be improved by applying more control to the recoverability of litigation costs, so that parties know with more certainty what the cost of litigation is likely to be in advance, and that costs will be more proportionate to the sum in dispute.
Currently, civil disputes are managed by the Courts on different ‘tracks’, dependent on the value of the dispute and its complexity. It is proposed that in future:
- The Small Claims Track will continue to deal with cases of up to £10,000 in value, providing a straight forward process with limited disclosure of documents and a simplified procedure leading to a relatively quick final hearing. This track is often used by unrepresented parties. The successful party can only recover a very limited amount of fixed costs from their opponent.
- The Fast Track will continue to deal with cases of between £10,000 to £25,000 in value. However, this track would introduce a fixed recoverable costs system for the first time, permitting successful parties to recover only specified fixed amounts from their opponent, no matter what they have spent themselves on legal advice and representation. That means that the successful party will be likely to bear more of its costs itself than would formerly have been the case.
- A new Intermediate Track will be created for cases of £25,000 to £100,000 in value, and that take no longer than 3 days at trial. Here, recoverable costs will be on a fixed staged basis (meaning that the successful party would only be able to recover costs to a fixed ceiling up to the stage of the case that has been reached). There will be four tiers of fixed costs, dependent on the type of case and complexity.
- Beyond that, cases will be dealt with on the Multi-Track, with the current recoverability of costs from an opponent continuing, but still on the basis of a budgeted approach to litigation costs that have to be agreed between the parties or approved by a judge at an early stage of the proceedings.
The report also proposes a voluntary pilot scheme in Manchester for business and property claims that envisages costs bring capped at specified levels for stages of the case, with an overall maximum amount that can be awarded. Such an approach is aimed to deal with a frequent concern that while businesses can take a view on their own costs when entering into litigation, they do not like the uncertainty of the amount of the opponent’s costs that they may ultimately be ordered to pay. Depending on the results of this pilot, further changes may follow.
The impact of these changes on the culture of litigation will be interesting. Arguably, the attraction to some of litigating when they previously would not (with better predictability of an opponent’s costs) will be offset by the number of parties being put off by a successful party being able to recover less costs from an opponent than was the case, and thereby bearing more cost itself. Will these changes therefore dissuade some potential claimants with strong cases from pursuing their claims if they are likely to be more ‘out of pocket’ than previously?
Further, will the changes mean that fewer cases will settle before trial as the cost risk in proceeding will be less than previously the case (which is often a reason to resolve a dispute)? At present only around 5% of issued cases proceed to trial, and a vast number of disputes are resolved before court proceedings are even brought. If so, more strain will be placed on the court system, as would the prospect of parties choosing to run cases themselves without legal input.
History shows that fundamental changes often have the impact of unforeseen consequences.
More than ever though, parties will need to work closely with their lawyers to ensure that litigation is conducted cost-effectively and appropriately and is the most effective method of dispute resolution for their dispute.
Nick Parker, Partner and Head of Dispute Resolution at Berry Smith LLP, Mediator, and a member of Law Society’s Civil Justice Committee.
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