Lord Justice Jackson's report on Fixed Recoverable Costs recommends a pilot for fixed recoverable costs for claims up to £250,000 and a new “intermediate track”.
Lord Justice Jackson published his Supplemental Report on Fixed Recoverable Costs on 31 July 2017, expanding on his recommendations from his January 2010 Report.
Two of his key recommendations are:
- a pilot scheme where recoverable costs will be capped at £80,000 for claims for up to £250,000 in the Business and Property Courts (the new name for the specialist courts and lists of the High Court, including the Commercial Court, Technology and Construction Court and the Chancery Division), and
- a new “intermediate track” for claims of modest complexity up to £100,000, where fixed recoverable costs will also be capped.
The Capped Costs pilot
A voluntary pilot scheme has been recommended, which will be open for two years in a number of courts (including the London Mercantile Court). If the recommendation is approved, the pilot should commence later this year.
The scheme will be open to all cases in the pilot courts, except those: (i) with a value over £250,000; (ii) requiring a trial of more than two days; (iii) involving allegations of fraud; (iv) requiring extensive disclosure or reliance on extensive witness or expert evidence; or (v) involving numerous issues and parties. Recoverable costs will be capped at £80,000.
Lord Justice Jackson appreciates that not all cases will be appropriate for the Capped Costs List, nor does he expect it simply to be down to the parties to cut costs; he has included proposals to streamline court procedure to assist the parties. The general rule will be that no disclosure will be ordered, witness evidence will be limited and expert evidence will not be permitted, unless the court orders otherwise. The time from the Case Management Conference (CMC) to trial should be limited to eight months, and statements of case will stand as evidence-in-chief with core documents attached.
If the pilot is successful, Jackson recommends that the regime be made available at the judge’s discretion for any suitable case in the Business and Property Courts or the Business and Property Lists of the County Court.
The threshold could be increased from cases with a value of £250,000 to £500,000 in the future, which would bring a significant number of further cases within the remit of the Capped Costs List, should the court deem them suitable.
The new “intermediate track”
While Lord Justice Jackson recommends fixed recoverable costs for all fast track cases, he hopes to extend this beyond the fast track. He has proposed a new “intermediate track” for claims of modest complexity valued up to £100,000 that can be tried in three days or less. The proposed cap on recoverable costs will be £68,450, excluding disbursements.
Again, the court process will be streamlined and the court will be heavily involved to assist with this at the CMC.
If this proposal is accepted, the progress of the intermediate track will be reviewed in four years and its scope could be further expanded to include monetary claims above £100,000 and non-monetary claims.
A departure from reasonable and proportionate costs
Lord Justice Jackson proposes tight limits on fixed recoverable costs. This is notable, given that in light of recent cases costs have been held to be proportionate where they are higher than the amount in dispute. This is unlikely to be a possibility where fixed recoverable costs apply.
In the case of BNM v Mirror Group Newspapers Ltd, the senior costs judge reduced the claimant’s recoverable costs from the £242,000 claimed to a level that was considered “reasonable” (£167,000), and then reduced it further to a level that was “proportionate” (£84,000). That amount was considered proportionate even though it was more than four times the amount at which the defendant agreed to settle the claim.
Similarly, in May & May v Wavell Group PLC & Bizarri, recoverable costs were reduced from £208,000 to £35,000, again higher than the £25,000 damages agreed, which was considered to represent the true value of the claim.
The implication is that where in the past the court has considered it reasonable and proportionate in certain circumstances to incur costs higher than the value of the claim, this is unlikely to be the case under the fixed recoverable costs regime.
To settle or to fight?
One benefit of the proposed regime is that parties will be certain at the outset of how much they will be able to recover if successful. This can be compared to the amount at stake, the likely costs of defending the claim, and the reputational and commercial concerns to determine whether it’s worth fighting or settling, and whether it’s worth instructing external counsel or handling in-house.
The key to the scheme’s success is the extent to which case management by the courts can control the cost of litigation. Reducing the recoverable costs can only be just where the actual costs are similarly reduced. The success of the Shorter Trials pilot scheme suggests there is an appetite for streamlined court procedures for suitable cases, but like any voluntary pilot scheme it can only succeed if a sufficient number of parties decide to use it. A recent voluntary pilot for a new form bill of costs failed to attract court users.
Claimants considering fighting a case that is subject to fixed recoverable costs should also consider making a Part 36 offer, as under both the Capped Costs Pilot and the “intermediate track”, Claimants whose offers are rejected and not beaten will be able to recover costs higher than the cap.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.