Deputy Head of Civil Justice endorses new fixed costs regime

In his lecture, which looked at the issues coming out of the Civil Justice Council costs review he chaired earlier this year, Sir Colin Birss, a Lord Justice of Appeal, said: “We know that claims are not being brought or defendants are throwing in the towel because the cost risk is too high. That is part of what the fixed recoverable costs are trying to address.

“We are trying as hard as we can, in the fixed recoverable costs that we have introduced, to try to make sure that the recoverable costs are broadly proportionate to the sum at stake.

“The idea is that £200,000 in costs being incurred on a claim worth £100,000 just is not sensible. Everyone always says immediately when I say that, ‘Yes, but what about so-and-so?’ We know, and it is built in, that there will be exceptional cases, but there really are not that many [and there are mechanisms within the rules to address those]…

“We tried using budgeting. That is what we used to have for claims between £25,000 and £100,000, but it has its own cost overhead. This new system is designed to produce an answer that is dependent on only three parameters: the sum at stake, the track and the complexity band.”

These were all questions that could be resolved by a judge, he said. “I wish we could have made it a bit simpler, but we have tried to make it the system that was in the Jackson reports, and we have tried to make it as good as it can be. That way, hopefully, it means that in that space cost recovery will become more certain.

“It will not happen overnight. I totally understand it is a new system and people will say at the beginning, ‘I do not know what this is going to be’. It will take time to bed in, but that is the idea. It also means that one can say probably from now, ‘Jackson, we are finished’. That is something, actually, when you think of the amount of work that went into the Jackson report. It is done now.”

Meanwhile, in a discussion about the impact of artificial intelligence on litigation held after the lecture, Edward Bird, chief executive of litigation analytics company Solomonic, said that, in time, large language models like ChatGPT are “just going to be smarter than we are”.

He told guests: “That is why it is even beyond revolutionary. I try to think about it almost anthropologically. Our relationship with technology has always been that we are the master of it, but that is genuinely going to change. The machine will be smarter. It will have an encyclopaedic knowledge of every case that has been ruled on in English courts.”

Looking more broadly at data, Mr Bird said law firms had the opportunity to build complete pictures of their clients by taking data from multiple sources and then producing “forecasts of what kind of services they will need over the next 18 to 36 months”.

Another panellist, Paul Worth, global co-head of litigation at Eversheds Sutherland, said he could see litigators using data first to improve costs budgeting and prediction – “Show me the last 50 cases we did that were very similar to this” – and secondly to produce more meaningful insights for marketing purposes, and thirdly to validate advice to clients.

“You have an inexperienced client, you receive an invitation to mediate and you say to them, ‘We think you should mediate. In our experience, it has a decent chance of being resolved on the day’.

“That is fine and that is what we say. It is far more powerful to be saying, ‘We have done 100 mediations at Eversheds in the last six months; 70 of them settled on the day, 10 of them settled within a week, 20 of them did not settle’. That does not mean that you have an 80% chance of settling, but it is a useful datapoint. I can use that to validate my proposition that the client should pursue a certain course.” This would require firms to have structured data, however, which few do at the moment, he said.

Fellow panellist Belinda Hollway, London head of class action firm Scott + Scott, suggested that, particularly for smaller firms like hers, data sharing might be needed through a third party with appropriate confidentiality protections to ensure there was enough of it.

It would then lead to some exciting challenges for law firms: “If I see in my firm that a case costs roughly this much, but there is a fantastic product that tells me other firms seem to be doing the same kind of case more cheaply, or they seem to be settling 70% of these and we are only settling 60%, it would beg some real questions,” she said. “Are my years of practice and my gut instinct really better than what the data would tell me?”

Ellora MacPherson, Managing Director and Chief Investment Officer at Harbour, said: “The rules of the game are set to change dramatically in the coming years, for smaller cases driven by the rigour of fixed costs and for larger ones by technology. We see significant opportunities for Harbour in backing not only cases themselves but also law firms in supporting them to adapt – because it is fast becoming clear that this is one trend that nobody can ignore.”