There have been two recent developments in the inexorable move towards a much clearer costs picture for parties involved in court proceedings.
Generally speaking the successful party to a dispute could expect a large proportion of their costs to be paid by their opponent. Until recently exactly how much this should be was left until the end of the case and assessed by the court if the parties could not agree (in a procedure known as a “detailed assessment”). In a usual case only 50 to 80% of the costs actually incurred by the party with their lawyers would be assessed as recoverable from the losing party. This was an unsatisfactory premise for most clients who faced no clarity about what costs they would recover and often be significantly out of pocket, even if they won.
Cost Budgets
Firstly, the Court of Appeal has clarified how costs will be assessed by the Court where the parties are subject to a costs budget.
Costs budgets were introduced to most civil litigation cases in April 2014 and were designed to move the courts involvement in the amount of costs parties could recover from after trial to as early as possible in a case.
Parties now ordinarily have to set out how much their costs should be for each future stage of a case to trial, and this budget will be either agreed by the parties, or approved by the court. Budgets however are only set by the Court part way through the case, when some costs have already been incurred.
The Court of Appeal in the case of Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792 clarified that at the end of the case the approved costs of a cost budget will only be departed from where there is good reason to do so, and so the uncertainty and unfairness of a detailed assessment seems likely to be avoided. What was not made clear is what a court may or may not consider a “good reason” to depart from a budget would be. As such, I expect further developments and arguments on this point in the near future.
In relation to the costs already incurred by the time budgets are approved, these are subject to a detailed assessment by the court as before.
The judgement gives clients some further clarity about what they can expect to recover where the Court has set a costs budget. It also serves to limit the uncertainty and unfairness in a detailed assessment in most cases to the costs incurred at the date the costs budget is set.
Fixed Costs
The second encouraging development is the apparent impending introduction of a pilot scheme to test how fixed costs for civil litigation would work.
The Civil Procedure Committee published papers on 20 June 2017 setting out that in the pilot costs would be capped for each stage of the case, with an overall cap of £80,000.
The pilot will run in three specified courts for two years for cases where the parties:-
- Agree to the scheme
- Value is less than £250,000
- The trial will be two days or less
Such a scheme is indicative of the move towards fixed costs which I expect to see of the next few years. Whilst some practitioners will recoil at the proposals and limits to what they can charge my view is that increasing the certainty for parties and their lawyers about what they can recover can only be a good thing and will allow solicitors to tailor their services in a much more attractive way to clients.
Lewis Addison is an Associate and Solicitor at Nelsons specialising in litigation and dispute resolution. To discuss our fixed fees for this area of work, please contact Lewis on 0800 024 1976 or email [email protected]