The dangers of fixed costs litigation

Mandy Rice-Davies is bound to apply whenever a costs lawyer criticises reforms which are directed at curbing discretion in costs recovery. We mainly deal with cases at Practico that are likely to survive the fixed recoverable costs cut, but I declare the interest that I am viscerally against the FRC extension.

It is as well, therefore, that I focus this piece on the submission of the City of London Law Society – a body that does not carry a torch for the costs profession, or represent a membership that has much business in the lower reaches of the multi-track.

The CLLS has produced a pithy and principled demolition of the FRC proposals. With apologies for paraphrasing an already crisply drafted document, the submission identifies 12 objections:

1. The rationale behind costs shifting is sound and just. FRC is not genuine costs shifting and there is insufficient justification in Sir Rupert Jackson’s proposals for a departure from the fundamental principle.

2. The potential to recover costs is one of the features of the English legal system that attracts litigants.

3. In commercial litigation the remuneration model is rarely ‘eat what you kill’. Instructions are secured in a competitive market from clients who are not detached from the effects and risk of costs.

4. The incurrence of high costs is largely governed by steps required by the Civil Procedure Rules. It is a product of rules. The submission questions whether judges exercise existing powers enough.

5. FRC limits what the Davids can recover but not what the Goliaths can spend. Inequality of arms is already a problem but FRC will unintentionally encourage oppressive tactics.

6. In commercial litigation the relationship between case value and factors such as the length of pleadings, the volume of disclosure, and trial length are often not linear.

7. The narrow and blunt proportionality test ignores how prospects of success influence the risk/reward equation. Clients will logically risk more in necessary costs when their prospects are high.

8. FRC will not bring absolute certainty. There will be scope for dispute around the woolly edges of expected rules about ‘substantially complete’ phases, ‘exceptional complexity’, and suchlike.

9. Relieving the burden of costs budgeting from the judiciary is not a good reason to revoke the costs management regime, which at least accommodates case-specific issues.

10. There are many difficulties – not just of principle but also in implementation. Obvious ones relate to clients seeking injunctive or declaratory relief but the list will be long and will grow legs.

11. Quantum methodology is a singular bucket of worms and the amounts in the grid are not going to reflect needs. The CLLS says it more elegantly of course, but every solicitor I have introduced to Sir Rupert’s January 2016 draft figures started to look queasy. And who can say the Minstry of Justice’s won’t be lower still?

12. Even if FRC could establish greater predictability, it would need to be piloted first.

Other submissions to Sir Rupert that have entered the public domain I can deal with shortly. The Bar Council is concerned that the FRC effect on the junior Bar would be very severe. The Public Law Project’s submission amplifies the CLLS’s concerns over cases that do not fit the damages model. My own representative body, the Association of Costs Lawyers, has been a bit timid on fundamentals, but fairly points out that the various reforms, budgeting, and harsher proportionality have not been given enough time to wash through.

The Law Society has said it does not object to the extension of FRC in principle without identifying what that principle is. It does, however, weigh in with caution and a note of alarm about the viability of many cases if the FRC threshold were to increase tenfold.

Advocates on the overtly pro side are harder to find. Well-known solicitor and legal commentator Kerry Underwood has become an unlikely bedfellow for Sir Rupert on the FRC issue. Underwood has advocated fixed costs for 25 years, so for him it is an idea whose time has come. What I fear he overlooks in his enthusiasm is that if the legal profession and judiciary acquiesce in the principle of the FRC extension, the prospects are that the scale imposed by this government in this climate will do nothing other than spread distress and lead to disaster.

Andy Ellis is a costs lawyer and managing director of Practico

@ndy_ellis

www.practico.co.uk