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I’m not sure if Lord Justice Jackson has recently started taking backhanders from the Association of Costs Lawyers but, if so, I’d be happy to start contributing to the payments. How else to explain his proposals for the extension of fixed fees?
Payments are to be linked to one of ten different phases with endless scope for arguing it was premature to undertake a particular phase (eg Witness Statements), full payment for each phase is subject to it being “completed” (what does “completed” mean?), or 50% payment if a phase has been “substantially started” (what does this mean?). It would not be difficult for a costs firm to set up a business model offering to maximise solicitors’ recovery based on these proposals and charging on a contingency fee basis.
The real problem with these proposals, I would suggest, it not a practical one but, rather at a more fundamental level. (And I do not simply mean whether it is realistic or fair to try to have fixed fees at all.)
There are two basic approaches to recovery of inter partes costs. The first is to have a fixed fee system where the fees are fixed by reference to the nature of the litigation, or the complexity of the case, or the value of the claim, or a combination of these elements. Under this system, the actual work undertaken is irrelevant.
The second approach is to have a system which attempts to set the level of fees payable based on the amount of work actually done. This is the existing (if imperfect) hourly rate system we currently have (for those cases not already subject to fixed fees). The more work (reasonably) undertaken, the greater the payment.
Jackson LJ’s proposals run the danger of conflating the two different systems.
If we are to have fixed fees, why should it matter whether a solicitor has, for example, completed work in relation to witness statements, or substantially started work in relation to witness statement, or, indeed, done any work concerning witness statements? What does a fixed fee system partially based on the work actually done add to the supposed benefits (certainty, end to costs budgeting, end to costs disputes) of fixed costs generally?
There are, of course, potential advantages and disadvantages to having staged fixed fees.
On the one hand, if fees are not staged there is an incentive for solicitors to settle the claim as quickly as possible to maximise their profits. Speedy settlement is a good thing for clients. On the other hand, if they are not staged there is a danger claimant solicitors will under-settle claims in their haste to conclude matters. That is a bad thing for claimants.
If fixed fees are not staged there may be a risk defendants will fight cases for longer, or to trial, knowing there is no additional cost consequence (other than increased own costs). Conversely, where fixed fees are staged, there will be a clear incentive for solicitors to press on to the next stage of the litigation and secure the further payment. (How many thousands of hours of judicial time have been wasted hearing arguments over “premature issue” in predictable fee cases because of the incentive in tipping the case into litigation and therefore potentially recovering greater costs?)
It is far from self-evident that the latest proposals have been put forward having properly considered the advantages or disadvantages of linking the fixed fees to the actual work undertaken.