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Jackson's new report signifies likely move towards extended use of fixed costs into claims worth up to £100,000

The most recent task within the current reform programme affecting civil justice, assigned again to Lord Justice Jackson, was one on which he was due to report at the end of July, and that report has now been published.

Most claims handled by insurers which are worth up to £100,000 will be affected by his recommendations in favour of an extension of the current fixed recoverable costs regime to include the majority of those cases in addition to filling the gaps in the current FRCs which apply in claims worth up to £25,000.

Summary

The report can be seen as an evolution from his earlier reports. He proposes new FRCs for the remaining cases worth up to £25,000 not yet subject to FRCs, as well as the majority of claims worth up to £100,000. Both values of claim would fall into 4 bands of complexity with higher levels of FRCs for the more complex bands. The actual levels of FRCs would depend on the stage reached: with 4 stages being used for claims worth up to £25,000 and 6 above that level, both with a trial stage in addition.

For claims up to £25,000 the FRCs largely build on existing FRCs, while over that level Jackson places reliance on data from existing cases in trying to set the right level of FRCs, as well as a subjective view. The actual levels of FRCs for the more complex cases may be higher than anticipated. There will be the chance of responding to Jackson's thoughts during a consultation later this year.

Background and next steps

The retirement of Sir Rupert Jackson is near as he reaches the age of 70 next March and so this may well be his last major intervention of this type.

He took on this task at the request of the Lord Chancellor and the Master of the Rolls, in response to movement from the then Lord Chancellor and Secretary of State for Justice Liz Truss, who was keen to extend the current FRC regime. This intention can safely be assumed to be shared by her replacement, David Lidington.

This report will now be considered by the senior judiciary and by the MoJ who are both expected to support its conclusions, after which the MoJ will hold a consultation on its terms, probably in the autumn.

Expected support from the Ministry will be key, but as primary legislation should not be required to achieve reform in this area, the changes set out in the report should be achievable without the involvement of parliament at what remains a difficult time for the government. We should expect rolling out of the sort of proposal Jackson has in mind next year, probably into new claims arising from October 2018 onwards.

Evolutionary rather than revolutionary

Claimant representatives were particularly concerned as to the terms in which Jackson would report. He had spoken before of seeing the way forward as fixing costs in all cases worth up to £250,000, and in January 2016 had produced a grid of proposed levels of fixed costs which did not distinguish between different types of claim and which we reported on here.

Essentially, instead of continued use of costs management which was a process which unloved by judges and lawyers, Jackson then saw FRCs as the answer to the problem of keeping costs in check in claims of that type.

This time round, after an exercise of consultation with interested parties and lawyers, and hearing from them that they had largely come to terms with costs management over the intervening 18 months, Jackson's views in favour of widespread further reform have been watered down. Even an unloved process can seem more attractive when faced with a more revolutionary alternative.

Effect on current FRCs

The current position of course is that FRCs will apply only to injury claims for RTA, EL and PL which start off inside the portals, even if they later drop out. EL disease claims are included too but only if they both start within and conclude inside the portal, and so FRCs affect only a limited proportion of that type of claim.

Jackson does not propose to change the level of FRCs for claims which conclude within the portal at either stage 2 or stage 3, at least for RTA, EL accident and PL claims. However, current FRCs for this type of claim outside the portals will no longer apply: instead the new FRCs will be applicable.

It seems that EL disease claims will be treated in that same way so that the existing level of FRCs will apply inside the portal, though NIHL cases are an exception and would be hived off into their own new FRCs and indeed a new claims process which will apply unless a particular defendant elects to have claims brought against it within the portal (though it is unclear in those particular circumstances whether the current EL disease FRCs or the new NIHL FRCs would be appropriate).

Filling the gaps in claims worth up to £25,000 – NIHL claims

So before looking at higher value claims Jackson first sees the need to fill in those gaps.

As to NIHL claims, he endorses the negotiated fixed costs grid achieved by the Civil Justice Working Group considering that type of claim as set out here, having himself inserted a figure for trial advocacy:

Table 1 Replacement

As can be seen, there are 4 stages, with an additional fifth stage being the trial advocacy.

A two defendant deafness claim proceeding to trial would it seems attract FRCs of £12,104. That same claim settling pre-proceedings and before any proceedings were drafted would result in FRCs of £4,000.

Both of those figures are in fact lower than the corresponding figures for EL accident and PL claims and are significantly lower than for other EL disease claims as will be considered further below. While this presumably reflects the characteristics of handling NIHL cases, the fact that these NIHL FRC figures derive from a negotiated agreement could lead to asking the question as to whether the levels of FRCs proposed for other EL disease claims are too high.

