Changing tactics in litigation – crystal ball gazing
By Diane Parker
Diane Parker discusses the potential consequences of the forthcoming intermediate track for civil claims.
I have been a litigator for over 30 years. I have seen a lot of changes in that time, most of which – to my jaundiced eye – appear aimed at reducing access to justice for the “man on the Clapham omnibus”.
Many civil litigation practitioners are wondering what will happen at the end of this month when the new intermediate track comes into play. For those who are not litigators, currently civil claims fall into one of three tracks:
1. The small claims track. Whether a claim falls into this track depends on its value, which varies according to the nature of the claim. In personal injury road traffic accidents, the small claims track applies to claims with a value of less than £5,000. For other personal injury claims, the limit is £1,500. For other claims, for example contract disputes, the limit on value is £10,000. The important thing to note is that legal costs do not “follow the event” as is the case in fast track or multi-track claims, so even if successful, if a solicitor is involved, the litigant has a legal bill to pay.
2. The fast track. Claims worth above the limits referred to above, but less than £25,000 fall into the fast track. Here legal fees are recoverable from the losing party unless you are the defendant in a personal injury claim for whom different rules apply.
3. The multi-track. All claims worth more than £25,000 fall into the multi-track. As with the fast track, legal fees are recoverable (again, not for successful defendants in personal injusry claims). The court has a discretion to refer more complex but lower value claims into the multi-track from the fast track and vice versa.
Experienced litigators don’t even think about it – but for someone not familiar with litigation, it can be seen that the process for allocating claims to track is already quite confusing.
Now we’re going to add another layer of complexity, the intermediate track. This will slot in between the fast track and the multi-track to cover claims between £25,000 and £100,000. Legal costs will continue to be recoverable by the successful party (unless you’re a defendant in a personal injury case) but now the costs will be fixed.
The intention is laudable. A party involved in litigation should know exactly how much the case is going to cost, win or lose. The reality, less so. I write this in mid-September 2023, with implementation of the new rules due to commence on 1 October, 2023. The final version of the rules hasn’t been published yet. There is an outstanding consultation and a judicial review in progress.
Even the commencement isn’t straightforward: for most claims, the cut-off is 1 October, but in personal injury accidents (different rules apply to disease claims) the new rules don’t apply to accidents that occurred prior to that date. Given that a claimant has three years from date of accident to bring a personal injury claim, there is a likelihood that cases will be issued under the current rules as late as September 2026.
The costs themselves are so complex that, at the moment, I would find it impossible to advise a client what their exposure might be. Possibly in five years’ time, when the reforms have bedded in and we know what view a judge is likely to take, but at the moment, no chance. The fixed costs tables currently run to 18 pages. Granted, only some of the tables will apply to the particular claim the solicitor is attempting to quote for, but in addition, the legal advisor needs to know into which of four complexity bands the claim is likely to fall.
Then there are factors like London weighting and, as many of the fixed costs are expressed as a percentage of the amount recovered, the solicitor has to have a good idea what the client is likely to recover and when the case will be likely to conclude to give any sort of estimate at the outset.
Let’s take an example:
Mr Bricky the builder has a dispute with a customer who has failed to pay his bill of £50,000. While taking initial instructions, you probe him as to the reason why the customer is refusing to pay. Is there a dispute about the quality of the work? No, retorts Mr Bricky, the customer is simply playing a fast one and refusing to pay for the work done. This is a simple county court case, he assures you, in the way that clients know best. But, he continues, he wants to know the maximum it will cost him, if he goes all the way to trial and loses.
On the face of it, the fact that this claim falls squarely into the intermediate track, should enable the solicitor to quote, at that initial meeting, the fixed costs payable for taking the claim to a conclusion.
