The biggest package of reforms to the civil justice regime in a decade has now come into force. In a recent lecture, the Deputy Head of Civil Justice Sir Colin Birss, a Lord Justice of Appeal, stated that with the reforms that came into force on 1 October 2023: “one can say probably from now, ‘Jackson, we are finished’.”
With a package of amendments due in April 2024 and an extension of fixed costs to clinical negligence matters also due it might well be that the end of the road – insofar as costs reforms are concerned – has been reached. Despite this, a decade of satellite litigation appears inevitable.
Fixed costs and anything that brings certainty to reserving is, on the face of it, to be welcomed. Birss summarised the FRC reforms as this: “This new system is designed to produce an answer that is dependent on only three parameters: the sum at stake, the track and the complexity band.” Unfortunately, this desired simplicity has not been achieved and significant levels of clarification from the courts or amendments to the rules are required. At that point, an efficient, cheaper way of bringing claims may well fall into place.
The new regime extends the fast track horizontally and introduces the intermediate track for claims between £25,000 and £100,000. Some claims remain exempt, including abuse, housing disrepair, mesothelioma or asbestos lung disease claims and many claims against the police; however, those sectors will likely also be affected by the reforms. Sectors in which hourly rate costs still apply face new players in the market, or disruptive influences seeking what they believe might be more profitable work.
The biggest initial problem with the new regime is that insofar as the transitional arrangements apply they do not do what was intended regarding non-personal injury claims. The intention is that the new FRC regime applies to all such claims where proceedings were not issued before 1 October. Unfortunately, the rule has been framed in such a way that it actually says FRC only applies once proceedings are commenced. While an urgent rule change is likely, in the meantime there is considerable scope for argument.
There are differing views on the financial level of the new FRC – in some areas, such as NIHL, it is felt that the new costs regime is actually generous. As such it is something to be monitored and in the meantime, it seems prudent not to change good claims handling processes. Nobody should seek ‘fixed costs at all costs’.
Rather unusually, allocation is something that now applies to all aspects of a claim. The parties are going to need to agree what track and band a claim would be allocated to, even if a claim settles without litigation. This will be necessary as it is the allocation that defines the level of recoverable costs. The fast track sees allocation based on subject matter, while the intermediate track is based on issues. There is going to be an awful lot of litigation regarding arguments such as ‘what is an issue?’, and ‘when is an issue in dispute?’. While such disputes filter through the system it would appear sensible for parties to apply a commercial outlook and to try to meet compromises when it comes to what costs are payable.
In a fixed costs regime, the final area that requires further guidance is, rather ironically, the costs themselves. The costs are not fixed but follow a matrix not dissimilar to those from previous costs regimes. They are, however, subject to fluctuation. While increases for Part 36, London weighting and the like are common sense, the potential increases for vulnerability and a general escape clause are more problematic. The “unreasonable behaviour” provisions allow for costs to be increased or decreased by 50%. There are no criteria as yet for this to apply, and the bar feels to be lower than perhaps it should be. The increase is not based on conduct but on behaviour. Parties are going to need to track all unreasonable behaviours in the knowledge at the end of a claim every little point – chasing correspondence for example – could be used in unsavoury mudslinging in order to increase costs.
While the reforms are a big step forward and will facilitate more accurate reserving, it feels as if there is a long way to go before calm descends and, in the meantime, practical solutions and collaboration between the public sector and their advisors are going to be essential in order to track and respond to the challenges that inevitably arise.
Author: Paul Edwards – Director of costs