The failure (for now) of the capped costs pilot

Published on
4 min read

Cast your mind back to the warm summer of July 2017 and you will no doubt think of Jackson LJ’s Supplemental Report on Fixed Recoverable Costs. A key recommendation was the voluntary “capped costs” pilot scheme for business and property cases, designed to improve efficiency, speed up the resolution of claims and lower the costs of litigation.

The two year pilot scheme began on 14 January 2019 in the Business & Property Courts in London, Leeds and Manchester for cases up to the value of £250,000, excluding those involving fraud. Statements of case are limited, as is factual and expert evidence, with a maximum two day trial. There is no costs budgeting. Instead, costs caps are applied at each stage, with an overall cap of £80,000.

Fast forward (almost) two years and the pilot is drawing to a close. Has it been a success? It seems not - there have been just two trials under the scheme. The reasons for the lack of uptake are unclear. It could be the lack of promotion, or the success of costs budgeting for such claims (more on this to follow).

The Civil Procedure Rule Committee (CPRC) has confirmed that, whilst “laudable”, the scheme will not be extended at the end of the pilot period. It is worth noting, however, that the CPRC did not close the door entirely on the idea of fixed costs, noting that “schemes of this kind… will continue to be considered in the context of post-Covid 19 recovery and new ways of doing business litigation”. With one of the lasting effects of Covid-19 likely to be more remote hearings, and with more economic uncertainty requiring the cutting of costs, there is arguably more justification for some sort of capped costs scheme in the future… but, for now, not this one.

Fixed recoverable costs in clinical negligence

Back to 2017 and another of Jackson LJ’s recommendations – a fixed costs regime for low value clinical negligence claims to address the issues of disproportionate costs and the rising overall costs of clinical negligence claims.

In October 2019, the Civil Justice Council (CJC) Working Group published their report “Fixed recoverable costs in lower value clinical negligence claims”, with various recommendations for fixed recoverable costs (FRCs) in clinical negligence claims with a value of up to £25,000, alongside process improvements.  

Over a year later and these recommendations have still not been implemented, due to a failure to agree on key issues, including the level of recoverable fixed costs. For now we await further input from the government – so watch this space. Perhaps, once the dust from Brexit and the pandemic settles, the government will also reinvigorate its March 2019 proposals to extend fixed recoverable costs (currently applying to low-value personal injury cases) across the entire fast-track and to “intermediate” cases valued at up to £100,000. 

In the meantime, the CJC has turned its attention to a review of the effectiveness of Pre- Action Protocols (PAP’s), including the costs associated with PAP compliance. Now what would overhaul costs is a system requiring the claimant to disclose evidence supporting their letter of claim at the time of sending it, and the mandatory requirement to make an offer (sum or percentage), with a counter offer or proposals to follow. However, given the inevitable impact on their costs, such a proposal is unlikely to gain much support from claimant solicitors and, just like Jackson LJ’s capped costs pilot, is more likely just another “laudable” idea with little uptake.

The success or otherwise of costs budgets in keeping costs in check

Stretch the memory back even further now to April 2013… it is hard to believe that costs budgets have been a part of our lives for so long! Love them or loathe them, they are definitely here to stay - but are they an effective way of keeping costs in check?

The answer to this is yes, but only if they are used properly. That does not just mean by following the rules and filing on time, and then filing the budget away after it has been approved at the CCMC.

It is each file handler’s responsibility to maintain the budget of a case and to do so involves regularly checking the budget, preparing costings and ensuring that work is within the agreed phase amounts. That is the only way to know that the budget is working, and indeed the only way to find out if an amended budget is required.

Clearly the court agrees, given the recent Civil Procedure (Amendment No 3) Rules 2020, which set out changes to costs budgeting and variations, including the introduction of the new Precedent T (budget variation summary sheet). The changes merit an article in their own right, but the overall effect is to place costs management and budgets (and their variation) at the forefront of practitioners’ minds. Only if practitioners engage in active costs management throughout the case and apply to revise budgets up or down when required by CPR 3.15A will costs budgets be effective.

This is topical now more than ever with the effect of Covid-19 on litigation and the impact it has and will have on budgeting. If there was ever a time to review costs budgets, it is now!

 

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