Time for a rethink on extending fixed costs

The claimant personal injury sector does not receive much by way of good news these days, so the past few months will have come as a pleasant surprise for many PI lawyers.

Not only did we have the Court of Appeal’s high-profile ruling in Belsner in October, which dealt a blow to the industry that brings fee dispute claims against solicitors. Last month there was a shock announcement from justice minister Lord Bellamy that the extension of fixed costs to most civil claims worth up to £100,000 has been put back by six months, to October 2023. This is now the second time that the move, which was originally due to come in last October, has been put back. Could it be that the government is having second thoughts about extending fixed costs?

It is probably too much to hope that the government is now thinking of scrapping the fixed costs extension altogether – sensible as that might be. But it seems that the penny has now dropped in relation to one key problem at least. In his speech revealing the new timetable, Bellamy referred to the fact that extending fixed costs would have ‘particular implications for housing cases’. What the minister would call ‘particular implications’, I would call ‘completely destroying’ the ability of solicitors to act in these claims.

Fixed recoverable costs (FRCs) inevitably create a shortfall in terms of what it costs to run the case, versus the amount that can be recovered from the losing side. In most claims, solicitors will be able to plug that gap by agreeing with the client that they will also take a percentage of their damages, on top of the fixed fee they recover from the defendant.

But a housing disrepair claim works like this: you take on a claim, you pay £800 or so for a surveyors’ report to see if there is serious structural damage, you do battle with an intransigent housing association or private landlord who drags their feet and rarely admits liability early on, and then if you eventually succeed in your claim, the result is that the landlord must carry out specific repairs. There is no pot of financial damages for you to take any extra payment from. These are difficult cases to run, involving expensive expert reports at the outset.

Unsurprisingly, not many law firms take on housing disrepair claims as it is. But in an extended fixed costs regime, you could quite reasonably expect that number to drop to zero. That would leave many thousands of tenants living in substandard conditions unable to find a lawyer to represent them. That cannot be what the government wants, especially at a time when the public’s eyes have recently been opened to the atrocious problems of damp and mould suffered by so many tenants.

What else might be causing the MoJ to hesitate over extending fixed costs? Bellamy mentioned the need to digest the impact of Belsner, which was itself a fixed costs case in which deductions were made from damages. Meanwhile the Civil Justice Council is currently knee-deep in submissions over what to do with costs budgeting. If it comes up with some brilliant solutions for making that existing costs-control mechanism more efficient and effective, will fixed costs need to be extended at all?

The trouble with fixed costs is that while they sound attractively simplistic, there is still so much to argue about. We can expect squabbles over which part of the fixed fee table a case belongs in; quarrels over which ‘band’ applies; and rows over why a case was ‘never worth that much’ and should only qualify for a lesser amount. The arguments will go on and on. If and when the extension does come in, it will be accompanied by a welter of satellite litigation.

So the MoJ’s decision to press ‘pause’ on the extension of fixed costs is certainly a wise one. If it were brave enough to press ‘delete’, that would be even better.

Rachel Rothwell is editor of Gazette sister magazine Litigation Funding, the essential guide to finance and costs.

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