Fixed Costs in civil claims – not as simple as you may think

In November 2016 the Court of Appeal heard two separate cases concerning Fixed Costs as set out in Part 45 of the Civil Procedure Rules ("CPR"). In both cases Lord Justice Briggs gave the main judgment.

Definition of "Trial"

In Bird v Acorn Group the question posed to the appeal judges was whether disposal hearings attract the top level of fixed fees which apply to trials. Disposal hearings occur where liability is admitted in a Defence or where judgment in default is obtained. The Defendant submitted that a disposal hearing was not a trial. The incentive for this argument is that if a disposal hearing is not a trial the difference in fixed costs to be paid to the Claimant was £2,450 plus 17.5% of damages against the higher figure of £3,790 plus 27.5% of damages (plus trial advocacy fee of between £500 and £1,705 if the case proceeds to a hearing).

Disposal hearings are often block listed with a time estimate of just 10 minutes.  At that hearing a judge can order directions, or dispose of the matter by assessing Quantum.  Which course of action is adopted will depend on the facts of each individual case.  If Quantum is assessed is it right that the case should jump to the highest level of fixed cost?

Unfortunately for compensators, Briggs LJ was not persuaded by the attempt to distinguish between a trial and a disposal hearing -  Briggs pointed out that a disposal hearing requires the evidence to be gathered in much the same way as for a trial, albeit no oral evidence is given.

Escaping the fixed costs regime

Less than a week later Briggs gave the main judgment in Qadar v Esure Services Ltd. In an even bolder move, the Court of Appeal decided that a section of Part 45 of the CPR required re-writing in order to clarify the Government's intention - that cases allocated to the multi-track which start in the fixed costs regime will be excluded from fixed costs. The emphasis here is allocation to multi-track not just a case with a multi-track value (over £25,000).

As Briggs pointed out, cases can remain in the fast track even if they are worth more than £25,000. Allocation is a matter for the district judge to consider after a Defence is filed. In all other cases, if you start in the MOJ claims portal, fixed costs will apply, even where these cases are later re-valued in excess of the £25,000 limit. This is hard to reconcile with the rules if you settle before proceedings are issued as the phase goes up to "not more than £25,000".  Briggs referred to this as a "anomaly".

Whilst the logic of the appeal judges cannot be criticised, the consequences may be unwelcome. One message to Claimants must be that if they start a potentially high value case in the MOJ portal, fixed costs will apply unless proceedings are issued and the case is allocated to multi-track. The only other remedy to Claimants is the little used (yet) provision in Part 45 to persuade the Court that there are "exceptional circumstances" that should apply to claim costs higher than fixed costs.

The other message to Claimants is that if an MOJ portal case later appears to be worth over £25,000 there is less incentive to settle until after allocation to multi-track. The RTA fixed costs phases combine fixed fees (which increase at each phase) with a percentage of the damages. Unless a Claimant solicitors is happy with payment on that basis, Claimants will be encouraged to beat a determined path to issuing a claim and getting prompt allocation and will not be interested in a pre-issue settlement.

Will there be more allocation disputes? I suggest there are strong incentives for compensators to challenge multi-track allocation.

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