Further extension of fixed recoverable costs in civil claims

The Ministry of Justice (MoJ) announced in September 2021 that it would be implementing majority of the recommendations of Sir Rupert Jackson from 2017, to extend the scope of the fixed recoverable costs (FRC) in civil litigation. Currently, FRC are restricted to claims allocated to the small claims track and personal injury claims valued between £1,000 to £25,000 ie fast track cases. The Civil Procedure Rule Committee (CPRC) confirmed in November 2021 the intention to implement the extension of FRC by October 2022.

More recently, the Department of Health set out its intention to introduce FRC to most clinical negligence (medical malpractice) claims valued up to £25,000.  There is also an imminent update to the rules to increase the value of small claims limit for personal injury claims.

The writing is on the wall and FRC will soon be implemented. Transitional provisions will be important. The government has indicated that the new FRC cases will apply where the accident or cause of action arises after the implementation date or in disease and equivalent cases where no letter of claim has been issued before the implementation date.  Thus, defendants and insurers will not expect a sudden sharp influx of new claims before October 2022 in those cases.

Defendants and insurers must remain vigilant and adapt quickly to any changes in claimant strategy once the reforms are implemented. We summarise the key reforms below and explore what they mean for defendants and insurers.

The Jackson Reforms

In 2008, Lord Justice Sir Rupert Jackson conducted a detailed review on the costs of civil litigation with the view of reforming the civil procedure rules. He produced his report in January 2010 which included numerous recommendations to tackle the issue of disproportionate costs, without denying access to justice. These key recommendations were implemented in 2013:

• Introduction of qualified one-way costs shifting (QOCS)
• Success fees and ATE premiums no longer recoverable from defendants and insurers
• FRC to apply to apply to fast track personal injury claims

These reforms were largely accepted to have been beneficial in streamlining litigation, managing costs and still enabling access to justice for claimants.

It had always been intended to introduce wider reforms to the civil justice system once the 2013 reforms had “bedded in”. A further review was undertaken by Sir Rupert Jackson to consider extending FRC to other types of civil claims.

A report was published in July 2017 which included the following key recommendations:

• FRC for all cases in fast track valued up to £25,000 – not just personal injury
• Extending the fast track scope to cover “intermediate” cases where FRC will apply to all claims valued between £25,000 to £100,000
• Further government consultations to hear from claimant and defendant representatives, to develop a bespoke process for clinical negligence claims initially up to £25,000

Proposals to reform the fast track

The MoJ announced in September 2021 that the government will:

• Extend FRC to all other civil claims within the fast track
• The scope of the track will be extended to include “intermediate” cases valued up to £100,000

It is the government’s intention that all fast track cases will be allocated to one of four bands of complexity.

It is worth noting that the government are not introducing a new intermediate track, which was considered to be too costly and complex. They are expanding the current fast track to capture such claims. The criteria for intermediate cases will include:

• Claim value limited to £100,000
• Trial likely to be no more than three days
• There will be no more than two expert witnesses giving oral evidence for each party
• There are no wider factors such as public importance which would deem it inappropriate

Specified cases are excluded: mesothelioma and other asbestos related claims, clinical negligence cases, actions against the police, child sexual abuse claims and intellectual property cases. Other types of complex cases may also avoid this new intermediate band.

The next formal step in the process of implementation will be for the government to submit draft rules for consideration by the CPRC.

Proposals to reform clinical negligence claims

In 1997 Lord Woolf said that: “…it was the area of medical negligence that the civil justice system was failing most conspicuously to meet the needs of litigants.”

Unfortunately, the development of the Civil Procedure Rules has brought with it relatively unchecked front loading of costs in a jurisdiction that also largely prevents recovery of costs from unsuccessful claimants.

The Department of Health announced in January 2022 its intention to reform the process of clinical negligence claims. A consultation is underway and is open until 24 Aril 2022 for stakeholders to contribute. Key proposals under consideration include:

• Introduction of a new streamlined process for most fast track clinical negligence claims
• Extension of FRC to fast track clinical negligence claims valued up to £25,000

The reforms consider the introduction of a “light track” (suitable for straightforward cases) and “standard track” which includes other low value claims excluded from the “light track”. Template letters of claim and letters of response also feature. There will also be opportunity for parties to stocktake and participate in early neutral evaluation.

FRC are also likely to be calculated similar to the grid approach utilised for existing fast track personal injury claims. Further details will emerge after the consultation has concluded.

