MoJ Keen on more Fixed Costs & QOCS
The debate on personal injury issues (Discount Rate, Whiplash reform, increase in Small Claims Track limit, the Civil Liability Bill 2018) properly dominates discussion but a couple of weeks ago Lord Keen spoke at the APIL conference. The greater part of his speech covered those issues but a section looked beyond both the present debate on injury and travel sickness to the LASPO Review and at the report of Lord Justice Jackson of July 2017 on Fixed Recoverable Costs (FRC). It is here, in the largely unnoticed sections of the speech that there is Government support for reforms that extend to most areas of civil justice and which would have a significant impact on lawyers, clients and the future provision of litigation services.
Jackson recommended (with some small amendments and exceptions) that the FRC presently only applicable to Fast Track personal injury claims should be extended to all matters in the Fast Track. He also made further recommendations to introduce an Intermediate Track for claims up to £100k and where again FRC would apply. Recoverable costs to Trial for a £100k damages case, depending on which of four “bands” applied and some other minor assumptions would be between £29,650 and £68,450. The latter figure is for the most complex cases allocated to the fourth band but would include business disputes and complex EL Disease cases. The end of the "costs to be assessed" based on the hourly rate and work reasonably incurred will have a major impact on how cases are funded and the net recovery of a successful party. Lawyers will be having very different conversations with clients about litigation risk, the service they will provide and fees they will charge.
And the changes might not end there. Keen speaks in the context of the LASPO review of the Government’s aims to reduce civil litigation costs overall and to rebalance the costs liabilities between claimants and defendants. Whilst being careful to indicate that no decisions have been taken “the government is now considering the way forward, including how best to deal with differences between types of civil litigation.” (Author’s italics). This does prompt a number of possible questions. LASPO introduced Qualified One Way Cost Shifting – but only for personal injury claims. There are a number of other areas where there is an “asymmetry” of resource / power between the parties. An example would be the professional indemnity action brought as a consequence of negligent legal advice originating in a personal injury action. In the original case the client would have QOCS protection available but the same client does not have the same QOCS protection in the subsequent claim – despite similar facts and the “asymmetry” between the parties. Could this be what Keen has in mind? A table of the many types of civil litigation will no doubt highlight anomalous outcomes facing parties in different types of litigation.
We do not know the extent of the appetite for further reform. It may be that the Parliamentary battles on the Civil Liability Bill will be so wearing that further change could be minimal. However the MoJ clearly has an agenda to reduce the cost for the consumer of litigation and the comments about extending FRC are positive. Indeed the issue of FRC can be traced back two decades to the Woolf Reforms of the 1990s.
Additionally, QOCs, with the checks that are thrown in for fraud, also seems an area where further reform can be justified on the basis of the rebalancing of costs liabilities. In which areas any extensions might be considered is a question for the review and ultimately for Government.
I foresee two impacts on mediation if these changes are introduced. Firstly, the FRC for the Intermediate Track has specific allowances for specialist lawyers and solicitors for ADR / mediation - thus a direct financial incentive to take this step. Secondly, with a variation to the risk assessment that arises from FRC in respect of the net damages recoverable / costs payable an indirect incentive is created that encourages earlier settlement. The risk will vary depending on the case and its circumstances and the perception of risk by the paying party may discourage settlement. In either situation parties will wish to explore those risks and the mechanism of mediation (encouraged by the allowances mentioned) is suited to this early exchange of risk information.
An adjustment to the fine balance of processes that is part of the civil process can be hazardous. There have been many instances of unforeseen consequences over the years and there is thus two author recommendations – particularly for the non-injury practitioners: firstly, do not assume that a speech to the Association of Personal Injury Practitioners can be ignored - the LASPO review is plainly wider than personal injury. Secondly, Lord Keen has invited all interested stakeholders to contribute to this process. When the time comes, practitioners should do so.