Costs pressure

Most clients run a mile at the prospect of trust or probate litigation and it is hardly surprising, given the substantial costs likely to be incurred. Solicitors too may run for the hills in light of the seemingly never ending change that is now facing civil procedure.

It is pretty much a truism to say that Lord Woolf's reform of civil procedure, which gave us the Civil Procedure Rules 1998, spectacularly failed to achieve its key goal - to reduce costs. Perversely,
the rules increased costs.

Fast forward to 2009 and we received Lord Justice Jackson's report on Civil Litigation Costs, the so called 'Jackson Report'. Most of his recommendations were directed at reducing costs and were embodied in and introduced on 1 April 2013 through the Legal Aid, Sentencing and Punishment of Offenders Act 2012, accompanied by a new set of Civil Procedure Rules.

Budgeting litigation

For those practising trust or estate litigation, one of the key reforms introduced in 2013 was costs budgets. These require us to forecast with a degree of accuracy the likely costs of any multi-track dispute.

The broad principle is that once you have declared your hand (i.e. said how much you think the case is going to cost) you are held to your budget and those anticipated costs will be broadly the sum recovered. However, costs budgeting still leaves the practitioner more or less in the driving seat since they can be agreed between the parties or, if not, the court will approve them heavily influenced by representations from the parties.

Costs budgets are however an expensive process and disliked by most judges and practitioners. But we are okay, as Lord Justice Jackson has gone one stage further with the proposal to introduce fixed costs, with the ambitious suggestion that their introduction could be consulted on and implemented within a year.

These will herald an entirely novel concept and one that is radically different, by imposing a regime of fixed recoverable costs by reference to the stage a matter concludes.

Fixed costs

Jackson's proposal is that fixed costs will apply to all cases up to £250,000 in value, and suggests a grid of fixed rates (for solicitors' and barristers' fees, excluding disbursements, enforcement fees and VAT) for each value of claim:

• £18,750 for claims up to £50,000;

• £30,000 for claims up to £100,000;

• £47,500 for claims up to £175,000;

• and £70,250 for claims up to £250,000.

Jackson said applying fixed costs to claims valued over £250,000 'would be too great a change for the profession', although he suggested a universal costs regime could be implemented in the future.

It is not clear at this stage how fixed costs will work, or exactly how they will be structured - for example whether the rates proposed will be adopted or not and what mechanism for changing those rates may apply - but the reality of fixed costs is with us. Indeed the Ministry of Justice has positively welcomed the proposal and looks set to agree to them.

Jackson has recognised that a universal costs template will need to make allowances for complexity. This would be reflected in a percentage uplift (possibly 15 per cent) to be applied to base costs.

While this may give us leeway in some trust and estate disputes, most complex disputes and low-value cases will undoubtedly be a victim (mirroring perhaps the state of play in personal injury work) and therefore fewer people will be able to bring claims as a result.

Of course, parties can still spend more than this (fixed costs relate to the recoverable costs only, not actual costs) they just can't recover anything more from the other party. This means that Goliaths (those with deep pockets like insurers) can outspend David if they want to.

If this is implemented, there will be increased pressure on lawyers to finalise cases within budget, as anything above the fixed costs will not be recoverable. A race to the bottom is one prediction, as low-priced legal providers try to undertake complex work by undertaking less work for the same money: to under-investigate and under-settle rather than to put in more time and effort for the same legal fees.

It should be noted that the architects of these reforms have never run a case. 

Lloyd Junor is a partner at Adams and Remers

He writes the regular in-practice article on wealth structuring for Private Client Adviser