Complaints about costs never seem to leave the headlines. Holiday-related personal injury claims are the latest target, with the Association of British Travel Agents asserting that these have surged by 500% since 2015. ABTA even warns – unconvincingly – that Brits could soon be banned from hotels in Spain and Turkey.
The reason for this claims boom? It is all about costs incentives. By contrast with most of the lower-value personal injury sector, overseas holiday claims are not shackled by fixed costs. So we are experiencing what has been aptly described as costs ‘whack-a-mole’ – you control costs in one area, but they pop up in another. Before the focus on holiday claims it was noise-induced hearing loss cases, which also attract hourly rates and which have seen a similar spike.
How long will this funfair game last? In the coming weeks we should see a major step towards a comprehensive, blanket control of costs in lower- and medium-value claims, with the publication of Lord Justice Jackson’s fixed costs review.
We do not know precisely what Jackson will say, but it is expected that he will move some distance from his original opening shot, fired in January 2016, of fixed costs throughout civil litigation for claims worth up to £250,000. That starting point was effective at grabbing the profession’s attention, but the outcry it provoked – and more importantly, the strong arguments against it – will not have gone unnoticed by Jackson.
From his talks during the review, it seems the judge has been listening to lawyers’ insistence that, despite a bumpy start, the budgeting process is providing an effective tool to keep costs proportionate. Perhaps it took the £250,000 threat to encourage lawyers to admit that. But if Jackson believes budgeting has found its feet and started to make a difference, this lessens the need for fixed costs. It is worth noting that earlier this month, the budgeting process was lent further weight by the Court of Appeal’s decision in Harrison v University Hospitals Coventry & Warwickshire NHS Trust  EWCA Civ 792. The appeal court backed the earlier decision in Merrix v Heart of England NHS Foundation Trust  EWHC 346 (QB) that costs judges at detailed assessment need ‘good reason’ before they depart from the figures in an approved or agreed budget. Practitioners may have mixed feelings about budgeting, but it is generally viewed as preferable to a fixed costs regime.
What should we make of the news that Jackson is setting up a voluntary pilot of costs capping – rather than fixed costs – for claims worth up to £250,000? It is not clear how this will fit in with the findings of his fixed costs review. The pilot is expected to start shortly, but there is clearly a danger that take-up will be low. From the claimant perspective, capped costs could well be worse than fixed costs, as you lose the potential for ‘swings and roundabouts’ benefits.
One point Jackson seems to appreciate is that if you reduce costs, you also need to streamline the relevant process. The costs capping pilot, for example, will involve a streamlined procedural code, while in relation to his wider fixed costs review, Jackson has openly pondered the prospect of a new ‘intermediate track’ for lower-value multi-track cases.
In the clinical negligence arena, Jackson accepted at the Association of Personal Injury Lawyers conference in May that there would be ‘considerable difficulties’ in developing fixed costs in clinical negligence cases worth more than £25,000, unless liability and causation were admitted. It could be that the judge has moved from his original position – that there should be no ‘balkanisation’ – to an acknowledgement that different schemes may be needed for different areas of law.
Jackson’s report is due to be completed by 31 July, with publication expected soon afterwards. Lawyers contemplating what reading material to take on holiday may prefer to choose something more uplifting. But perhaps they should pack that too.
Rachel Rothwell is editor of Gazette sister publication Litigation Funding