The proposed extension of fixed recoverable costs: the potential for unwelcome claimant behaviour
Providing a means of controlling legal costs, fixed recoverable costs (FRC) currently apply in most low value personal injury cases and are well integrated into the everyday lives of lawyers dealing with such claims.
Following publication of Sir Rupert Jackson’s report on 31 July 2017 (which followed his major report in 2010 in to civil litigation costs), the Ministry of Justice (MoJ) opened its consultation on extending FRC in civil cases on 28 March 2019.
Closing on 6 June 2019, the consultation seeks views on:
- The extension of FRC to fast track cases by the creation of four new bands
- The extension of FRC to intermediate cases (cases valued at between £25,000 and £100,000)
- A new procedure and FRC for noise induced hearing loss (NIHL) claims
- Cost budgeting in ‘heavy’ judicial review cases.
The proposals set out the costs that will apply at stages from pre-action through to trial, which are split into four bands:
|Band 1 – for RTA non-PI claims (i.e. ‘bent metal’ or damage to vehicles only), defended debt claims.
Band 2 – for RTA personal injury claims (within the Pre-Action Protocol).
Band 3 – for RTA personal injury claims (outside of the Pre-Action Protocol), employers’ liability accident claims, public liability claims, tracked possession claims, housing disrepair, and other money claims.
Band 4 – for employers’ liability disease claims (excluding NIHL claims*), particularly complex tracked possession claims or housing disrepair claims, property disputes, professional negligence claims and other claims at the top end of the fast track.
* There is a proposal for a separate band for NIHL claims.
The consultation also notes that part of the process of Part 36 offers is to require a higher costs award where an offer to settle is made by one side but not beaten by the other at trial.
In doing so, the question posed is on what basis these higher costs should be awarded in a FRC regime – either an uplift of FRC, or on the traditional indemnity costs basis, based on a detailed assessment of hourly rates. For the purposes of Part 36, the MoJ proposes an uplift of 35% on the FRC.
Intermediate cases will be identified based upon certain criteria, and will not be heard in the High Court. Whilst value will be a good indicator of whether the claim falls within the extended fast track, it is not the sole criterion, as set out below:
Cases identified as not being suitable for FRC include those involving mesothelioma or other asbestos related lung diseases, complex professional indemnity and professional negligence, clinical negligence, some multi-party claims, actions against the police, child sexual abuse cases and intellectual property cases.
The proposals recommend a streamlined procedure for intermediate cases:
Following the previous introduction of FRC to cases dealt with under the MoJ portal and those within the fast track, we identified a shift in the behaviour and tactics employed by claimant representatives, to a less open and collaborative approach.
With the proposed extension of FRC, we expect to see a similar shift in behaviour where very little information is volunteered beyond the Claims Notification Form, with commencement of proceedings being the first indication that the insurer is dealing with a claim of over £25,000 or one that is more complex than initially intimated. This makes reserving difficult for insurers not to mention the impact on early intervention via rehabilitation and investigations.
Equally, the adoption of a more aggressive and tactical approach by claimant lawyers is also possible, raising conduct issues in order to seek indemnity costs instead of the proposed 35% uplift likely to apply where a Part 36 offer is not beaten. Further, we anticipate an increase in early, tactical and robust Part 36 offers from claimant representatives to place themselves in the best position possible at an early stage, particularly where the full picture of the claimant’s claim is unknown to the insurer.
Those representing claimants will want to ensure continued profitability whilst still acting in their client's best interests when the changes take effect. We anticipate that claimant lawyers will seek allocation to bands 3 and 4 by keeping as many issues as possible live. It is unclear whether the court will have discretion to move claims down bands after allocation. The current suggestion is that the proposed changes will not give the potential for a party to request a CMC solely on “track” without the risk of a costs implication.
As such, we expect claimant lawyers to argue a higher band at an early stage and to maintain that position until allocation, with schedules of loss likely to become increasingly detailed with more baseless heads of loss. The stance for many claimant lawyers will be back to the old arguments of “reasonable expectation” of value.
Exploring the grey areas within the proposals, is another potential area for manipulation by claimant representatives. An obvious example is the request for oral evidence from more than two experts, drafting statements of case over ten pages or relying on expert reports over twenty pages will result in the claim falling out of the extended fast track.
One thing for certain is that there will be a period of uncertainty and test litigation during those early years.
In the next article we will outline the potential areas for satellite litigation and how insurers and defendant lawyers alike can best protect their position and utilise the potential in the proposed rules to their benefit.