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26 May 2016
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FOIL calls for fixed costs in costs-only cases

The Civil Procedure Rule Committee (CPRC) has deflected a call by the Forum of Insurance Lawyers (FOIL) to introduce fixed costs in costs-only proceedings, saying that the issue should form part of the wider reform agenda.

Newly released papers from the CPRC’s February meeting revealed that FOIL told the CPRC that “the costs of the procedure are eminently suitable for fixing for both parties. Fixing would operate on the usual ‘swings and roundabouts’ basis, where remuneration is fair when taken as a whole”.

However, minutes of the meeting recorded: “The [CPRC] agreed that, if reform of the steps required to recover the costs of costs-only proceedings is required, it should be addressed together with other initiatives on costs rather than dealing with any issues raised as discrete areas of work. A response would be sent to FOIL expressing this view and FOIL’s letter would be forwarded to the costs policy team at [the Ministry of Justice].”

Describing costs-only proceedings as the “intermediate stage” between the substantive claim and detailed assessment, FOIL disputed the CPRC’s previous characterisation of this as a “very small gap” and a “very minor issue”. Its submission said: “It does have very significant costs consequences, with the costs of this small intermediate stage often significantly exceeding the costs of the substantive proceedings and the sums in issue.”

FOIL argued that claimants were presently “incentivised” to begin costs-only proceedings so as to generate additional recoverable costs and “to recover additional costs generated by the costs negotiation process which would otherwise be unrecoverable”.

It continued that claimants were also incentivised to issue proceedings as soon as possible so as “to prevent the defendant having time to make a final offer for costs, which might put the claimant at risk on costs of the proceedings and to minimise the work that may be done in the costs negotiation process which might not be recovered”.

FOIL said: “Those claimants who abuse the process (often represented by one of the large claimant costs drafting firms, geared up for bulk work) will send their claim for costs with a covering letter saying that if costs are not agreed or a reasonable offer is not made within, say, 14 days, costs-only proceedings will be commenced. That threat is typically followed through, irrespective of offers or the defendant’s attempt to negotiate. It is difficult to envisage another type of claim where it might be thought reasonable to commence proceedings after so short a time.”

By discouraging the issue of proceedings, fixed costs “would relieve some administrative pressure on the courts and save some judicial time”, FOIL argued.

It added that data provided by defendant firm Taylor Rose TTKW showed that 18% of otherwise unlitigated claims in the last year attracted costs-only proceedings. Of them, nearly half (46%) settled at that stage.

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