- Firstly, which complexity band does this fall into? Band 1 covers defended debt claims. If the solicitor takes Mr Bricky’s instructions at face value, that is what this is. But, is it really as simple as the client is telling you? Is it Band 3 – a money claim? Or Band 4, a property and building dispute? (I have taken the “complexity” definitions from the fast-track complexity bands. The definitions of complexity are far less well defined in the intermediate track and therefore much more open to judicial discretion.)
- If the case falls into band 1 then up to the date of the trial the costs recovered are £6,600 plus 15 per cent of the damages - £7,500, a total of £14,100.
- If the case more properly belongs in Band 3 or 4, as you suspect there are aspects of this case Mr Bricky isn’t telling you, then calculating the sums he would recover/be exposed to becomes next to impossible because what is 20 per cent or 22 per cent of a figure that is unknown at this stage?
There is a likelihood that the customer will make a counter claim in any proceedings Mr Bricky initiates and the claim will ultimately settle for a figure less than £50,000. Or, what happens if the customer argues that the work Mr Bricky did was so bad that it has caused significant damage to surrounding buildings, with an estimated cost to remedy at £75,000? A revision to the costs exposure is then necessary, just as it would be under the current system.
Claimant personal injury lawyers have been working in a fixed costs regime for a number of years, with the first fixed costs being applied to lower value road traffic claims in 2010. The scope of fixed costs was extended to incorporate employer and public liability accidents in 2013 up to a value of £25,000. (And here is my first note of caution to any would-be litigators out there: the fixed costs rates have not been increased since 2013.)
It could be argued that the period from 2013-2020 was a time of low inflation and low growth and perhaps a review wasn’t necessary but the last three years have seen significant inflation – so much so that the new fixed fees, set last year, are already falling behind.
What has been learned about fixed costs so far?
- The rates are too low.
- A number of firms have moved out of the fast-track personal injury market. It is partly why there has been a significant increase in firms undertaking clinical negligence work and diversifying into markets such as cavity wall insulation and Japanese knotweed claims.
- The practice of charging clients “solicitor/own client” fees has started to rise. Traditionally, personal injury solicitors tended to accept party and party costs (the amount recoverable from the other side when the case is won) but fixed fees are such that the work is not viable unless the client makes a contribution from their winnings to the costs of the case.
- If one party is much better resourced than the other, they can use fixed costs to make the claim uneconomic.
- Claims that we know, if they were higher value, would be compromised, are fought in a fixed costs environment. Esoteric points of law can be taken, unusual defences filed and claims taken all the way to trial might as well be when the amount to be paid is far less than what will have been needed to be spent to succeed.
- Following on from the previous point, we’ve seen far fewer cases being settled at an early stage. Again, why bother to settle when it isn’t going to cost very much more to take a chance at trial?
- In personal injury it is not unusual to have senior solicitors, often at partner/director level, fighting low-value claims. Conversely, we’ve seen quite junior fee earners at defendant firms running six figure value claims.
- Settlement, especially more expensive forms of alternative dispute resolution such as mediation and joint settlement meetings becomes less attractive. Currently, defendants in personal injury cases typically leave it late to settle, usually close to trial, when counsel has had a look at the case and pointed out the weaknesses. Claimant Part 36 offers offer some benefit; a well-pitched offer that the defendant might not beat at trial would quite frequently bring an otherwise intransigent defendant to the negotiating table. Unfortunately, the new rules on fixed costs have largely removed any power a claimant might have had in making Part 36 offers because the primary incentive to accept, an order for indemnity costs, has been removed.
So, the lessons learnt show that more cases are contested for longer in a fixed costs regime. This seems, therefore, an odd route for the Ministry of Justice to take when the court estate is literally falling down around us. Decades of underfunding building repairs means that courts are leaking, crumbling, lifts don’t work, toilets don’t work etc. Courts have been closed and those that remain open are understaffed. The Law Society Gazette recently reported that litigants are waiting 78 weeks for cases to come to trial, a period that will only get longer as more cases are fought thanks to the cushion that fixed costs provides.
Diane Parker is a director and solicitor at Switalskis Solicitors.