Proposals to reform the small claims track

In April 2021 the government announced that it would increase the small claims limit for personal injury claims from £1,000 to £1,500. This change comes into effect from 6 April 2022 and will apply to all non-RTA personal injury claims.

Summary

• The small claim limit for non-RTA personal injury claims increases to from £1,000 to £1,500 on 6 April 2022.
• The small claim limit for RTA personal injury will remain at £5,000 (subject to exceptions).
• The small claims limit for non-personal injury i.e. monetary claims will remain at £10,000.
• The fast track limit for all civil claims, including personal injury will remain at £25,000. FRC will apply.
• An intermediate banding will be introduced likely in October 2022 for cases valued between £25,000 to £100,000 (some cases excluded). FRC will apply.
• Cases excluded from intermediate banding and exceeding value of £25,000 will remain within multi-track case management.
• Clinical negligence claims are also likely to undergo reform by introduction of FRC and a new streamlined process. A final decision is awaited from the government.

We look below at what all of the above proposals will mean for defendants and insurers.

General impact

Overall, the various reforms described will be welcomed by defendants and their indemnifying insurers. Disproportionate costs in civil litigation have been a long-standing problem for many years which required careful consideration and redress, without denying access to justice to claimants with reasonable claims. The extended proposals will also help smaller businesses to pursue smaller commercial claims which were once disproportionate to pursue. Of course, the proposals are unlikely to receive unanimous support but in large they are likely to achieve the benefits of FRC seen up to now with fast track personal injury claims.

Impact on lower value civil claims

As seen with personal injury, the implementation of FRC will quickly focus the minds of both parties from the outset. Claimants will need to consider whether it is commercially viable to pursue meritless claims and will encourage wider use of ADR from early stages. FRC will also support defendants in taking early cost risk analysis knowing that the quicker they settle, the lower their exposure to costs without any nasty surprises. This new regime is also likely to filter out poor claims from those that reasonably require the court’s adjudication.

Impact on low value clinical negligence

FRC will be welcomed by defendants and insurers. They have been overdue for some time, whilst costs have disproportionately increased in recent years. Since the introduction of QOCS, defendants and insurers have had to endure disproportionate costs when they settle and face little prospect of recovering any defences costs should they succeed in defending a claim. The scales have been unfairly balanced for some time for defendants. It is expected FRC will help redress that balance, enabling claimants to gain access to justice and defendants to resolve claims with merit in a manner proportionate to the issues in dispute.

It is clear that the medical profession as a whole, and the NHS in particular (and of course the wider interested public) cannot afford the continuation of the current situation. It would be good to see real collaboration on better patient outcomes and a no fault process that provides effective redress. Until then the proposals could be seen as tinkering, but are in many ways a step in the right direction.

Robust rules necessary to prevent circumvention of FRC

The government and CPRC must carefully consider the implementation of forthcoming changes to the Civil Procedure Rules and pre-action protocols. Defendants and insurers will be familiar with questionable conduct of some claimants who in the past have attempted to circumvent FRC implemented in 2013. Satellite litigation has been unfortunately familiar to resolve ambiguity within the court rules and such decisions have often gone against defendants and their insurers.

Lessons from the past must be learnt. Clear rules are required to set out precisely which claims will fall within FRC (including the intermediate band), in what circumstances they are exempt, and how to resolve issues between the parties in a cost-effective manner.

The court rules must also include robust penalties where there is unreasonable behaviour by either of the parties. In particular, some claimants will attempt to circumvent FRC with reliance on unnecessary expert evidence. Such conduct is still seen today with personal injury fast track claims. For example, there may be unnecessary reliance on reports for experts in care, aids & equipment and forensic accountancy in order to inflate the value of the claim against the opinion of medical experts. The rules need to address and eradicate such conduct.

QOCS and Part 36 offers

The government intend to implement an uplift of 35% of FRC where Part 36 offers are beaten, and to impose a 50% uplift on fixed costs where one party has engaged in unreasonable behaviour. We do not believe these proposals go far enough to deter unreasonable behaviour by claimants in personal injury and clinical negligence cases. They will retain costs protection under QOCS.

The rules should apply a percentage reduction to claimant costs for unreasonable conduct and/or the current rules regarding QOCS should be extended so that a defendant can enforce costs orders where the claimant has acted unreasonably even though the claim has not been struck out under CPR 44.15. Similar types of reduction should also apply to other types of civil claims.  This will have the desired effect of quickly deterring sharp practices.

Last and by no means least, that proposed changes and the spirit behind such changes need to be supported by the judiciary and they should severely penalise parties for non-compliance with court rules and protocols.