Right… so let me explain the basic proposal:
– Fixed costs for small claims up to £10k
– Fixed costs for fast track claims up to £25k (i.e. 2.5 times the above)
– Fixed costs for multi track claims to go up to £250k? (i.e. 10 times the above)
The gulf between small claims and fast track makes sense.
I still feel that it was ok when small claims were set at £5k (particularly when you understand the average 2nd hand car market sees a lot of £5k-£10k value cars and a certain amount of building contracts are also between the £5k and £10k range), but the difference between tracks as it stands can be tolerated. It’s a difference of £15k, which in “litigation terms” is not that much.
The jump from fast track fixed costs at £25k to fixed costs for multi track up to £250k does seem to be a stretch at a ten-fold increase.
So what will happen?
Claimant solicitors will adapt their tactics to the changes.
The provisional changes are said to cap costs in percentage terms to the value of the claim.
– pre-lit settlement at 10%
– post-lit but pre-allocation at 15%
– to trial at 40%
Interim stages likely to apply in and around allocation and pre-trial review / pre-trial. (say 20% and 30% respectively but this is all open to consultation and final decision).
Where there are reasonable prospects of success the Claimant will be encouraged to litigate at the earliest opportunity. Once there is a slip by a defendant (within a protocol or the practice direction for pre-action conduct) then the Claimant will issue. As long as they can justify issuing (say a failure to comply with a deadline) then it automatically entitles the Claimant to an additional 5% of costs.
Because in litigation departments the solicitor hates having to bill the client for “solicitor-client” costs. (The issue over complaints relating to these costs is for another blog but the summary is: clients hate paying, solicitors hate having to handle these complaints as they are irrecoverable costs, and cost assessment is a pain in the backside for claimants – but this is all for another article).
If claimants can charge more to a defendant than to their client then they will do this!
Any other important points?
A large number of cases settle around the following times:
(1) After the first CMC when the Judge gives the sides a dosage of reality about the claim
(2) Either just before or soon after exchanging disclosure when one side has to put their cards on the table in full and disclose something which undermines their position
(3) Witness statement exchange when people either do or do not have the courage to sign a statement of truth
(4) Expert reports or joint statement of experts – this is frequently the case where there is medical evidence in PI claims or engineering evidence for construction claims.
Bearing the above in mind, if the trends outlined remain to be in play, then most cases will settle with claimants entitled to between 20% – 30% of the value of the claim.
So what is weird about the proposal?
A claim that slips into the fast track, at say £30k, would only see costs awarded at 10%. This arrives at £3k. With this being the case it would be better to value the claim at £24,999 and then settle it pre-lit with the defendant. This would then allow you to have the costs to be assessed if not agreed. On hourly rates this could give you (subject to proportionality) a return far in excess of £3k. You could sell this to the client by highlighting the £5k they lose in damages would outweigh potentially paying £7.5k in extra legal costs (I use this on the basis of £12.5k likely to be the limit of proportionality of a £24,999 value claim).
Any other comments
If counsel fees are to be included within the limit of damages then this will result in some interesting observation of how the Bar will respond. Their funding arrangements may need to be altered to suit the new regime.
I am also looking forward to the full consultation and proposal with a particular eye on the effect of Part 36.
Over and out.