Lord Justice Jackson is currently undertaking a review of fixed recoverable costs (FRC) and is due to report in July 2017.
The current FRC regime’s rules have been likened to a wooden box by one commentator saying1:
“If you imagine for a moment, a cartoon where a wooden box contains two creatures who are experts at escaping from such boxes. Along comes the hero of the cartoon who is charged with keeping these creatures in the box.
There then exists a scene where the hero is constantly nailing more and more pieces of wood on to the original box in order to plug gaps being created by the two creatures. Soon the box looks nothing like the original creation and is probably odds on to survive anything short of a nuclear explosion.”
This elaborately portrays the evolution of the rules to deal with the claimant solicitors’ desire to escape FRC and the defendant’s desire to prevent that from happening.
Sadly, the fast track box is not yet bomb proof and we hope that Lord Justice Jackson will make recommendations to resolve some of the current issues that exist.
Chronological approach to FRC
The regimes of FRC that apply under Section IIIA2 of CPR 45 no longer work in practice. The stage at which a case settles, as depicted in the table below, was intended to be sequential so that the amount of the fixed fee increased in stages the closer settlement occurred to trial.
The triggers and the fixed fee calculations were derived from an analysis of actual costs incurred data from fast track personal injury cases settled between 2006 and 2009. The stages were determined by identifying the payment of various fees within the datasets3 as the case progressed towards trial. The data analysis provided three points of reference in the data as follows:
These three points became the triggers for an increase in fixed fees as the case progressed.
Standard orders for directions that make Stage 2 redundant
At the time that the stages were conceived it was envisaged that upon the filing of a defence, the court would list claims for an allocation hearing at which it would order directions. Upon completion of the directions it was envisaged that there would be a listed hearing following filing of pre-trial checklists.
In recent years the County Court, upon the filing of a defence, have adopted the practice of issuing standard orders for directions which include listing the claim for trial. This new practice effectively makes Stage 2 redundant as cases are both allocated and listed in the same order.
This is unacceptable, as Stage 2 was intended to provide the parties with an opportunity for settlement if they complied with directions for disclosure and exchange of witness and expert evidence.
This can easily be rectified by a change in the wording used for Stage 3 and 4 as follows:
This would rectify the perverse situation that has arisen as a result of the courts new practice and will allow the parties to settle a case within Stage 2.
Bird v Acorn Group PLC
During the data collection period between 2006 and 2009, those cases where liability was admitted in the defence were not allocated to a track and so no allocation fee was paid. Instead, these cases were listed for a “disposal hearing.” As no allocation fee was paid, these cases fell in the dataset of cases that were issued but not allocated when the data analysis was undertaken.
It follows that if they fell within this dataset that the fixed fee that should apply to them should be the Stage 1 fixed fee.
However, the rules implementing FRC on fast track litigated claims4 provided that “a reference to 'trial' is a reference to the final contested hearing.”
In Bird v Acorn Group Plc5, the defendant argued unsuccessfully that a “disposal hearing” is not a “final contested hearing” for the purposes of the rule. This means that cases listed for a disposal hearing attracted Stage 3 fixed costs rather than the Stage 1 fixed fees upon settlement.
This unintended consequence of the way the rule was drafted produces the perverse result of applying a fixed fee derived from a dataset that did not include disposal hearing cases.
It is perverse because it penalises a defendant who admits liability by imposing a higher fixed fee than if the defendant had denied liability in the defence and settled the claim before allocation.
Infant approval applications
Where damages are agreed within the portal, the court will assess the costs in the manner set out in Section III of CPR 45 which specifically provides amounts of fixed fees for the approval application and hearing.
However, where a claim exits the portal and damages are agreed then the court will assess costs in the manner set out in Section IIIA of CPR 45, which does not provide specific amounts of fixed fees for the approval application and hearing.
Claimants routinely argue that FRC does not apply and seek recovery of hourly rate costs to be assessed. We argue that the claimant is restricted to the costs under Section IIIA.
This is very similar to hourly rate costs claims that were made following a pre-action disclosure application in which the Court of Appeal recently decided6 were restricted to the fixed “interim application” costs under Section IIIA of Part 45.
Keoghs comment
It is clear that the box is not yet bomb proof but hopefully Jackson’s Review of FRC will make recommendations for the appropriate amendment of the rules.
Keoghs supports the extension of FRC into the lower reaches of the multi track but hope that the regime that is implemented contains the claimant solicitor’s efforts to escape whatever regime is put in place.
1 - Cook on Costs 2017 at para 26.15
2 - Claims which no longer continue under the RTA or EL/PL pre-action protocols
3 - Review of Civil Litigation Costs: Preliminary Report - Chapter 22 paragraph 2.6
4 - CPR 45.29(4)(c) in EL/PL Protocol cases and CPR 45.29C (4)(c) for RTA cases
5 - Bird v Acorn Group Ltd [2016] EWCA Civ 1096
6 - Sharp v Leeds City Council [2017] EWCA Civ 33
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