Fixed costs for litigation – a step too far

Litigation is by nature contentious and often hostile. No two cases are the same and where the parties are disputing liability, causation and quantum can become complex. The post-Jackson rule changes are designed to control a growing compensation culture and, in the case of motor claims, ultimately make insurance premiums more affordable. Ensuring lawyers keep to court deadlines, curtailing relief from sanctions, and promoting proportionality have been sensible steps to reducing costs.

The new SI, Civil Procedure (Amendment No.6) Rules 2013 has introduced a fixed costs regime for all cases where letters of claim / claim notification forms are served after 31 July 2013 for cases with a value up to £25,000.

At first glance the rules favour the insurers but it is likely they will soon become an annoyance to defendants. First, claimants will have an interest in valuing their claims above £25,000. This will encourage inflated claims, including every imaginable head of loss. Secondly, when faced with defendants' requests for further information and disclosure, District Judges may sympathise when the claimant's solicitor raises proportionality as an issue. If disclosure is not permitted on grounds of proportionality because of the fixed costs regime, the parties will have to determine matters on less evidence. This could lead, in some cases, to defendants being denied the right to investigate and validate claims.

Lord Dyson, Master of the Rolls, recently told the District Judges' annual seminar: "This may mean that in some cases, or some classes of case (such as those allocated to the small claims or fast track), that the court must reach a decision at trial on less evidence than it might have done in the pas".

This will not assist in discouraging spurious claims. Where fraud is suspected but there is insufficient evidence to plead the same Part 18 and Part 31 of the Civil Procedure Rules are valuable tools to enable defendants to probe the bona fides of a claim.

It is often the case that only after the exchange of witness statements will the defendant have sufficient evidence to plead fraud, a fact supported by the Court of Appeal's judgment in Hussain v Sakar 2010.

The main ingredient of a fraud is that it cannot be easily detected. Defendants will therefore be faced with suspicious claims that they wish to investigate only to be met with arguments regarding proportionality. To sustain a pleading of fraud there must be "reasonably credible material which as it stands establishes a prima facie case of fraud" (see Bar Code of Conduct at Paragraph 704(c)); the defendant cannot plead fraud hoping its investigations will later prove its suspicions right. So if the court refuses the defendant's requests much fraud will go undetected.

We should be cautious of cheapening all cases up to £25,000 which can involve complex issues.