It feels that barely a week goes by without an update to costs legislation or a paper on potential future legislative changes. This week it is the turn of the Civil Justice Council (CJC) who have published their final report, following the establishment of a working group in April 2022. The working group was tasked with considering four issues concerning costs; (i) guideline hourly rates (ii) costs budgeting (iii) pre-action and digitisation (iv) consequences of the extension of fixed recoverable costs.
The working group produced an initial paper raising questions for consideration. These questions were then included in a consultation, with parties asked to provide their responses by 15 December 2022. Recommendations in response to the consultation are contained within the final report. We summarise here the key points arising within each of the four issues and will comment on the likely impact for civil litigation practitioners.
Guideline Hourly Rates (GHRs)
GHRs are a useful starting point for assessment, indicating the rates considered reasonable by the courts. There was no real appetite for abandonment given the potential uncertainty this would create in the market and the lack of any simple alternative.
The key recommendation was annual index linked increases to take place on 1 January of each year over the next five years. The index linking is to have retrospective effect to account for the time which has passed since the new rates were implemented in 2021. It is proposed that the general SPPI index is used to reflect inflation in the UK services sector. This aligns with the use of SPPI in the extension of Fixed Recoverable Costs.
The working group also proposed the below revisions to the current system;
- Create a new band for complex, high value and commercial work. This would sit above existing bands
- Correcting the anomaly of counsel’s fees being excluded from the current system
- Setting out an applicable test for departing from GHR
A further working group was also proposed to consider the methodology by which hourly rate data is obtained and considered. Further reviews on GHRs would then take place every five years based upon the findings of the new working group.
Whilst there was surprising and overwhelming support for the retention of costs budgeting, the working group considers that one size does not fit all in respect of costs budgeting and has therefore proposed pilots of more tailored approaches to costs management. The identified areas are;
- Personal Injury and clinical negligence work (covered by QOCS) – The recommendation here is that full budgets are dispensed with and only the Precedent H front sheet be required
- A proposal for a ‘Costs Budget Light’, being an approach less than full scale budgeting. This would be applicable;
- All Part 7 Multi-Track claims with a value between £100k and £1m
- Claims progressing in the Business and Property Courts up to £1m. Claims with a value over £1m are to be subject to a lighter touch approach than the current full budgeting process.
- Other specialist work (mesothelioma, media and communications claims, and those in charge of specialist proceedings, such as High Court Senior Masters for multi-party litigation) – Proposal that judges with specialist lists be consulted for their views on bespoke arrangements for budgeting within their specialism
The group also recommended that there is greater use of staged CMCs and CCMCs allowing for shorter, and earlier, directions hearings and budgets prepared on the basis of ordered directions.
Pre-action and Digitisation
The working group has proposed the implementation of new digital pre-action portals with specific costs provisions to balance compliance within the portals whilst not discouraging their use in the first place. In respect of existing portals, a variation is proposed so that claims are deemed ‘issued’ at the point the protocol is commenced. It is proposed that this be subject to a pilot scheme, with housing disrepair claims identified as the best area in which to pilot such a system.
Additional recommendations include;
- A revision to CPR 46.14 to allow the court to deal with costs liability as well as quantification
- Updates to the Solicitors Act 1974 to bring this up to date with modern practices and digitisation, noting that there is unlikely to be parliamentary time to consider further
Consequences of the Extension of Fixed Recoverable Costs (FRC)
The only real recommendation of the working group concerned a proposal for a £500,000 costs cap in patent cases. This is a narrow recommendation that will impact a very specific claim type. The absence of a more wide-ranging recommendation is reflective of the recent developments in relation to FRC, including publication of proposed changes and wording to effect those changes.
What is clear from the final report is that different areas of litigation have diverse issues and needs, so a ‘one-size fits all’ position will be a difficult one to find across each of the four issues. This has led to proposals concerning various pilots. We are yet to see the details of the various pilots and will provide further commentary once these are available. Eventually, this may result in a more user friendly and streamlined digital litigation process, but in the immediate future, there is going to be great uncertainty arising from the desired implementation of multiple different pilots and the inevitable teething problems which each will subsequently face.