The Fixed Costs Determination process (FCD), which was proposed within Lord Justice Jackson’s infamous review of civil litigation costs in 2017, is to be finally implemented on 1 October this year. 1 year on from the implementation of his other expansive recommendations and the extension of the Fixed Recoverable Costs regime.
There was initially some optimism within the legal costs world, that the process would not be implemented when it was omitted from the new rules. However, minutes from the CPRC meetings, released over the last 10 months or so, revealed an intention to implement the new streamlined process this year.
The procedure for the new process, which will be incorporated into CPR 45.63 to CPR 45.66 has been published in Civil Procedure (Amendment No.3) Rules 2024 and 171st update – Practice Directions amendments. The new Precedent U, which will be completed by receiving parties as part of the process has also been released for review.
How does the process operate?
Determination after a hearing
The new process will require any party who intends to claim any fixed costs or disbursements in a case captured by CPR 45, to file at court and serve on any party against whom an order for payment is intended to be sought a completed Precedent U. This new document must include, if applicable, the details of any claim under rule 45.9, rule 45.10 or rule 45.13, and is to be filed and served no later than 24 hours before the time fixed for the hearing. This is a slight variation on the current rules in relation to final hearings, where statements must be filed at Court 48 hours prior to the hearing commencing.
The Court may then summarily assess the costs, or if it is unable to make a summary determination at the hearing, then it may order a determination on paper, or a further hearing and make any directions it sees fit. The costs of that determination will be treated as an interim application and costs limited under CPR 45.8. Those costs currently amount to £250 plus VAT on cases which are assigned to bands 1-3 of the Fast Track, and £333 plus VAT on cases which are assigned to band 4 of the Fast Track or allocated to the Intermediate Track.
Determination where parties agree on all issues except costs
Where the parties have reached agreement on all issues except costs, then the receiving party may make an application for those costs to be determined under the new streamlined process. On an issued matter, this will be by way of a Part 23 application as is the current procedure when a fixed costs dispute arises.
On an unissued matter, the application will be made when Part 8 costs only proceedings are commenced pursuant to CPR 46.14.
Applications, whether on issued or unissued matters, should be supported by the written agreement or confirmation, together with a completed Precedent U containing details of the costs or disbursements to which the applicant claims to be entitled and, if applicable, the details of any claim under rule 45.9 (a claim for costs exceeding fixed costs as a result of exceptional circumstances), rule 45.10 (a claim for costs exceeding fixed costs as a result of vulnerability of the Claimant or a witness), or rule 45.13 a claim for costs exceeding fixed costs as a result of unreasonable behaviour).
Any evidence in response from the paying party must be filed within 21 days of service of the application on issued matters, and within 21 days of filing the acknowledgment of service where proceedings have not been started.
The determination may then take place on papers or at a final hearing, but regardless, the fees recoverable will be limited to £500 plus VAT as set out in Table 17 of the soon to be amended Practice Direction 45, plus any relevant application fees.
Appealing outcomes
The Court will record its decision by annotating the Precedent U document and the parties will have 21 days from service of the decision to appeal the outcome. If an application is made, then a hearing will be held to determine the issues, and the applicant must achieve an outcome at least 20% more favourable to them, otherwise they will be liable for the costs of and incidental to the hearing. These costs will, however, be limited again to those outlined in CPR 45.8.
Final key points
Where a party seeks an assessment of costs because of exceptional circumstances, vulnerability, or where the matter settles at S.1 on the Intermediate Track and is a non-PI matter, then the Court has the power to give directions that those costs can be assessed in conjunction with the fixed costs determination.
Part 36 consequences are disapplied from the process.
Discussion
Those of us involved in fixed costs dispute know that currently, the process can be a drawn out, expensive and disproportionate exercise. A streamlined process, designed specifically to deal with what is likely to be largely disbursement disputes is to be welcomed.
It is interesting that the base figure allowed for the process (a maximum of £500), has not been uplifted for inflation, in the same way that those costs tables were. When fees are broken down into hours, the process allows for less than 4 hours of Grade D band 2 time for preparing a statement and written submissions, as well as attempting to agree costs before an application is made. That is not withstanding the fact that submissions in relation to costs exceeding fixed costs can be technically complex and arguably justify the input of more experienced fee earners.
Further limitations on fees recoverable where the Court does not determine costs at the final hearing also seems a harsh added stipulation, with a maximum of £333 recoverable, to include a potential attendance at a hearing.
By disapplying the consequences of Part 36 from the process, there appears to be little by way of incentive for parties to reach agreement. This is exacerbated by the fact that the adverse costs exposure if decisions are unsuccessfully appealed, is limited to less than £400. The provisional assessment process, which currently captures most cases that will proceed through this process after its implementation, removes its cap on recoverable fees when initial outcomes are appealed. A mechanism that operates as a real deterrent for zealous challenges.
As things stand, this new process would not apply to cases to which the fixed costs implemented on 1 October 2023 apply. This seems something which could and perhaps should be rectified prior to the rules coming into effect and requires clarification.
Finally, the interplay between requests for assessment of fees above fixed costs and the new process remain unclear. Whilst it is noted that there is the possibility for both the new process and detailed assessment to run in conjunction, how this will operate is still uncertain.
For further information on the process, or assistance once it is implemented please contact Clarion’s Costs and Litigation Funding Department who can be contacted on any fixed costs issues, at our dedicated fixed costs email address at FRC@clarionsolicitors.com.