The level of costs available pre-issue from the first line of the table above is of course well above the level of FRCs applicable in the current regime but it should be recognised that the CJC Working Group have also been considering a new process for this type of claim so that the new level of FRCs has been negotiated within the Working Group as suitable for that process.

£1,280 is an additional sum payable for restoring a company to the register.

The new process is to include service of a letter of claim addressing a check list of requirements, with a formal letter of response also being required addressing certain requirements, as well as submission by the claimant of an audiologist's report.

Mention is made by the Working Group not of potential future use of MedCo, but of setting up of a further cross party group to consider an agreed accreditation process for audiologists supplying reports for this type of claim.

Filling the gaps in claims worth up to £25,000 – other claims

Jackson suggests that claims are divided into 4 types as follows:

  • Band 1 - RTA non-injury claims; defended debt claims

  • Band 2 - RTA injury claims which fall within the RTA low value protocol; holiday sickness claims

  • Band 3 - EL accident claims; PL claims; RTA injury claims which fall outside the low value protocol; housing disrepair claims; other money claims

  • Band 4 – EL disease claims except NIHL; professional negligence claims; property claims; complex housing disrepair claims; other claims at the top end of the fast track

Most RTA claims worth under £25,000 will of course be within the low value protocol as the exceptions provided within it are few. On this basis RTA injury claims will generally be band 2 rather than band 3. This is assumed in the examples below.

As to other types of claims handled by insurers, bent metal claims would clearly fall within band 1, while band 4 may well be appropriate for other non-injury claims faced by insurers away from RTA including professional indemnity claims and property claims.

The FRC figures are as follows:

Table 2 10817

This time there are again 4 stages together with a fifth for trial advocacy, but the pre-issue costs section is sub-divided into 3 value bands. It is important to consider the level of costs provided for.

Costs in claims proceeding to trial

So for a claim of the following types of injury claim going to trial where the claimant is awarded (for ease of calculation) £25,000 in damages, the FRC costs on the basis of Jackson's figures would be:

  • RTA - £9,466
  • EL accident/PL - £13,656
  • EL disease (excluding NIHL) - £19,300

Current FRCs for that type of claim are as follows:

  • RTA £9,360
  • PL - £12,370
  • EL accident - £13,485
  • EL disease – hourly rate costs

So the new proposed rates for RTA and for EL accident cases going to trial are effectively the same as the current level of FRCs for ex portal claims of those types, with small increases for inflation. Those increases for RTA and EL are between 1.1% and 1.3%, while PL shows an increase of 10.4% as a result of the plan to move it into the same band as EL accident.

FRCs for EL disease (non NIHL) have been proposed at a level 41% higher than for EL accident and PL.

We saw above how on the basis of the CJC Working Group figures a 2 defendant NIHL claim reaching trial would attract FRCs of £12,104. At £19,300, the FRC level for other EL disease claims is 59% higher. Where the NIHL figures are the product of negotiation within the CJC, it could be asked within the forthcoming consultation whether the level of FRCs for other disease claims and therefore band 4 claims generally should really be as high as proposed.

Costs in claims settling pre-litigation

Taking the example of the same types of injury claim settling for £25,000 pre-litigation then the costs on the basis of the new report would be:

  • RTA - £3,507
  • EL accident/PL - £4,100
  • EL disease (excluding NIHL) - £6,000

Current FRCs for that type of claim are as follows:

  • RTA £3,430
  • PL - £3,870
  • EL accident - £4,000
  • EL disease – hourly rate costs

So again the proposal from the report essentially takes the existing level of FRCs for RTA and EL accident claims and updates them for inflation. With RTA and EL there is an increase of between 2.2% and 2.5%, while for PL the increase is 5.9%, again so as to create equality with EL accident.

It can be seen that EL disease excluding deafness is at a level 46% above EL accident and PL. Making the comparison again with NIHL claims, while EL disease claims would at this stage be paid at £6,000, our example NIHL would be 50% lower at £4,000. The same point considered above as to whether EL disease is too high can be made at this early stage of the claim as well though it should be recognised that EL disease is only one example of a band 4 claim.

So in summary, Jackson proposes to fill the gaps in FRCs in claims under £25,000 by taking the current FRCs used both for RTA (essentially band 2 claims) and for EL accident and PL claims (band 3 claims) which drop out of the portal, uprate them marginally, and then scale them downwards for bent metal and other more straightforward claims (band 1 claims), and upwards for EL disease, professional indemnity and property claims (band 4 claims).

So this seems to be a relatively conservative approach.

