Life in the fast lane
Date: 11 June 2009
Authors: Andrew Parker
Issue: Vol 159, Issue 7373
Categories: Opinion, Costs, Procedure & practice
There are many issues tackled in Lord Justice Jackson’s Preliminary Report on Civil Costs, but one target area in particular is crying out for reform: fixed costs in fast track cases. As he records in Chapter 22, this was one of Lord Woolf’s original proposals in his Final Report in 2006, appropriately entitled Access to Justice.
Sir Rupert goes on to say that, although limited elements of fast track costs have been fixed (see CPR Pts 45 and 46), he and his panel of assessors unanimously agree “that we should take forward this work and try to achieve a fixed costs system in fast track cases”.
He then sets out the work of his sub-committee in creating an up to date matrix for all fast track cases.
It is worth noting that the debate has moved on from whether we should have fixed costs in all stages of fast track cases, if indeed that point was ever seriously in debate. Sir Rupert considers a number of objections, for instance the legitimate concern that figures once fixed will not be reviewed, but concludes that these can be addressed by the detail of any scheme, eg by building in regular defined review.
A possible matrix
Chapter 22 sets out two alternative approaches to a fast track matrix. Each adopts the type of formula linked to claim value that has proved largely successful in pre-issue road traffic accident cases under Pt 45.
The figures have come from a study of data by Professor Paul Fenn, an assessor to the review, based almost exclusively on personal injury cases given the available data. It is important to understand that the figures are illustrative only and are based on existing cases: the need for fixed costs itself suggests that these figures may be on the high side.
It would be wrong to focus on the numbers currently in each matrix rather than the concept itself. The difference between the two is that one attempts to populate different stages of the litigation (similar to Lord Woolf’s original concept), whereas the other simply contains one pre-issue stage and one post-issue stage before trial.
There are obvious difficulties with the latter: as currently drafted it provides too significant a step change at issue of proceedings. However, there are limited data on cases settled at the proposed litigation stages, which reduces statistical confidence in figures for them.
Around the world in 18 days
An important consideration is whether our system is out of step with other countries: part of Sir Rupert’s terms of reference was to examine the treatment of costs in other jurisdictions around the world. Part 11 of the preliminary report does just that, reflecting the findings from Sir Rupert’s whirlwind tour of the common law world and from a few other countries, in particular Germany.
The German fixed costs model is instructive. As recorded in Ch 55: “These rules do not seek to provide a successful party with a complete indemnity for his or her legal fees.
Instead, they provide for the payment of legal fees and court costs in scales which increase in a degressive, non-linear fashion and with the use of multipliers that vary according to the value of the dispute, the stage at which the case is resolved, and other aspects of the case.” If that appears complex, the exercise is essentially mechanistic and IT solutions are readily available.
Another formula approach comes from New Zealand, where the court sets a “daily rate” depending on the complexity of the case (1, 2 or 3). That is then applied to the “reasonable time” for each step in the litigation, for which the case must be allocated to one of three possible bands (A, B or C) depending on whether the time considered reasonable would be comparatively small, normal or comparatively large.
The New Zealand model expressly states that recoverable costs do not represent the full costs incurred: the daily rate is set as two-thirds of the rate considered reasonable for such proceedings. Both the German and New Zealand systems apply to cases of much higher value than our current fast track limit: Sir Rupert quotes a worked example from Germany of fixed costs in a claim worth €30m.
The Canadian system generally also features restricted recovery of costs: practitioners estimated that a litigant would recover between 50% and 60% of costs incurred.
Access to justice
Sir Rupert’s terms of reference require him to consider the effect of costs rules on access to the civil justice system. While fears have been expressed that a rigid system of fixed costs might restrict the willingness of claimants to seek redress, the examples from around the world strongly suggest otherwise.
The German system, in particular, appears to encourage litigation, as both sides are certain of their costs exposure from the outset.
We will have to wait for Sir Rupert’s final report before knowing the answer, but the call for fixed costs is compelling and there seems to be a real doubt whether England and Wales should continue to tolerate full costs recovery in this area.
Andrew Parker is head of strategic litigation at national commercial law firm Beachcroft LLP and an assessor to Lord Justice Jackson’s review. Jackson LJ’s Review of Civil Litigation Costs: Preliminary Report can be found at: www.judiciary.gov.uk/about_judiciary/cost-review/docs.htm
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