Costs - a look at the road ahead

Despite the lack of enthusiasm from the profession, Fraser Whitehead advises solicitors that a fixed-fee scheme is in the pipeline and that views should be aired regarding the proposals

A scheme of fixed costs was part of the Woolf civil justice concept for the fast-track, although its introduction was delayed until there was practical experience of the new procedures.

We now have that experience - and added to that the radical changes in the funding of litigation services introduced by the Access to Justice Act, plus litigation over the costs of actions clouding the horizon.

There are different perceptions as to whether this multitude of disputes arises from excessive claims for costs, a failure to manage cases in a proportionate manner or whether it is the inevitable result of the introduction of widely drafted legislation which required further definition by the courts and presented opportunities for challenge by paying parties.

The increase in the number of costs disputes was discussed at a costs forum organised by the Civil Justice Council at the end of 2001 and there was a renewed pressure for some kind of fixed or predictable costs scheme.

A costs sub-committee, headed by Professor John Peysner, was charged with the task of devising a scheme.

It was the aim of the Civil Justice Council to include representation from the full range of interests and to develop a policy as far as possible by consensus.

Working groups have been charged with producing models for discussion at the next meeting.

The various models are displayed on the Civil Justice Council's Web site at: www.civiljustice council.org.uk

The Law Society has approached local law societies and individual practitioners involved in litigation for their views as to the viability of a fixed costs regime.

Responses analysed to date reveal a lack of enthusiasm for fixed fees.

Against this background, the Society's civil litigation committee has debated the issue.

What follows is the developed position of the committee on which the views of the profession are sought.

The committee's view is that the external pressure for a fixed costs alternative to the present uncertainty is persuasive and that a scheme is likely to be introduced with or without our consent.

With that in mind, the committee has looked at this issue for the purposes of determining the agenda.

The overriding objective of any scheme for fixed costs is to maintain a balance between fair and reasonable remuneration to those carrying out the work while preserving access to justice and a level playing field for claimants and defendants.

It is a point of principle that a system of fixed costs will not work unless the indemnity principle is abolished.

The committee takes the view that it may be appropriate to support the introduction of fixed costs for simple road traffic accident (RTA) cases only, but that fixed costs should apply only to work done pre-issue as such a small percentage of these cases are issued as to make exceptional those that are issued.

While this is a narrow class of case, it is a significant proportion of cases overall.

This could serve as a pilot for study of the feasibility of any scheme although careful consideration and significant additional work would be necessary before extending a scheme as greater variation in case pattern would need to be addressed.

At this stage, the committee is unconvinced that an extension beyond low value RTAs is either achievable or desirable.

The committee maintains that the upper value in a fixed cost regime should be 10,000.

Higher value cases are likely to be more complex.

Furthermore, in view of plans to extend the upper value of the fast-track to 25,000, 'all fast-track' RTA cases will not be a suitable platform.

The committee considered the relative merits of an opt-in or opt-out scheme.

Recognising the need for appropriate cases to be excluded, the committee preferred a scheme where the assumption is that all cases will qualify for fixed costs unless the solicitor seeks detailed assessment of the actual costs.

It is envisaged that the party seeking actual costs would be at risk of the costs of assessment if he failed to persuade the court that the fixed costs were inappropriate.

The committee preferred this to an opt-in scheme because of the danger that insurers would agree to a minimum rather than reasonable fee if they believed that cases would be outside the scheme whenever costs exceed the fixed fee.

The committee would prefer to see fees set at a level where there can be a genuine swings and roundabout effect.

Reasons for opting-out of fixed fees might include unreasonable conduct, failure to observe the protocol, prevaricating in or resiling from admissions of liability and failure to provide disclosure.

Other reasons would include unforeseen exceptional features of the case or complexity.

Fixed fees should only relate to party-and-party costs.

The fees should be set at a level which ordinarily would mean that the successful claimant does not need to pay any shortfall between fixed and actual fees out of damages.

The committee would support a matrix established by agreement within the industry by key parties.

This would be preferable to having figures imposed by an external source.

The figures in the matrix should be based on time, to be calculated for each stage/feature of the case, and calculated on the basis of the proposed regional guideline rates developed in connection with the proposals for benchmarking.

The rates should be subject to annual review, not on the basis of the retail price index which fails to reflect salary inflation, the largest proportion of solicitor practice expense, but rather in line with the actual increase in costs faced by solicitors.

This should, in any case, be reflected in increases to the guideline hourly rates by the existing mechanisms.

This approach is adopted by the committee as experience of other fixed costs scales, for example, in relation to legal aid work and the fixed trial costs introduced with the CPR, suggests that, without this safeguard, fixed costs remain unchanged and become unrelated to the cost of doing the work, thus, failing to provide fair and reasonable remuneration.

The committee takes the view that fixed fees should be inclusive of what are properly solicitors' fees, for example, agency fees and also advocate's fees.

Success fees should be recoverable in addition to fixed fees and work should be done to develop a guideline success fee.

These points address many of the concerns raised about the viability of a fixed costs scheme.

The committee would welcome the views of litigation solicitors on these and any other points about fixed costs.

It would particularly welcome views as to what amount of time is reasonably spent, on average, to reach each stage in a simple RTA case settled prior to the issue of proceedings.

Contact the Law Society's civil litigation committee c/o Judith Purchas, Law Society, 113 Chancery Lane, London WC2A 1PL.

Fraser Whitehead is the chairman of the Law Society's civil litigation committee