FRCs in claims worth over £25,000 – the principles

Jackson recommends that with certain provisos, FRCs should be introduced into claims worth up to £100,000. This is the figure which has reduced from £250,000 which he had in mind in January last year. Cases of a value up to £100,000 which are of most 'modest complexity' would fall into FRCs.

To accommodate these claims, he proposes the creation of a new claims track, sitting between the fast track and the multi-track, which he calls the intermediate track.

The progress of a claim in this track would be simpler and presumably faster than on the multi-track. Trial would be expected to be for 3 days at most; with only 2 experts each side at most, and the case would need to be suitable for the expedited process. At the CMC the court would be reviewing and approving a list of issues. Claims for asbestos related disease would be excluded.

It follows that Jackson is accepting that some cases worth less than £100,000 would still be outside the intermediate track, so would be allocated to the multi-track as now instead, with hourly rate costs and not FRCs applying. One example he has in mind are clinical negligence claims, the majority of which worth over £25,000 he expects still to be allocated to the multi-track.

As with the position with claims worth up to £25,000, these cases which would be subject to FRCs on the intermediate track would be allocated to one of 4 bands. This time though Jackson is not as prescriptive as to what type of claim should fall into which band as he is with the lower value claims.

The judgment as to what band to allocate a claim to within the proposed intermediate track seems to be more subjective depending on the issues in the specific case, and perhaps that makes more sense with higher value claims. However, inevitably there will be more room for argument and adverse behaviours will need to be identified and responded to.

His examples are these:

  • Band 1 – quantum only injury claims; debt claims

  • Band 2 – with band 3, this is to be one of the "normal" bands, while suitable for the more straightforward cases

  • Band 3 – as with band 2 this is the other "normal" band, while suitable for the more complex cases

  • Band 4 – the example given is of an EL disease claim where there are serious issues of fact/law and the trial is likely to last 3 days

He proposes that at pre-action stage the parties should be trying to agree the appropriate track for the claim, and also if that is the intermediate track, should also try to agree the appropriate band of that track. Then on allocation, if this is to the intermediate track, there would be a further allocation to the appropriate band.

FRCs in claims worth over £25,000 – the figures

Table 3 10817

To use the table, you need to select from the horizontal axis the appropriate band, and then from the vertical axis the stage reached in the claim. In the intermediate track there are 6 stages, in addition to the trial. So that is more stages than is proposed for claims worth up to £25,000, but less than those used in the costs management process.

As with FRCs for the under £25,000 claims, the figures shown on the greyed lines are the cumulative totals for a case reaching that stage.

The figures on the lines which are not greyed are potential additions to those costs, if that specific work has been carried out. Most of these are connected either to trial or to any mediation/JSM, but there are 2 other columns: for work done by either a barrister or another 'specialist lawyer' for advising in writing or in conference, if that work is undertaken.

An exception is that the figures in the first line for pre-issue settlements in non-injury claims are said not to be actual FRCs, but instead capped levels because of the variable amount of work needed per claim. Jackson thinks that in injury claims this approach is not needed and that the figures in the table can stand as actual FRCs and not as a cap as they fairly represent average costs for a claim of that type.

Where have the figures come from you may ask? While various submissions with data in support were made, Jackson looked in particular at data from a defendant firm submitted on behalf of insurers, as well as an exercise of considering actual costs budgets from the costs management process, set alongside the views of the 14 assessors which he used in the exercise, as well as his own views. Those opposing Jackson's conclusions will be able to point to certain weaknesses in that approach.

Costs in claims proceeding to trial

Average FRCs for a case proceeding the whole way to trial could therefore be as set out below, taking examples which assist the maths.

Firstly, a claim which settled for £50,000 and so halfway to the maximum value:

 

  • Band 1 to include a 1 day trial - £22,150
  • Band 2 to include a 2 day trial - £37,250
  • Band 3 to include a 3 day trial - £43,450
  • Band 4 to include a 3 day trial - £57,450

 

Secondly, a settlement was at the top of the value range of £100,000:

  • Band 1 to include a 1 day trial - £29,650
  • Band 2 to include a 2 day trial - £47,250
  • Band 3 to include a 3 day trial - £53,450
  • Band 4 to include a 3 day trial - £68,450

In his January 2016 paper, Jackson was of the view that there should only be one band of claim into which all cases would fall. He has clearly moved away from that view.

In the 2016 paper he proposed FRCs of £18,750 for taking a case worth £25,000-50,000 through to trial. It can be seen from the figures above that his FRC range for a claim worth £50,000 is now between £22,150 and £57,450. That is, the new figures range from between 18% and 306% higher than he had in mind early last year taking a £50,000 settlement.

