Many of the 27,000 civil litigators are blissfully unaware that, from April 2023, most of their workload will be subject to fixed recoverable costs, but that may only be the beginning of a wholesale – holistic in the words of the Civil Justice Council – shakeup of every aspect of the civil costs system.
The Civil Justice Council issued a consultation paper in June 2022 and the consultation ends at noon on Friday 30 September 2022.
It concentrates on five areas:
- Costs budgeting.
- Guideline hourly rates.
- Pre-action portal and protocol costs.
- Digital justice.
- Consequences of the fixed recoverable costs extension.
Here, I look at the interrelated issues of pre-action portal and protocol costs, digital justice and consequences of the fixed recoverable costs extension. I will look at the other matters in a future piece.
The principle of the extension of fixed recoverable costs is not up for further consultation – it will be implemented in April 2023 and will apply to virtually all civil cases valued at £100,000 or less, but the consultation exercise seeks views on how this will affect the wider civil justice system.
“There may be other areas in which some form of fixed costs or cost capping scheme may be worthy of consideration. A possible example could be certain kinds of high value specialist litigation.”
The review is being led by senior members of the Judiciary and at a costs conference on 13 July 2022 to discuss these matters, the Master of the Rolls and the Deputy Head of Civil Justice were present.
A key issue concerns assessing costs before court proceedings begin, and a recognition that in an age of portals, protocols and digital justice, whatever that means, there is not such an obvious point where the Rubicon is crossed, and proceedings are issued.
For example, in the existing portal system for personal injury work, do proceedings begin:
- When the Claim Notification Form is lodged on the portal; or
- When Stage 3 is engaged, and a court fee paid; or
- Only when the matter drops out of the process and substantive Part 7 proceedings are issued?
Pre-issue work is non-contentious, but becomes retrospectively contentious once proceedings are issued, which is why in a matter settled pre-issue, there needs to be a contractual provision for costs, for example:
“The defendant will pay the claimant’s reasonable costs to be assessed if not agreed.”
What is, or is not, contentious, or a dispute, was considered recently by the Supreme Court in Bott & Co Solicitors Ltd v Ryanair DAC and remains to be considered by the Court of Appeal in the seemingly endless saga of Belsner v Cam Legal Services Ltd.
In the absence of an entitlement to costs pre-issue, there is an incentive to issue, which goes against current government and judicial thinking, partly, or even mainly, because of the shortage of judges and resources.
That is a different issue from the desirability of certainty in relation to costs where matters are resolved through a quasi-judicial pre-issue portal process.
Both the existing personal injury pre-action process, and the general civil litigation fixed recoverable costs scheme from April 2023, provide an entitlement to fixed costs where the matter is settled pre-issue.
However, there is a fundamental difference between personal injury work and other civil litigation, in that qualified one-way costs shifting means that an unsuccessful personal injury claimant generally does not pay the successful defendant’s costs.
In general civil litigation, they do. Creating that liability pre-issue means that a putative claimant who does not go ahead with the claim is liable for the un-sued defendant’s costs.
Let us take an example.
It is April 2023. Charlie Claimant writes the email from hell to Denise Defendant claiming £100,000 and saying that it is a Band 4 case with maximum fixed recoverable costs.
Denise Defendant politely tells Charlie Claimant to go away and no further action is taken.
Under the new system the putative claimant has to pay the un-sued defendant £16,000 (see page 106 of Jackson LJ’s Supplemental Report: Fixed Recoverable Costs).
That will come as a shock to some of the more aggressive litigators and their clients, and it throws up many issues.
When does liability crystallise?
In issued proceedings it would be on defeat, or on notice of discontinuance. Is there to be a form of pre-action strike out, so that if no action is taken for three months or whatever, then the inactive claimant becomes liable for costs?
Can a claimant keep it jogging along – at no extra costs as they are fixed – for the six-year limitation period?
What about a litigant in person who writes an email with it never occurring to them that they are thus engaging in a cost bearing litigation process?
Where does the system draw a line between, at one end, a mild Letter of Complaint, and at the other a full-blown Letter before Action?
The risk is that a digital process will be seen as a form of litigation and have the consequences of deterring parties from engaging and thus have the exactly the opposite of the intended effect.
Small businesses, in particular, are concerned about this.
At the Civil Justice Council meeting, there was a general view that there should be pre-issue costs liability, but no consensus on where to draw the line.
Whatever happens, it is hard now to justify the distinction between contentious and non-contentious business, and surely it is time that these terms were scrapped.
Likewise, the indemnity principle, which in any event has no application in fixed recoverable costs cases (see Butt v Nizami).
The related matters of costs under pre-action protocols and portals and the digital justice system on the one hand, and fixed recoverable costs for pre-issue work whether the matter becomes issued or not, are of great importance if the desire is to have matters settled pre-issue.
At present, there are more questions than answers.
Either you had no purpose
Or the purpose is beyond the end you figured
And is altered in fulfilment.
TS Eliot: Four Quartets: Little Gidding