If costs management is judged to trump detailed assessment, then the rush to fixed costs could be stopped, says Francis Kendall
Lord Justice Jackson is busy revisiting old haunts from 2010 to gather the views of practitioners and others from across England and Wales about the extension of fixed recoverable costs (FRCs)
that he has been charged with examining.
He openly came to the task with a view in favour of the wider application of FRCs in “lower-value” cases, but in his keynote address to a costs conference in early March, observed that the written and oral submissions received to date delivered a “strong message” that “despite all the criticisms in the past, costs management is now working much better”.
Sir Rupert reported: “It applies the new proportionality rule to the circumstances of each individual case. Many people are arguing that this does away with the need for fixed costs in the multi-track. The counterargument is that for lower-value cases, a fixed-costs regime is simpler and cheaper. Defendants and liability insurers are inclined to accept that costs management controls future costs. But they maintain that fixed costs would be better.
One size does not fit all
Another “frequent” message, Jackson LJ said, was that one size does not fit all. “There is force in that point. I have therefore got to identify which types of case and which ‘levels’ of case are suitable for fixed costs. The Bar Council and many other respondents accept in principle that all fast-track costs should be fixed…Therefore, the main task is to identify what the figures should be and whether any process changes are required.
“Outside the fast-track, there is much more controversy about which (if any) cases should have fixed costs. One view is that costs management should take care of everything above the fast-track. The alternative view is that lower-value multi-track cases should have fixed costs. Many people are arguing that the value of a claim should not be the sole determinant of whether it is suitable for fixed
costs. One must also look at the complexity of the case, the number of issues, the number of experts and so forth.”
He even talked about piloting a new “intermediate-track” to accommodate these multi-track cases that attract FRCs.
Pause for thought?
I doubt many people will be surprised by what Sir Rupert has heard to date, but I hope the positive support for costs management will give him pause for thought as he considers
a major shift towards fixed costs. After all, it is less than four years since his own reforms were introduced and it was to be expected that such a significant change to legal practice would take time to bed down.
Importantly, the judge also recognised that “lower value” has different meanings in different areas of law: “In the mercantile courts (I am told) ‘lower value’ means claims up to about £250,000. In personal injury litigation, on the other hand, the upper limit for ‘lower value’ claims would be well below that figure.” It is vital that these distinctions continue to be recognised in any FRC scheme
A call for certainty
But alongside Sir Rupert’s work, we need certainty about the status of costs management. In February, Mrs Justice Carr ruled in Merrix v Heart of England NHS Foundation Trust  EWHC 346 (QB),  1 Costs LR 91 that a costs judge undertaking detailed assessment is bound by the receiving party’s last approved or agreed budget, unless there is good reason to depart from it either up or down.
Overturning a much-discussed decision of Regional Costs Judge Lumb in Birmingham, she said her conclusion reflected what was “the clear intention of costs management”—to reduce the cost of
the detailed assessment.
The district judge had expressed concern that her approach would lead to longer and more expensive cost management hearings instead, but Carr J said: “With proper and realistic co-operation and engagement between the parties, that should not be the case. The costs budgeting exercise already takes up significant amounts of court time and the parties’ time in preparation. There is already a very substantial investment.”
The “shortcomings and inevitable inaccuracies” in the cost budgeting process did not help the respondent, she continued: “Where costs claimed are less than the budgeted figure, then the inaccuracies will be irrelevant, since the receiving party will only recover the lower figure (because there would be good reason to depart by reason of the indemnity principle). Equally, where
costs claimed were higher, the receiving party would have to show good reason for departure from the budget.”
The Court of Appeal is set to hear an appeal on this issue in May, and its final verdict is much needed. A decision that costs management trumps detailed assessment will bolster the argument that
fixed fees are not needed. But to go the other way may make them inevitable. NLJ
Francis Kendall is vice-chairman of the Association of Costs Lawyers and a partner at Masters Legal Costs Services
This article first appeared in the New Law Journal on 24 March 2017.