And if we make the same comparison at damages of £100,000, then in January 2016 he had in mind £30,000 as an FRC level for settlements of £50,000-£100,000. The new proposed figures are in the case of band 1 claims 99% of that level, but with band 4 cases 228% of it with a £100,000 settlement.

Costs in claims settling pre-litigation

Looking at the same quantum settlements as we have done above the FRCs could be as follows:

Firstly, for that claim which settled for £50,000 and so halfway to the maximum value:

  • Band 1 - £2,900
  • Band 2 - £7,350
  • Band 3 - £8,550
  • Band 4 - £12,000

Secondly, for the settlement at the top of the value range of £100,000:

  • Band 1 - £4,400
  • Band 2 - £10,350
  • Band 3 - £11,550
  • Band 4 - £16,000

In the January 2016 paper he had proposed FRC of £3,250 for a pre-action settlement worth £25,000-50,000, and of £5,250 for one worth £50,000-£100,000. 

So at £50,000 the new proposed FRC figure is for a band 1 claim 89% of that figure but at band 4 is 369% of it. While at £100,000 the new proposed FRC figure for a band 1 claim is 84% of the former figure, but at band 4 is 305% of it.

Jackson asks himself whether he is being more generous with the proposed level of FRCs than the evidence from the defendant firm and the results from the costs management exercise would permit. He answers that he is at least in relation to band 4 claims, but is satisfied with the result nevertheless as the outcome figures meet the assessment of himself and his assessors as to what is reasonable for that type of claim.

Where on the other hand the proposed FRCs are less than some of the evidence submitted, he relies on both the 'process' and the 'efficiency' savings will result from the use of FRCs.

FRCs in claims worth over £25,000 – other matters

As to future developments, he says this could include an extension to higher value claims over £100,000 and to all Part 8 claims (limited Part 8 claims in the form of approvals of settlements for protected parties are included in the table above), and to disbursements which are excluded from these figures. He encourages an extension of collaboration between insurers and claimants in this space.

As with claims worth under £25,000, insurers will clearly be need to be alive to the potential for adverse behaviours and be ready to respond to them.

Claimants may seek to avoid the intermediate track and therefore the use of FRCs when inappropriate to do so; they may argue for allocation to a higher band than is appropriate; they may seek to handle the claim so as to use as many stages of FRCs as they can including premature issue of proceedings; they may routinely look to claim the additional work of a barrister or specialist lawyer drafting statements of case and advising. They may look to maximise disbursements. All of these aspects and others will need careful monitoring on behalf of insurers.

Final matters

Claimant beating his Part 36 offer in FRC cases

The case of Broadhurst v Tan from last year decided that in this situation the claimant's entitlement to indemnity basis costs meant release from FRCs and a switch to hourly rate costs. This can currently be seen as a route for claimants looking for a higher costs recovery than permitted by FRCs.

Jackson comes down on the side of replacing the entitlement to hourly rate costs with a percentage increase or uplift of the FRCs himself, which he says should be "30% or perhaps 40%".

He would give the same discretion to increase FRCs by a percentage for unreasonable litigation conduct if serious, and says that one example might be substantial non-compliance with a pre-action protocol.  

Front loading of costs

The problem is recognised of what to do about front loading of costs by claimants so as to help them through the costs management process which will of course continue for non FRC claims. He says this is outside his terms of reference but recognises the value of a rule that permission from the court would be needed to exceed a specific sum at that pre costs management stage.

As a tougher nut to crack as it would be likely to need primary legislation, he sees this as currently premature, but that future consideration should be given to both a grid of FRCs to cover this situation, as well as a procedure for dealing with a request for permission to exceed those figures.

Other matters

Jackson suggests that the levels of FRCs in his report should not be static but should be updated automatically every 3 years depending on the Services Producer Prices Index.

For obtaining an order under Part 8 to bring a claim for costs, that is 'costs only proceedings', Jackson proposes FRCs of £300 for the receiving party. This indeed is an obvious area for FRCs.

As to the Business and Property Courts which deal with cases including professional negligence and claims regarding property, he proposes the development of streamlined processes and a pilot of capped recoverable costs with an overall costs ceiling of £80,000 in claims worth up to a higher level of £250,000.

Jackson is sympathetic to the claimant arguments as to the difficulties in fixing costs in clinical negligence claims. He suggests that the CJC and the Department of Health should set up a working group to agree a new process and FRCs initially for claims worth up to £25,000.

Contact

For more information please contact Simon Denyer, Partner on +44 (0)161 604 1551 or email simon.denyer@dwf.co.uk

By Simon Denyer

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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