Is the current Costs regime a barrier to justice?

Since 2013 we have been operating in a new costs regime in litigation. In layman’s terms, if you fall out with another company or another individual about anything to do with money and seek to recover or defend the dispute in the court arena, then you will become acutely aware of the cost of your lawyer and what you can and can’t recover from your opponent. The adversarial approach of our court system still prevails but the winner does not take all – and perhaps a lot less now than yesteryear when the costs burden comes to fruition.

Costs and what you can recover

As a broad brush to the different layers of court proceedings, small claims are anything up to £10,000 of which there are no costs consequences if you win or lose. From a dispute ranging between £10,000 and £25,000 these are fast track claims and the successful party can recover its costs, but these must be “proportionate” to the value of the claim, and you can only recover fixed trial costs. The practical effect of this is that you will only be able to recover what is deemed to be proportionate from the losing party, of your costs of prosecuting the action. This will however, be different from what your Solicitor is entitled to charge you which will be greater.

The question of proportionality is an ever moving feast, but the common denominator will be that, unless you agree with your lawyer from the outset, your own costs will be greater than the amount of costs you can get back from the other side. This means that the economies of running a claim this size can be extremely marginal. A good deal of thought needs to be given to instructing a lawyer in the first place, and settling the claim and an earlier stage by comprommising your position in the knowledge that whilst you may recover more at trial, the benefit would be outweighed by the added costs that you cannot recover from your opponent. This is  irrespective of your own time and stress in running a claim with your lawyer which is an invisible but none the less, very relevant cost.

Anything over £25,000 would ordinarily fall into the multi-track where a cost budgeting regime presides up to a claim value of two million pounds.

To give an idea to the complexity of the costs budgeting hearing, we are now working to the 66th edition of precedent Form H which is the cost budgeting form. The cost budgeting hearing takes place in front of the Judge, and all costs for each and every aspect of the case must be either agreed by the other side, or argued in front of the court and then ratified by the court. In practice, from our experience if the Judge does get involved, they do not tend to ordinarily increase the cost expenditure! The preparation for these hearings is very onerous, since your lawyers cannot afford to get it wrong – as this would prohibit the recovery of the amount from the other side. Again, your solicitor costs will be higher than the amounts recovered from the other side in the main.

Cases in excess of two million pounds are not subject to this regime. In addition to the above after the event insurance (“ATE”) is now not a recoverable item for the other side and will be borne by the clients themselves. If your lawyer is acting on a conditional fee agreement (“CFA”) /no win no fee, the uplift on your lawyers’ fees is a non-recoverable item from the other side and comes from any damages awarded to yourselves.

Whilst the above is very complicated to lawyers never mind clients the upshot is that litigation has become even more expensive than it once was to the client. The courts have put the issue of lawyers’ costs firmly under the microscope in an attempt to focus parties’ minds on alternative dispute resolution. It has achieved a barrier to access to justice to smaller clients.

Your terms and conditions can offer you solutions

Taking this into account, avoiding litigation by means of mediation, settlement, adjudication etc. needs to be considered very carefully and indeed before entering into any dispute, it would be sound advice to consider your terms and conditions and ensure that alternative forms of dispute resolution are incorporated into your contracts as a binding term – leaving litigation as a final last resort.

If you have any queries concerning litigation or any other legal issue please do not hesitate to contact Giles Ward or Ben Harrison.

This article was published in the March 2015 edition of Pest Control News.

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