Association also tells rule committee that determination process is “entirely inadequate”
The continued push for fixed costs has resulted in more deductions from clients’ damages and raises questions about whether justice is being achieved, the ACL has told the Civil Procedure Rule Committee.
Further, the process introduced as part of the extension of fixed recoverable costs (FRC) in October 2023 to resolve disputes about the level of those costs has proven “entirely inadequate”.
Responding to the committee’s FRC interim implementation stocktake, the ACL cautioned that the new regime remained in its infancy and so it was too early to draw concrete conclusions about its success. The ACL recommended another review in two years’ time.
“At present the continued push to introduce fixed costs has resulted in additional liabilities and shortfalls being deducted from a client’s damages and the current rules are likely to add further pressure on such deductions,” the ACL says.
“Ultimately, the question must be asked as to whether this is ultimately achieving justice for a wronged party at all, because it cannot be currently said that a successful party in a civil claim is placed into a position had they not suffered a loss in the first place.”
The ACL surveyed members and also ran a virtual ‘town hall’ meeting to gather views. There was significant anecdotal evidence that the FRC scheme has, as expected, led to arguments about the allocation of cases to the correct complexity banding – particularly for claims which settle pre-issue – and that more guidance was needed to help practitioners with this.
Meanwhile, the determination process has not achieved what it set out to do. “The ACL is concerned that, should the current state of implementation continue, then there will be significant curbing of access to justice because Costs Lawyers will not be able to provide their expertise in an economically viable way.”
It explained that, rather than reducing disputes about fixed costs, as was the goal, the rules have led to a rise. Disputes about the correct level of fixed costs go through a determination process where the costs are also fixed, at only £500 + VAT. The ACL said this meant there was little downside in parties rolling the dice to challenge the costs, and little incentive to negotiate. This caused delay and further strain on the county court system.
At the same time, £500 was inadequate for the work involved in the determination process – especially given court delays – and will lead either to Costs Lawyers refusing to handle such cases, reducing the supply of costs knowledge and expertise available to the market, or seeking to recover the shortfall from the client’s damages or their solicitors.
Most Costs Lawyers said solicitors were unaware of the determination process and instructed them to deal with it. But members highlighted shortcomings in the Precedent U form used as part of the process, as well as a lack of consistency between courts in how they run it – with some smaller courts transferring them to larger ones, adding yet more cost. The ACL strongly advocated for standardised orders and additional training.
“Concerns have been raised in respect of the boxes which are provided for parties to make their submissions; the lack of guidance on how to draft a Precedent U was also raised, as there is confusion about where to include VAT or any unreasonable conduct uplift.
“Anecdotal evidence was received that there are numerous different approaches being adopted across the board in respect of the fixed costs determination process and this again increases the level of uncertainty when proceeding with a fixed cost determination… This included reports that Precedent Us have been submitted with skeleton arguments in support of the points raised which have been accepted by the courts.
“A number of anecdotal case studies were provided by members of the courts not understanding the how the fixed determination process should be followed. This has lead to increased confusion in respect of how the fixed costs determination process should proceed and resulted in several inconsistent orders being made.”
Examples included the court ordering a detailed assessment where a Precedent U was submitted, orders that effectively required parties to prepare points of dispute and replies, and orders that simply said ‘fixed costs to be determined’ with no further directions.
The response added: “One area which should be addressed in respect of the Precedent U and the fixed costs determination process is the right of a receiving party to reply to points raised by a paying party. As the Precedent U is currently drafted, a receiving party must pre-empt arguments which are going to be made by the paying party in respect of the fixed costs which are being sought.
“This appears to be unfair when compared to almost all other costs determination/assessment processes where a right of reply, whilst optional, is available to a receiving party to justify the costs which are being sought.”
On other issues, the ACL said the levels of FRC more generally needed to be considered in light of the Mazur ruling – given the need for greater involvement in cases by more senior lawyers – and that the figures should be reviewed annually, as the guideline hourly rates now are.
The submission also called for more guidance on the recovery of disbursements – the cause of a large proportion of fixed costs disputes – as well as on vulnerability, and opposed the introduction of FRC for housing disrepair claims, “as this could result in the most serious of matters no longer being economically viable and, therefore, seriously restrict access to justice for the most vulnerable people in society”.
Kris Kilsby (pictured), who sits on the ACL’s policy committee, which drew up the response, said: “Less than 18 months on from implementation of the extended FRC, many of the worries expressed in the run-up have come to pass, especially arguments over complexity and shortcomings in the determination process.
“The rule committee needs to respond urgently with more guidance and an uplift in the costs of the determination process, or else the system could grind to a halt – there was no evidential basis for setting the costs at £500 and it is clear that this is not enough.
“The aim of FRC is to promote certainty, not crudely cut costs, and a more realistic sum for the determination process would make the whole system work more smoothly.”